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Curing problem sales

Every company has some problem sales months. Doing something to improve them — even a little — can have a surprisingly large impact on profits.

The Situation: Kay’s $12 million commercial shop was doing fairly well, but wasn’t earning the kind of profits they wanted. We found that sales were unpredictable – varying considerably from month to month – and the company was maintaining plenty of extra capacity for its peak months. Profits were fairly good in the good months, but losses were fairly large in the bad months.

Our Approach: It was clear that the company needed more consistent sales volume. It was also clear that costs needed to be more closely aligned with likely volume. We identified the company’s three worst sales months and helped to build a plan for improving sales during those slowest periods – with a special focus on building new customer relationships. Then we  helped the company to align their cost structure with likely sales – which required making some tough choices. Ultimately, they cut their capacity by about 5%.

We also started the process of improving their short-term sales projections – getting everyone to face up to the facts, so that there wouldn’t be sudden surprises when jobs were delayed or cancelled. The early warning permitted faster reaction in offering opportunistic pricing when there were likely holes in the schedule.

The Results: Sales for the next twelve months only rose 6%, but sales during the three worst months were up by more than 20%. Since costs had been lowered somewhat, this had a huge effect on profitability.

The improved sales projections allowed the company to be more aggressive in pricing when it was clear they would unexpectedly have unused capacity.

All the changes contributed to profitability. Instead of suffering painful losses during problem sales months, the company essentially broke even, while becoming slightly more profitable during the rest of the year. Pre-tax profits rose from $300,000 to almost $800,000. While these are hardly record-setting results, they were still a vast improvement.

Don’t be too patient. You can start improving your results this month!