6 replies to this topic

[DavidBlaise]

The recent failure of industry giant CorpLogoWare underscores a really important point: Gross sales, in and of themselves, are practically meaningless. Here's the video...

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[A G]

Definitely, volume is not the answer. However, one must sell so many items, whether to one customer, a few, many or very many, to get anywhere. Small orders here and there to many customers does not equal the "somewhat larger" orders one gets from certain clients.

Of course, if those "larger orders" have insufficient gross profit margin in them, they are not worth it either.

"Bottom line" (i.e., "lowest price") is NOT the answer. More and more customers are trying to change everything to a commodity, and then get a bid for the lowest price. There are SO MANY variables involved, that sooner or later (usually later), someone figures out that bidding everything out brings back ho-hum results.

Ideas, qualifications on products, decorating or "imprinting" products, message, execution on orders, on presentation, etc, are all important many steps along the way.

Not all providers (whether we are talking healthcare, working on a building, or putting together a promotion) provide the same. If you don't think that's true, go and let just any brain surgeon work on your head (funny, that is actually what most people do - in so many situations, one either doesn't have sufficient time, information, or judgement ability in choosing the best doctor for a given ailment or procedure). Not all attorneys or accountants necessarily can/will/do provide the same results. The same is true in our business.

I just wrote a letter to a major supplier in our industry, who, in the last year, has cut all margins from an 'A' to a 'C'. As I pointed out in an e-mail to their sales director yesterday, while the difference between an 'A' and a 'C' appears to be only 10%, the REAL difference is MUCH BIGGER!!!

Most sales people and distributors in this business don't realize how much MORE PROFITABLE selling on an 'A' (or a 'P' - same thing) is versus selling on a 'C' (or an 'R') margin.

To illustrate, let's suppose we have an item that has a suggested list price of $10. And it has a 'C' discount. So, OUR cost is $6. If we sell it at suggested resale (or "list price"), our profit per item is $4.

Now, let's suppose that same item is priced on an 'A' discount. Our cost to the supplier is the same, $6. And our price to our customer is a bit more, $12, which is a "mere 20%" more.

However, NOW our profit margin per item is $6 (same as our cost). On the sale of 100 items, we would make $600 instead of just the $400 we would on a 'C' margin.

But note, $600/$400 is 150%. Or a WHOPPING 50% MORE!!!

How would you like to make 50% more each time you sold something?

Hey, you CAN! Price things with a 50% margin built in, instead of a lousy 40% margin built in. You'll make MUCH MORE!!!!

[maxrscharf]

:) Of course proper planning is necessary for success in business.

But most businesses fail because they do not understand their customer needs.

:confused: Possibly one of the failures of CorpLogoWare was that they took their eye off the customer by concentrating on too many different things at a time and did not have the skilled people to handle them successfully.

First of all, we must understand that "All business starts with a customer", and, if you can fullfill your customers needs, you have an outstanding chance for success. Remember, it is not what you have to sell, it is what your customer needs to accomplish that counts.

Second, is that marketing is a major key to success. "Marketing is war". You need to plan the proper use of your financial & human resources to accomplish a marketing plan that is directed to accomplishing the needs of the customer base that you are servicing.

The above information is just as effective if you are a company of one or a company of hundreds. When I started my distributorship (with $60) all the way through my supplier company (18 million dollars in sales) I kept the customer in the forefront.

Max
www.scharfandassociates.com

[DavidBlaise]

Max,

I agree with everything you said about all business starting with the customer and the necessity of a marketing plan that accomplishes the needs of the customer.

But today's video is about something different. It's about how you have to be profitable if you want to be able to remain in business and service the customer.

Even if you are focused passionately on your customers, if the profit margins on the sales you are making don't cover your overhead, then your business will run out of money and the business will fail. So yes, absolultely service the customer. But recognize that only profitable sales allow the business to continue.

Best,

[Chris Miller]

I sure wish I could earn CEU credits for browsing DT..... i'd be there by now. Maybe you should look into that, David. :)

[DavidBlaise]

Sure. We'll just have Scott pick up the certification fees!

[Chris Miller]

DavidBlaise said:

Sure. We'll just have Scott pick up the certification fees!

I'm sure he would do it..... i'd even chip in.