a:25:{s:9:"weblog_id";s:1:"5";s:8:"entry_id";s:0:"";s:6:"sticky";s:0:"";s:14:"allow_comments";s:1:"n";s:16:"allow_trackbacks";s:1:"n";s:10:"entry_date";s:19:"2010-07-30 06:47 AM";s:15:"expiration_date";s:0:"";s:23:"comment_expiration_date";s:0:"";s:8:"category";a:1:{i:0;s:2:"12";}s:9:"author_id";s:1:"4";s:6:"status";s:4:"open";s:14:"trackback_urls";s:0:"";s:18:"versioning_enabled";s:1:"y";s:5:"title";s:21:"Who Needs More Sales?";s:9:"url_title";s:20:"who_needs_more_sales";s:4:"save";s:10:"Quick Save";s:11:"field_id_20";s:21:"Who Needs More Sales?";s:11:"field_ft_20";s:4:"none";s:11:"field_id_25";s:3:"694";s:11:"field_id_45";s:57:"More sales? Who needs more sales? I bet you think you do.";s:11:"field_ft_45";s:4:"none";s:11:"field_id_22";s:14:"sales, collier";s:11:"field_ft_22";s:4:"none";s:11:"field_id_23";s:3224:"<p>More sales? Who needs more sales? I bet you think you do.<br /><br />Everyone knows times are tough - especially small business owners. We\'re all scrambling to<br />succeed.</p>
<p>Here\'s something everyone doesn\'t know: More sales may not be what you need to survive.<br />Come with me as we take a trip down a typical income statement to see what I mean. Here\'s<br />last year\'s income statement for the fictional Joe\'s Computer Repair:</p>
<p>&nbsp;</p>
<ul>
<li>Sales $950,000 100%</li>
<li>Cost of Sales $522,500 55%</li>
<li>Gross Profit $427,500 45%</li>
<li>Compensation costs $190,000 20%</li>
<li>Other overhead costs $256,500 27%</li>
<li>Total overhead costs $446,500 47%</li>
<li>Profit (Loss) ($ 19,000) -2%</li>
</ul>
<p>&nbsp;</p>
<p>Let\'s assume that sales are down 10% from the prior year.</p>
<p>You can see that Joe lost $19,000 last year, and like most small business owners his first<br />instinct is to regain lost revenues. Not a bad goal, but if that is Joe\'s singular focus, he may<br />be missing opportunities and leaving money on the table.</p>
<p>While doing what he can to restore the sales, why not also look elsewhere for financial<br />improvements? Let\'s start with Cost of Sales.</p>
<p>Most of the cost of sales is direct labor expenses, but some comes from the parts used. If Joe<br />can reduce cost of sales by just $9,500 - by getting his repair team to be more efficient and<br />working out a better deal on parts costs - Gross Profit goes up by that same amount.</p>
<p>Now to compensation. Joe has 11 full timers. With sales of $950,000, that comes to about<br />$86,000/employee. Sales/FTE varies by industry, but in general, anything much below<br />$100,000 is cause for a closer look. With the dip in sales, Joe may have to reduce hours or<br />even headcount. Getting down to 10 FTEs would put him at $95,000/FTE - a significant<br />improvement. This is an important measure that deserves attention. For this example, we\'ll<br />leave Joe\'s compensation costs alone as there are enough real layoffs without me piling on<br />fictional ones.</p>
<p>Regarding overhead costs, can the team brainstorm on ways to cut costs and reduce overhead<br />spending by just $12,000? If so, here is the new income statement, reflecting the<br />improvements:</p>
<ul>
<li>Sales $950,000 100%</li>
<li>Cost of Sales $513,000 54%</li>
<li>Gross Profit $437,500 46%</li>
<li>Compensation costs $190,000 20%</li>
<li>Other overhead costs $244,500 26%</li>
<li>Total overhead costs $434,500 46%</li>
<li>Profit (Loss) $ 3,000 +0.3%</li>
</ul>
<p>At just better than breakeven, it\'s a start and beats the heck out of a loss. All with the same<br />sales. To get that same bottom line result solely by growing sales, Joe would have had to<br />increase revenue by almost $50,000 at 45% gross profit!</p>
<p>So, what can you take away from this admittedly simplistic example?<br /><br />&bull; You and your people should look for improvements in every nook and cranny of<br />your P&amp;L<br />&bull; Small percentage changes can make all the difference at the bottom lin<br />&bull; If you don\'t know your numbers, you can\'t manage them</p>
<p><br />Now, go sell something!</p>";s:10:"category_0";s:2:"12";}