One of the most common mistakes made in business is an attitude of over simplification.
You can detect this as a potential problem when you hear comments like:
“It will sell”
“Just sell the stuff”
“It will all come out in the wash”
“We had to take less margin, but we can expand our fleet of trucks and hit more stores!”
Believe it or not, I did not fabricate any of the above…I actually heard each of these statements spoken in various locations!
If you read this blog or any of the publications I write, it won’t take you long to figure out that I believe life is not all about money. However, neither am I naive. Every stakeholder (customer, supplier, employee or shareholder) needs your organization to be profitable / sustainable. Money must be managed well for this to happen! So…I have decided to blog for a while on the topic of profitability…to keep potential skeptics from forming the wrong opinion: that I am a bleeding heart / passion for mission idealist, with no regard for profitability!
Profitability / sustainability is a simple concept: there must be less money going out than coming in.
Sales growth actually eats up cash like crazy. Inventory and receivables, to name just two areas…not to mention staff training, loss of efficiency during ramp ups, expansions to manufacturing / production and / or service areas, etc, etc, etc…the list is endless.
Sometimes more money can be made / retained by selling less.
The first level of viability evaluation is not just sales…and not just margin (%), but rather sales – cost of sales = gross margin.
In the next blog…I’ll tell you a story about how this can have HUGE effect!
Hey…BTW…if you have heard an over simplified comment not mentioned above, I’d love to hear it! Email me at “info@synergysg.net” or just blog it!
—
David E White
Performance Coach
