CFO’s are sometimes viewed as “Deal Killers”.  Sales executives sometimes view CFO’s as a necessary hurdle to move past.  But to the smart sales executives and CEO’s alike, the CFO can provide direction and boost profits during a time of sales growth.  Why is there such a traditional disconnect?  To understand the tension, we need to first examine all the ways that you can grow the sales of your company.

Growing sales is simple really.  Besides buying a company and growing through acquisition, there are really only four ways to grow your company:

1.       Sell more of the same stuff to the same people

2.       Sell the same stuff to different people

3.       Sell different stuff to the same people

4.       Sell different stuff to different people

Each of these paths to growth are covered with potholes that can pull the axle off your company’s progress.  A CFO, working with the vision of the CEO can provide context and feedback specific to each of these growth strategies.

Sell more of the same stuff to the same people

                This strategy is perhaps the lowest risk path to growth.  It depends upon the company knowing how its products can solve problems for its current customers that it isn’t already solving. Think “Would you like fries with that”.  The assumption is that non-customers can use the same product or service, so just making more of it is easy.  The success of this strategies lies in securing one or more sources of benefit.

Selling more stuff to the same people depends on knowing what needs they are currently satisfying with the services or products of other vendors.  If you are a printing firm, what printing is your customers having done at your competitors?  Is there a product that you make that can replace an existing part – if you are a plastic molder, can you replace a part your customer is currently buying in metal?  As you increase the volume of products you make, you need to ask if there are costs, or economies in scaling up?  If capital goods are a significant portion of the cost, can you spread your investment over more volume, or are you at capacity now?  Capacity costs are often a step function – once the commitment has been made, the cost may be steep and require a leap of faith if you want to in-source all of the production.  Does the product even have economies of scale – if the marginal cost per unit is high, you might not get as much bang for the buck as you think.

Impact on short term financing – higher sales volumes means means a higher investment in working capital – Accounts Receivable, Inventory and Accounts Receivable.  Timing of expenses relative to collections usually means securing a larger Line of Credit.   And while increasing sales are normally a great thing, this credit demand can be met with pushback from your bank.  Increasing sales to current customers also may come from a change in terms of sale – extended payment periods that can add to the possibility of default or an increased demand for purchase discounts to support volume increases.  The economics of buying more from a single vendor – remember YOU are the vendor in this case – can serve to erode marginal income.

Are you sure that your sales increase is coming from a focus on most profitable products?  Many smaller companies do not have clear delineations in their margins by product line.  Surprise, not all of your products have the same margin.  By selling more of the wrong stuff, you can actually drive yourself out of business.  Do you really KNOW what stuff do you want to sell more of?

If you have some idea about margins, are you sure that you are accounting for the real product costs correctly? A lot of accounting systems don’t allow the company to properly account for the cost of acquisition or inbound shipping of materials, so costs can be distorted.  Dedicated packaging required for the sale of some products in lumped with general packaging in overhead and distributed across all product lines.  Are your BOM’s  accurate?  Oftentimes they haven’t been properly maintained as materials have changed over the product life.

Do you know the activities required to support the sales of one product versus another?   You may not want to increase sales for the customer who has higher rejections, greater documentation requirements, etc.  The cost of maintaining the customer may be outweighing the profit of the products sold to them.

Selling More Stuff to the Same People is the lowest cost, easiest to implement strategy to increase the sales of any organization.  Proper execution requires answers to key questions.  Answers that your CFO can provide you.   Answers you need to reach the best possible decisions.  If you don’t have a CFO, well, “Every company, regardless of its size, needs a Chief Financial Officer^®”