Thursday, August 21, 2008

Common Sales Question: Can I Increase My Overall Sales And Margins at the Same Time?

A pretty common sales question is the following: Can I increase my overall sales and grow gross profit margins at the same time?

That question has perplexed almost every CEO, business owner, executive, and top sales pro for many years. It is certainly one of the most difficult tasks to accomplish in sales, maybe even the most difficult. Sales managers and top level executives try to rally the troops (salespeople) into believing it is very realistic, but in the real world it hardly ever happens.

The following two realities usually always happen in regards to sales growth or lagging sales and gross profit margins. As sales grow, gross profit margins shrink. As sales decline, gross profit margins grow. I don't care where I have been, this rule has almost always been universally applied as a "truth" in the sales world.

To me, the two following questions are the most realistic approach for salespeople, sales managers, executives, and business owners to ask when dealing with this problem:

1) How much overall gross profit margin am I willing to give up to increase overall sales?
2) If sales are lagging, is the overall gross profit margin high enough to sustain the overall sales decline?

If you can't answer these questions, your business is certainly headed for the "gutter". Salespeople need to be able to have a coherent answer and plan for attacking this primary business issue. It cannot be simplified to the level of "we need more sales" or "we have to get a higher price", so we need to "cold call more". If anything, a heavy sales increase accompanied by a steep margin decline is a result of cold calling.

Lastly, you might ask again, can you grow profit margins and overall sales at the same time? The short answer is "yes" but it takes a lot of positioning. To accomplish this goal, you will need most of the following:

1) Strong "Branding" (For the Salesperson & Company)
2) Strong Qualification Requirements of Prospects
3) Vast Amounts of Incoming Leads
4) Strong Negotiating Skills
5) Weak Competitors
6) Your Industry is Growing Beyond Inflation

I hope this article gets you thinking about what a challenge this area of business will always be. Remember, you must have a clear vision and plan when addressing this issue of balancing overall sales against your overall gross profit figure.

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