Posts Tagged ‘product’

One Simple Low Cost Method To Increase Sales

July 1, 2010

by Doug Smith, President, The Woodhaven Group

If sales are down try this low-cost method to increase sales and instantly improve your business cash flow.  The best part is it takes zero advertising dollars.

Look back at the last 3 years and calculate the average revenue or sales per customer that was generated for a year.

Make a list of your top customers and rank them in order top to bottom by year to date volume and determine who is trending to hit or exceed the yearly average.

Now,  make a list of those customers that are trending below the average, set a specific goal per customer to close the gap and have the sales department assign these customers to the top sales people in your company.  Their mission is to move sales volume up on each of these customers so by year-end their volume is at the predetermined average.

Why would this approach work?

First, you have already invested dollars to get them as a customer so no new advertising is needed to get these sales.  Second, the customer likes your company and what you have to offer since they are purchasing from you.  They are just not buying enough.

Try the following steps to increase sales with these customers:

  1. It sounds crazy but ask them to buy more.  It could be that the sales department has just been taking orders and not trying to build the sale.  Tell the customer how much the company values them as a client and would like to do more business than they currently are doing.  Believe me, this will work by itself with some customers.
  2. Increase sales by identifying a product or service that they are not buying that would be a good fit for the customer.  This becomes new sales for your company and sales that should have been generated with this customer all along.
  3. Offer a rebate or some incentive if by the end of the year their total volume hits the target goal.  If you get pushback, tell them the goal is realistic and is just the average amount purchased by the typical customer of your company.
  4. Review the payment history of this account and if it has been good, inform them that as a valuable loyal customer their credit limit has been increased. Like many users of credit they may purchase up to their credit limit.

I would do all 4 of the above suggestions for each customer.

Bonus method to increase sales:

After you have implemented the above program to increase sales with the “below average” volume customers, do the same steps with the “above average” volume customers.

The result will be a spike upward in the overall annual average revenue per customer.  This all happens without bringing on any new customers.  You are just maximizing the potential with your current customer database. 

Your business should see a jump in sales, cash flow, and profit.

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Have A Down Payment Pricing Policy To Speed Up Cash Flow

June 29, 2010

by Doug Smith, President, The Woodhaven Group

Does your business perform a unique service or make a custom-made product?  If so, start including a down payment requirement when quoting a price for services or products.  This will dramatically speed up your business cash flow.  Combine this with extended terms from suppliers and that line of credit at the bank may not be needed.

Many companies are reluctant to ask for a down payment out of fear that it will upset the customer.  Our society has trained customers to expect to pay a down payment when purchasing certain products and services.  Most consumers would expect to be asked for a down payment when purchasing a home or car.  Unless your business is a retail transaction in a store where the customer gets the product immediately (ie:  restaurent, drug store, oil change, etc.), then try this tip and see your business cash flow take off.

It should always be a policy that any custom product or service  should require up to 50% down payment.  These funds early in the transaction can be used to offset materials & labor, marketing, and sales cost.  Or, just put the cash in your bank account and earn interest.  By receiving a down payment it also shows commitment on the part of the buyer.

Examples of a few products or services that should be getting up front down payments are:

  • Landscaping projects
  • Website design
  • Home or commercial remodeling of any kind
  • Caterers
  • Interior decorators
  • Direct mail design and production
  • Tailoring
  • Machine shops
  • Excavation
  • Dock repair or replacement
  • Mold remediation

Always make sure a complete purchase order or contract is signed by both parties spelling out the contract price, amount of down payment and balance owing so there is no misunderstanding at the end of the job how much the final payment will be.

Put this pricing policy in place today and watch your business cash flow immediately increase.

Is Your Core Product Still Generating Profit and Cash Flow?

May 10, 2010

by Doug Smith, President, The Woodhaven Group

Is your core product still a priority in your company?

Do your employees know what your core product is?

Is your core product profitable and creating cash to drive your business forward?

A core product of a specific business historically has solved a problem or fulfilled a unique need better than the competition.  Often it represents a product or service that is first to the market and is hard to displace.

As sales of a core product grows for a company a major benefit is a strong loyal customer base.  Examples of companies and their core products:

  • Starbucks:  a good cup of coffee
  • Google:  search and advertising
  • KFC:  chicken
  • Goodyear:  tires 

A few thoughts on core products:

  1. The core product of your business should be your company’s most profitable product line.  Calculate the direct profit of all of your products by taking the selling price less direct costs such as labor and materials.  You must know how profitable each product line is.  Based on profit, is your core product still #1.  If not, why not?
  2. Has your company become bored with your core product and branched into other product lines that are not as profitable but are using up cash and management time and talent?
  3. Does your customer know that you have been known for your core product and why?
  4. Have you evolved your core product to stay abreast of your customer’s needs or have you allowed competition to steal sales with a newer better version?

As a company grows sometimes it loses focus and direction.  Make sure your core product is the most profitable part of your business.

Never let a competitor take your core product and the loyal customers that go with it.

Consider Early Pay Discount To Increase Cash Flow

May 9, 2010

by Doug Smith, President, The Woodhaven Group

Many industries have a traditional preset discount off the invoice for paying early.  As the customer I used to take advantage of an 8% discount if I paid my supplier by the 10th of the following month.  The invoice was due, otherwise, at the end of 30 days.

As a provider of a product or service your business may want to consider implementing an early pay discount. The discount may only be 1-2% but will be enough to entice some customers to pay early.

The key decision for your company is balancing the bottom line profit impact against the potential for increased cash flow from your customers.

Here are some thoughts to guide you in your decision making:

  1. Does your industry currently offer a discount for early pay?  If not, then this could be a way for your company to differentiate itself from the competition.  The result could be added sales as the early pay discount is perceived as added value by your company and you can steal marketshare. The fact that the customers you acquire would have strong cash flow (evidenced by the ability to take the discount) would be a plus. 
  2. An ongoing argument against early discounts is its potential negative impact on profits.  Can the discount be passed on as a price increase?  Your customer may not balk at a 1-2% increase in prices if it has been some time since the last increase and you provide a high quality dependable product.  If you are concerned about implementing a price increase at this time  then wait and piggyback the increase on top of an increase in price in the future.
  3. What is the interest cost to your company to currently fund  accounts receivable?  This should be factored into the profit computation.
  4. Also, determine if there is operational savings realized by having less accounts receivable to collect due to accelerated payments.
  5. Not everyone will take advantage of the early payment discount.  For those who do not, if a price increase is in place to support the discount, then your company just realized more gross margin dollars and percent.
  6. You cannot let a customer pay late and take advantage of the early pay discount.  An aggressive accounts payable manager will attempt this if you do not catch it and cut it off.  Assume this will happen.  
  7. Invoices need to be received at the same time the product is delivered so that your customer has time to process the early pay discount. You do not want to give your customer an excuse for taking the discount late.  
  8. Your best creditworthy customers will take advantage of the discount.  Prior to your company offering a discount your customer was most likely aggressive in delaying payment as long as possible to preserve their own cash.  The trade-off, as discussed earlier, is faster availability of cash for your company back against the discount cost. 

Which is the best way?

In my opinion, I want to find a way to make an early pay discount program work with a minimal cost to my profit.  I believe the quicker I can get use of cash the faster I can put it to work and  the greater potential there is to increase my overall return on investment.

I would be interested to know what your experience has been.