Sales And The CFO Part Ii
Dec 17, 2010
In the prior newsletter, we explored the first of the four basic ways of the increasing your company sales – Sell More Stuff to the Same People. CFO’s aren’t the “Deal Killers” that Sales Executives seem to perceive them as. CFO’s ask the questions that need to be answered before the company is put at risk. The CFO can provide the CEO the detail they need to boost profits during a time of sales growth.
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 is covered with potholes that can pull the axle off your company’s progress. In this Newsletter we will explore the second strategy – Sell more of the Same Stuff to Different People.
Different Measures: Selling your products to new customers can place unusual demands upon your organization. New customers have different expectations. New customers can have new standards. Vendor qualifications can impose ISO standards, which may demand new quality systems, more people, more equipment, more systems. Those costs change the profit profile of the product. What is the cost versus the opportunity? If you made products that were sold to consumers and now you are pursuing Military sales?
Sales Metrics – An important factor in growing sales is creating the key indicators of success. How can you motivate companies that haven’t purchased from you before to purchase from you now? Measuring the progress along the sales process is key to gauging success. What standards will you use to measure the success of new customer development against costs? With the variety of marketing methods now available, creating benchmarks to so that the company can nimbly move unsuccessful to successful sales channels can maximize the return on marketing investment. Setting expectations and measuring results – CFO’s work hand in hand in gathering and communicating the message to Operations and Sales.
Gross Margin Optimization – what stuff do we want to sell more of? If you are going to sell more of the existing products, which ones should you sell? All products are NOT equal. Let’s be honest, some items in you catalog are there to fill out the line – to ensure you offer the complete range of options. But you don’t make the same margin on all of them. You don’t sell the same quantities of each part number. There are different setup requirements, different economies of scale, and different vendors of subcomponents.
Are we accounting for the real product costs correctly? Are the BOM’s? Do we know the activities required for the sales of one product versus another? (Selling cost for dollar of repair is less than the selling cost of new build). CFO’s can both point to the best products to sell for the bottom line, but can also work with Operations to improve the margins on the “dogs” that make their home in your catalog.
Acquisition of Customers via purchase of competitor – One way to grow your sales of existing products is to purchase a competitor, someone already selling a similar product to your target market. If your product is a better value to the customer, or the additional volume will improve your margins, an acquisition may make sense. To enhance the success of an acquisition, a CFO can direct and perform the Due diligence and especially measure customer loyalty versus the cost of the acquisition. Many a company has been purchased only to have the target customers move on shortly thereafter. A CFO can help to gage the fit of competitor’s client base – remember no competitor is exactly like your company! Finally there is the cost of converting the acquired company and integrating its operations. Tasks which are overlooked and commonly the cause of a poor acquisition.
Selling More Stuff to New People is a low risk strategy to increase the sales of any organization. But it is always easier to say than to do. 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®”