Business volume and market share are important and valuable. Extra volume also helps us to spread the fixed costs. Volume also helps us in making a good sales pitch and creates confidence to approach big customers.
Business volume changes the way the world perceives your business. There is more acceptance and feel good environment. More people are hired to handle the extra volume. And the moral of the existing employees is high to see the company in the growing gear. You become a part of the preferred employer list for a lot of good talent, who earlier wouldn't even consider you worth sending their profile.
Its a feel-good environment everywhere, till the balance sheet is presented.
The bottom line still doesn't change why does high volume fail to translate in to high profits.
Why do businesses have to pay the price of shrinking margins when targeting more business volume or market share.
What can be the cause of increasing costs? More business should be more profits and the cost to profit ratio should remain the same, ideally. Converse is true though.
Real problem is not more volume but extra complexity.
Showing posts with label business. Show all posts
Showing posts with label business. Show all posts
Saturday, March 15, 2008
Friday, March 14, 2008
Sweating the small stuff
The simple week was anything away from being simple. As one of the steps, I decided to investigate the roots of the unending list of unfinished, incomplete things. With a little push from my better half, I decided to look at the last 6 months sales reports and what was revealed was no less than a jolt for me.
The analysis put forth an alarming fact that 80% of our sales were coming from 30% of our projects. The remaining 70% of our projects were bringing the 20% sales.
70% of our projects were significantly small in revenue. They helped us gain a long list of customers and enhance our portfolio, but they were also a big time drain. They expected and received the same service like our big project customers.
Our service to our cream customers (80% sales) always suffered owing to the chaos created by the huge number of small customers.
The chaos which was result of the pressure put by huge number of small customers was building frustration with the team members, management and customers equally. At the end of a hard day, uncompleted work, annoyed customers was nothing than a nail in the coffin.
We kept on adding people to complete the unfinished work and ease the pressures, but they inturn ate our profit margins by inflating our cost. Their was no change in the situation of customer satisfaction or growth in sales , only a dry pocket.
It is high time to rethink our strategy towards sales.
The analysis put forth an alarming fact that 80% of our sales were coming from 30% of our projects. The remaining 70% of our projects were bringing the 20% sales.
70% of our projects were significantly small in revenue. They helped us gain a long list of customers and enhance our portfolio, but they were also a big time drain. They expected and received the same service like our big project customers.
Our service to our cream customers (80% sales) always suffered owing to the chaos created by the huge number of small customers.
The chaos which was result of the pressure put by huge number of small customers was building frustration with the team members, management and customers equally. At the end of a hard day, uncompleted work, annoyed customers was nothing than a nail in the coffin.
We kept on adding people to complete the unfinished work and ease the pressures, but they inturn ate our profit margins by inflating our cost. Their was no change in the situation of customer satisfaction or growth in sales , only a dry pocket.
It is high time to rethink our strategy towards sales.
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