The Solution is More Sales ... Right?
The Solution is More Sales ... Right?
THE SOLUTION IS MORE SALES ... RIGHT?
- Is it fair to say that most of our efforts throughout any day or week are devoted to sales?
- And is it fair to say that a primary driver of business success is sales?
- And is it fair to say that sales have to exceed expenses for a business to make money?
- In addition, if it fair to say that expenses can be very difficult to reduce, especially in the shorter run?
- Therefore, is it fair to say that the solution to most business crises is expanded sales?
The answers are yes, yes, yes, yes, and no.
_________________
SETTING THE STAGE
Let’s assume you own and manage a small civil engineering company, a Subchapter S corporation, that is marginally profitable and very short of cash. Exhibit I illustrates the key financial results for the past two years.
EXHIBIT I - SELECTED FINANCIAL RESULTS
2004 2005
Contract Revenues $3,131,021 $3,249,007
Profit Before Tax 46,965 47,760
Accounts Receivables 317,391 427,267
Accounts Payable 257,344 222,535
You’re faced with two options. You can continue as you have in the past, selling your services primarily to residential real estate developers. Or you can aggressively pursue business with the state transportation authorities where the prospects of rapid growth are considerable.
______________________
THE HIGH GROWTH OPTION
Exhibit II reflects the hypothetical results one year later under the second option. Sales grew more than 25%, while profits grew almost as rapidly.
EXHIBIT II - SELECTED FINANCIAL RESULTS
2005 2006
Contract Revenues $3,249,007 $4,074,255
Profit Before Tax 47,760 59,031
Accounts Receivables 427,267 692,065
Accounts Payable 222,535 200,092
But now you’re in far worse shape. The state government pays very methodically, as you can see by the massive increase in receivables. That increase means your cash revenue has significantly slowed, which forces you to either a) borrow more from the bank or b) reach deeply into your own pocket to come up with the cash to pay operating expenses.
Further, as your accounts payable balance indicates, you’ve been compelled to pay your subcontractors more rapidly, since you need to assure their services to fulfill the new projects – another cash drain.
_________________
WHAT DID WE MISS?
The answer to your profitability and cash flow problems may not be growth after all. In reexamining Exhibit I, note that you let your balance sheet management slip badly in 2005. In a period of virtually flat growth, your receivables increased by $109,876. That means your cash revenue in 2005 was not $3,249,007 but, rather, $3,139,131 (i.e., $3,249,007 – $109,876). In addition, your cash expenses were actually $34,809 greater than you reported in your income statement because you paid down your accounts payable by $34,809.
____________
OBSERVATIONS
Growth is rarely the answer to business problems – particularly growth at any cost. The real issues may lie with balance sheet management. Not as exciting as growth but frequently more important.
==============================================
Business Alert - For the Business Professional
(C) 2006 Shockproof! Training (by Rex Beach)
www.ShockproofTraining.com (phone 866.237.7228)
The Solution is More Sales Right - To learn more about this author, visit Rex Beach's Website.
Like this article? Share it with your friends
=====================================
THE SOLUTION IS MORE SALES ... RIGHT?
- Is it fair to say that most of our efforts throughout any day or week are devoted to sales?
- And is it fair to say that a primary driver of business success is sales?
- And is it fair to say that sales have to exceed expenses for a business to make money?
- In addition, if it fair to say that expenses can be very difficult to reduce, especially in the shorter run?
- Therefore, is it fair to say that the solution to most business crises is expanded sales?
The answers are yes, yes, yes, yes, and no.
_________________
SETTING THE STAGE
Let’s assume you own and manage a small civil engineering company, a Subchapter S corporation, that is marginally profitable and very short of cash. Exhibit I illustrates the key financial results for the past two years.
EXHIBIT I - SELECTED FINANCIAL RESULTS
2004 2005
Contract Revenues $3,131,021 $3,249,007
Profit Before Tax 46,965 47,760
Accounts Receivables 317,391 427,267
Accounts Payable 257,344 222,535
You’re faced with two options. You can continue as you have in the past, selling your services primarily to residential real estate developers. Or you can aggressively pursue business with the state transportation authorities where the prospects of rapid growth are considerable.
______________________
THE HIGH GROWTH OPTION
Exhibit II reflects the hypothetical results one year later under the second option. Sales grew more than 25%, while profits grew almost as rapidly.
EXHIBIT II - SELECTED FINANCIAL RESULTS
2005 2006
Contract Revenues $3,249,007 $4,074,255
Profit Before Tax 47,760 59,031
Accounts Receivables 427,267 692,065
Accounts Payable 222,535 200,092
But now you’re in far worse shape. The state government pays very methodically, as you can see by the massive increase in receivables. That increase means your cash revenue has significantly slowed, which forces you to either a) borrow more from the bank or b) reach deeply into your own pocket to come up with the cash to pay operating expenses.
Further, as your accounts payable balance indicates, you’ve been compelled to pay your subcontractors more rapidly, since you need to assure their services to fulfill the new projects – another cash drain.
_________________
WHAT DID WE MISS?
The answer to your profitability and cash flow problems may not be growth after all. In reexamining Exhibit I, note that you let your balance sheet management slip badly in 2005. In a period of virtually flat growth, your receivables increased by $109,876. That means your cash revenue in 2005 was not $3,249,007 but, rather, $3,139,131 (i.e., $3,249,007 – $109,876). In addition, your cash expenses were actually $34,809 greater than you reported in your income statement because you paid down your accounts payable by $34,809.
____________
OBSERVATIONS
Growth is rarely the answer to business problems – particularly growth at any cost. The real issues may lie with balance sheet management. Not as exciting as growth but frequently more important.
==============================================
Business Alert - For the Business Professional
(C) 2006 Shockproof! Training (by Rex Beach)
www.ShockproofTraining.com (phone 866.237.7228)
The Solution is More Sales Right - To learn more about this author, visit Rex Beach's Website.
Like this article? Share it with your friends
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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George LudwigGeorge Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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