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Know your company’s MPG
“We’re lost but we are making good time”
That’s what my father would say on our family vacations whenever we got lost. I find some businesses have a similar philosophy when it comes to how they focus their sales activity.
Yesterday, I was helping a client with their sales strategy for 2014. They had done their homework, and had their prospect list. Now it was time to categorize the list. They broke the list down into these categories in order of priority:
- Small jobs with high profit
- moderate size jobs with high profit
- Large jobs with high profit margins
- Large jobs with low profit margins
In the beginning of the discussion, they had large jobs with high profit margins as #1. That makes sense on the surface. As we looked closer at factors like cost of sale, amount of time to prepare bids, the closing probability, and amount of time and resources spent, small jobs with high profits came out on top. The cumulative effect of these jobs contributed to a majority of their profits. All they needed to do was look at the numbers, and the numbers gave them the information they needed to do the best job of prioritizing their categories. If they simply guessed, they would have guessed wrong.
A colleague of mine makes his living off numbers. As Chuck says, “It’s all in the numbers”. His job is to help companies build the right configuration of time and resources to maximize their profits. For example, he worked with one company that had just grossed $20 million the previous year, and they had only made a little over $100,000 profit. He looked at their various labor rates, their products and services, and the margins on each one. In doing so, he was able to show them how to increase their profit margins. At the end of the next year, their gross was $20 million again, but the profit was over $2 million. Over the years, Chuck has related many such examples that have led me to this conclusion: Each company needs to look closely at their situation, how they spend their time, and what is the best “bang for the buck”. If you do, you will be making good time, and you won’t be lost!