03 Jul Numbers versus marketing
The question is. Can you sell your way out of a problem? The answer is Kind Of!
I have come to realize in my business coaching career it’s what the numbers are telling us is most important. Growth for the sake of growth just doesn’t cut it. More leads will not fix all business yet that is what we see being pushed at us on our screens every day. As important as leads are it’s the last place I want to go to help a struggling business out of the gate.
The first place to start is to bench mark. What are the industry standards? Does the company have recent financials or heaven forbid? Accurate financials. Where does the company stand in respect to fixed and variable costs? What is their profit margin? These areas are often referred to the low hanging fruit. I’m OK with that because if it generates real profit quickly it will help drive positive cash flow. You pay your bills from profit and not sales. I love the saying from Business friend and mentor Frank Mummolo who’s famous quote states. “Revenue feeds your Ego. Profit feeds your family.”
Most struggling business are 30 to 60 days from running out of cash. Will a marketing plan that will likely take 60 to 90 days to get traction solve their immediate problem? I don’t think so. Most certainly a marketing plan will likely add additional costs and no guarantee it will work. Getting your financial house in order is the first order of the day for a struggling business.
When you do the math little changes in three key areas can make a huge difference to profitability. Fixed Costs, Variable Costs and Profit Margin. Once you have solved these three areas you are now ready to go to market. Why wait you ask. Because we have lowered your “BEP”. Yes, your break-even point. Once you have lowered your break-even point every Gross Profit dollar is a Net Profit dollar. That means if you are in a 25% Gross Profit Business you need to sell 4 dollars to make just 1 gross profit dollar. If you are running at a 10% net profit you need to sell 10 dollars to make 1.
When is the time to go with a Marketing Plan? Yup! After you fix the 3 key areas. What you have accomplished now has set your company up from profitable growth and not growth for the sake of growth.
Remember. More revenue does not fix a company that is not on a solid foundation. Think of the energy it takes to sell something. Does it not make sense to make the same profit from selling one item as it would take from the extra energy it takes to sell four?
I rest my case. Start with the numbers.