I was scanning the net looking for new information when I came across this presentation from Karmak Training in the US. Dollars or pounds (or Euros come to that), the arithmetic works!
To download it free here Click Here!
Hope you find it interesting!
Crockett
Thursday, January 25, 2007
Friday, January 12, 2007
5 things you can do to improve your profitability
1. Have a pricing strategy. It is surprising how many companies don’t have a proper pricing strategy and handle it in a very ad hoc way. Have a look at the article posted on December 9th 2006 called ‘Three Ways of Pricing’. This expands on a) cost plus – the least profitable way in my opinion, b) competitive – important to know where you’re pitched and c) value – where you price up your whole proposition and optimise your profit.
2. Promote added value. If you operate in an environment where you must promote to keep customers interested and this is generally in a repeat B2B market, then use value added rather than discount. Use BOGOF (buy one, get one free) deals if you can get or afford them; these are really strong and don’t affect your normal shelf or list price. Supermarkets do it all the time to good effect. Buy 2 get 1 free works as well, as does extra fill products – “20% extra free” means just that i.e. selling 600 ml for the price of 500 ml and is a much stronger offer than 20% off, not least because you know it’ll be passed on at retail.
3. Keep control of your price list. Never, ever panic! You can’t win every sale - the laws of economics won’t let you. A knee-jerk reaction to lower price because of a competitors activity won’t get you any extra sales over the medium term, but it will certainly get you lower profits. Don’t forget, on a 50% margin, if you sell 10 units at £1, you’ll make £5; if you drop 10%, you’ve got to sell 13 units to stand still! Personally, I'd lose the one sale and sell the other 9 at £1. When this happens, sit back, have a cup of coffee and plan your market research – talk to all your customers – you never know, you may be £0.10 cheaper than the competition and be able to make a bit more.
4. Bonus your sales people on cash gross margin. Don’t be tempted to reward on percentage GM, you sales could take a dive. If you do cash GM then your sales people are not just discounting with your money, it’s theirs as well. So, back to the 10 units at £1. You want growth, so you target 11 units at £1 at 50% GM which equals £5.50 cash margin. If you sales people want to discount 10% they’ll have to sell 14 units to hit their target before they get a cent! In reality, the need for heavy discounting will tend to reduce.
5. Watch your business. We’ve been talking about gross margins here, but real profit is after expenses are paid. There are not many ways to influence your net profits: a) sell at a higher price, b) buy, or manufacture at a lower price, c) lower your other non-variable costs. Unless you are Tesco (who’s stated aim is to sell as low as it can, rather than for as much as it can get) you should try to do all of these, all of the time - keep your eye on it constantly.
Have a look at jdsblog.com for another view on pricing - click here
---------------------------------
Would you like to know the "insider secrets" of controlling your finances even better, so you'll reach the goals you've set?
Did you know that every business activity creates both problems and opportunities every week? A business is like a living entity, constantly developing, forever creating SOMETHING — and always also something ELSE than what you consciously want it to produce. To find out what the experts know Click Here!
2. Promote added value. If you operate in an environment where you must promote to keep customers interested and this is generally in a repeat B2B market, then use value added rather than discount. Use BOGOF (buy one, get one free) deals if you can get or afford them; these are really strong and don’t affect your normal shelf or list price. Supermarkets do it all the time to good effect. Buy 2 get 1 free works as well, as does extra fill products – “20% extra free” means just that i.e. selling 600 ml for the price of 500 ml and is a much stronger offer than 20% off, not least because you know it’ll be passed on at retail.
3. Keep control of your price list. Never, ever panic! You can’t win every sale - the laws of economics won’t let you. A knee-jerk reaction to lower price because of a competitors activity won’t get you any extra sales over the medium term, but it will certainly get you lower profits. Don’t forget, on a 50% margin, if you sell 10 units at £1, you’ll make £5; if you drop 10%, you’ve got to sell 13 units to stand still! Personally, I'd lose the one sale and sell the other 9 at £1. When this happens, sit back, have a cup of coffee and plan your market research – talk to all your customers – you never know, you may be £0.10 cheaper than the competition and be able to make a bit more.
4. Bonus your sales people on cash gross margin. Don’t be tempted to reward on percentage GM, you sales could take a dive. If you do cash GM then your sales people are not just discounting with your money, it’s theirs as well. So, back to the 10 units at £1. You want growth, so you target 11 units at £1 at 50% GM which equals £5.50 cash margin. If you sales people want to discount 10% they’ll have to sell 14 units to hit their target before they get a cent! In reality, the need for heavy discounting will tend to reduce.
5. Watch your business. We’ve been talking about gross margins here, but real profit is after expenses are paid. There are not many ways to influence your net profits: a) sell at a higher price, b) buy, or manufacture at a lower price, c) lower your other non-variable costs. Unless you are Tesco (who’s stated aim is to sell as low as it can, rather than for as much as it can get) you should try to do all of these, all of the time - keep your eye on it constantly.
Have a look at jdsblog.com for another view on pricing - click here
---------------------------------
Would you like to know the "insider secrets" of controlling your finances even better, so you'll reach the goals you've set?
Did you know that every business activity creates both problems and opportunities every week? A business is like a living entity, constantly developing, forever creating SOMETHING — and always also something ELSE than what you consciously want it to produce. To find out what the experts know Click Here!
Sunday, January 07, 2007
Meetings, Meetings, Meetings
Do you ever wonder where your time has gone? I don’t, I know where my time has gone! Most of it’s wasted in never ending meetings that rarely achieve anything except to establish the date and time of the follow-up meeting.
First there are weekly management meetings with massively long agendas that seek to resolve every problem the company has ever encountered, but actually cause more by setting impossible tasks and goals in impossible timeframes. However, these can go on all day and sometimes longer, although lunch is invariably supplied if you’re not too stressed to eat it.
Then there are the inter-departmental meetings, designed to progress the impossible tasks set at the management meetings. Nothing is ever achieved at these, as no one wants to be held accountable at the next management meeting!
Next come the ‘project’ meetings to plan and monitor the flavour-of-the-month projects and initiatives. First of all, someone is elected to take the blame and appointed project leader. Everyone has to take their turn at this unless you are a superb politician who can deflect all the slings and arrows of outrageous fortune. You can then pass this poison chalice to another unfortunate whilst being convincingly disappointed that you were unable to grasp this opportunity because of your root canal problem or acute alcoholism (brought on by weekly management meetings).
Then there are the scheduled ad hoc meetings (as opposed to the truly ad hoc meetings) which are planned to the very last detail and have the sole purpose of shifting the blame for something to someone other than the originator of the meeting. These work extremely well for the alcoholic shyster mentioned in the previous paragraph!
Finally, unless you know differently, are the truly ad hoc meetings. Generally engendered by a real and pressing issue that requires immediate resolution, these often work well and are arguably the only meetings worth having.
Here are some suggestions:
1. Have regular management meetings designed to inform and that set a strategy for problem solving rather than become a forum for allocating blame.
2. Start with a discussion about sales performance, which will generally draw-out the majority of opportunities and issues facing the business.
3. Have meetings with short agendas, but send clear and prompt minutes so everyone knows what was agreed.
4. Deal with problems one at a time rather than all at once.
5. Use truly ad hoc meetings sensibly and constructively and ban political ones.
6. Ensure that everyone is clear about their responsibilities, which will go a long way towards removing the inter-departmental rivalries.
7. Avoid a blame culture by welcoming new ideas and being open-minded and understanding that the occasional failure is acceptable and expected and serve to demonstrate that people are working outside of their comfort zone.
Without doubt, some meetings are necessary, but short meetings are always more effective than long ones. In a three-hour meeting you will get 70% done in the first hour, 30% in the second and nothing useful in the third - except lunch!
First there are weekly management meetings with massively long agendas that seek to resolve every problem the company has ever encountered, but actually cause more by setting impossible tasks and goals in impossible timeframes. However, these can go on all day and sometimes longer, although lunch is invariably supplied if you’re not too stressed to eat it.
Then there are the inter-departmental meetings, designed to progress the impossible tasks set at the management meetings. Nothing is ever achieved at these, as no one wants to be held accountable at the next management meeting!
Next come the ‘project’ meetings to plan and monitor the flavour-of-the-month projects and initiatives. First of all, someone is elected to take the blame and appointed project leader. Everyone has to take their turn at this unless you are a superb politician who can deflect all the slings and arrows of outrageous fortune. You can then pass this poison chalice to another unfortunate whilst being convincingly disappointed that you were unable to grasp this opportunity because of your root canal problem or acute alcoholism (brought on by weekly management meetings).
Then there are the scheduled ad hoc meetings (as opposed to the truly ad hoc meetings) which are planned to the very last detail and have the sole purpose of shifting the blame for something to someone other than the originator of the meeting. These work extremely well for the alcoholic shyster mentioned in the previous paragraph!
Finally, unless you know differently, are the truly ad hoc meetings. Generally engendered by a real and pressing issue that requires immediate resolution, these often work well and are arguably the only meetings worth having.
Here are some suggestions:
1. Have regular management meetings designed to inform and that set a strategy for problem solving rather than become a forum for allocating blame.
2. Start with a discussion about sales performance, which will generally draw-out the majority of opportunities and issues facing the business.
3. Have meetings with short agendas, but send clear and prompt minutes so everyone knows what was agreed.
4. Deal with problems one at a time rather than all at once.
5. Use truly ad hoc meetings sensibly and constructively and ban political ones.
6. Ensure that everyone is clear about their responsibilities, which will go a long way towards removing the inter-departmental rivalries.
7. Avoid a blame culture by welcoming new ideas and being open-minded and understanding that the occasional failure is acceptable and expected and serve to demonstrate that people are working outside of their comfort zone.
Without doubt, some meetings are necessary, but short meetings are always more effective than long ones. In a three-hour meeting you will get 70% done in the first hour, 30% in the second and nothing useful in the third - except lunch!
Monday, January 01, 2007
5 Good Reasons to take the ‘Price Negotiation’ Burden from Your Sales Team
If you are working in a traditional repeat-business company, you probably have a field based sales team. If so, the team are probably calling on the same customers on a monthly (maybe more frequent) basis. Because your sales team is well trained and enthusiastic, as well as servicing their existing customer base, they will be trying to follow-up new leads and find new customers by networking with other sales people, searching directories and asking existing customers who their main competitors are.
In a nutshell, they’re pretty busy!
There is also a good chance that they have some latitude to negotiate prices; I don’t mean customer terms here, I mean the price of individual items. The customer asks, “how much are your widgets?” and your sales guy replies “£11.29”. The customer then says “Acme Widgets is doing them for £10.99”, so your guy matches the price and walks away with the order.
Well, that’s a result isn’t it?
I don’t know, because, just like you, I don’t know the price at which Acme is selling widgets!
Here are 5 good reasons why your sales team shouldn’t do it:
1. Because if the customer can buy from Acme at £10.99 then, a) your price is too high; b) your product is better, c) your service is better, d) your availability is better. If it’s a), then your prices need reviewing generally and papering over the cracks with one customer won’t resolve the wider issue and not all customers will tell you, they’ll just buy elsewhere. If it’s b), c) or d) then you deserve a premium don’t you?
2. Because they don’t really know the Acme price, only the customer’s version of it and buyers always tell the truth don’t they? What’s needed here is some properly structured market research rather than one buyers opinion.
3. Because by freeing the sales team from price negotiation, you enable them to get back to real selling; for example, explaining the company’s proposition and waxing lyrical about your service, quality, availability, delivery frequency, superb sales team, extensive product range etc. Let’s face it, Acme probably doesn’t have them in stock anyway and if it does, it’ll be next Friday before it can deliver them.
4. Because the customer may not be set-up on the right deal. Sales people can be dilatory about reviewing customer terms – it’s admin and their job is selling, right? If your widgets and Acme’s are the same and all other things are equal, it may be time to review customer terms.
5. Because it wastes time and effort. Customers will soon understand that your prices are competitive and the sales team has no price flexibility, so that game has gone away, leaving more time to discuss new ranges and extensions, this month’s specials and new product launches.
The sales team won’t like it much to start with, but the good ones will soon see the benefits as will the company from the extra sales at higher margins that will result from it.
Happy New Year!
Crockett. January 2007.
Do you wish you could increase prices, but are afraid you will lose customers? The answers may be right here: Please tell me how to increase prices without losing sales!
In a nutshell, they’re pretty busy!
There is also a good chance that they have some latitude to negotiate prices; I don’t mean customer terms here, I mean the price of individual items. The customer asks, “how much are your widgets?” and your sales guy replies “£11.29”. The customer then says “Acme Widgets is doing them for £10.99”, so your guy matches the price and walks away with the order.
Well, that’s a result isn’t it?
I don’t know, because, just like you, I don’t know the price at which Acme is selling widgets!
Here are 5 good reasons why your sales team shouldn’t do it:
1. Because if the customer can buy from Acme at £10.99 then, a) your price is too high; b) your product is better, c) your service is better, d) your availability is better. If it’s a), then your prices need reviewing generally and papering over the cracks with one customer won’t resolve the wider issue and not all customers will tell you, they’ll just buy elsewhere. If it’s b), c) or d) then you deserve a premium don’t you?
2. Because they don’t really know the Acme price, only the customer’s version of it and buyers always tell the truth don’t they? What’s needed here is some properly structured market research rather than one buyers opinion.
3. Because by freeing the sales team from price negotiation, you enable them to get back to real selling; for example, explaining the company’s proposition and waxing lyrical about your service, quality, availability, delivery frequency, superb sales team, extensive product range etc. Let’s face it, Acme probably doesn’t have them in stock anyway and if it does, it’ll be next Friday before it can deliver them.
4. Because the customer may not be set-up on the right deal. Sales people can be dilatory about reviewing customer terms – it’s admin and their job is selling, right? If your widgets and Acme’s are the same and all other things are equal, it may be time to review customer terms.
5. Because it wastes time and effort. Customers will soon understand that your prices are competitive and the sales team has no price flexibility, so that game has gone away, leaving more time to discuss new ranges and extensions, this month’s specials and new product launches.
The sales team won’t like it much to start with, but the good ones will soon see the benefits as will the company from the extra sales at higher margins that will result from it.
Happy New Year!
Crockett. January 2007.
Do you wish you could increase prices, but are afraid you will lose customers? The answers may be right here: Please tell me how to increase prices without losing sales!
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