When I hear business people talking about sales goals, they’re always referring to Gross sales. I want to do a million dollars in sales or I want my company to grow to $10 million or $100 million. But then I ask, which is more important gross sales, or net profits?
From my perspective, I think they’ve got it wrong. The goal should be to dramatically increase your net profits – the money you keep after paying your expenses. It does not go hand-in-hand that by doubling your sales you double your profits. In many cases the opposite happens. Sales may increase, but the profits lag far behind.
A good idea is to prune your business – stop calling on the unprofitable and time consuming accounts – so you can reduce your costs and dramatically increase your profit margins. Working with the right customers is critical. The trick is knowing when to say no. The wrong client can kill morale, force good employees to leave, and cost you big bucks. Working with the right client isn’t work at all – it’s a pleasure.
Saying Yes or No to a client is a business decision just like any other business decision you have to make. Should we rent this space or that space? Should we buy this computer or that computer? Should I hire this person or not? If you do put some thought into hiring a new employee, there should be as much, if not more, in getting a new customer. Remember, some customers cost you more than they’re worth.
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