Sales Are Great But Profitability Is King
Smart Ideas To Put More Money In Your Pocket
Some time ago I attended a National Speakers Association convention and heard a speaker share insights on the importance of profitability. The speaker was a CPA and, while his name and the details of his presentation escape me, a comment he made during his presentation stuck in my head. Now, some 20 years later, it still resonates with me. “Sales feed egos, profits feed families.” This has become my mantra as I speak, train and consult with small businesses internationally.
As you look at various education programs offered in the industry, you’ll see topics such as:
- “How to Become a Million-Dollar Salesperson.”
- “How I Sold a Million Dollars in My First Three Years.”
- “How to Be a Million-Dollar Producer.”
Now I will agree that selling $1 million in one year is impressive, but it’s only impressive if the profitability is equally impressive. I remember hearing someone at a show bragging to a friend about his sales from the previous year. It went something like this: “Yeah, last year was great, we did $1.2 million in sales.” His buddy responded, “...Wow! What were your profits?” Ignoring the question, the first man continued, “Can you believe we crested $1 million in sales?”
It makes me laugh and really drives the CPA’s quote home when I hear this type of response. People are so driven by the sales side that they forget about the profit. Let me say again: I am all for people selling a million dollars and more but it must be profitable.
If you dig a bit you can find some interesting industry statistics. For example, the average gross profit in our industry is between 32 and 34 percent. Why is this? I contend it’s because that range is the average margin published in supplier catalogs, and because we price and sell the products based on the catalog’s suggested price. Nowhere has it ever been stated that you must sell at those margins; they are merely guidelines.
What Are You Worth An Hour?
If I were to ask, “What is your time worth per hour?” what would you say? I have heard ranges from $10 an hour (seriously) to $300 an hour. If you are unable to answer that question, let me set the record straight. What if I told you that your time is worth a minimum of $100 per hour? How would that change your next quote? If you had to earn $100 per hour what would you do differently? What steps would you take to ensure that you meet that quota? Unfortunately, most promotional consultants don’t see the amazing value they bring to the table and therefore give away their most precious commodities—their time, ideas and creativity. You need to get paid for those things.
Selling At Higher Margins
Some time back, in a similar article on increasing profits by upselling, I shared the four things I always do when selling high-end jackets:
- Have the client’s logo engraved on a wooden hanger and place the jacket on the hanger for the presentation.
- Attach a custom hang-tag on the jacket.
- Consider placing the client’s logo on the jacket.
- Place the jacket in a logoed hang bag.
Each of these touches creates an opportunity to upsell. I cannot tell you the number of times clients have commented on the logoed hangers and garment hangtags, but each of these is a touchpoint for me to sell the value of why it’s important, such as: it gives the item a higher perceived value, makes it look more like a gift and it gives it a retail appearance and appeal.
The client usually loves these upselling ideas and orders the jackets along with logoed hangers. My cost for the logoed hangers is $2 but I sell them for $15. When I mentioned this in a previous article, a gentleman called me and told me I should be ashamed of myself for ripping off my customers. Really? I have never used a handgun during a sales presentation. I show, tell a story, sell the value and clients agree that the value is there; then they can freely purchase—or not.
I always sell on value, and I always upsell. For those of you who think selling way above an “A” discount code is impossible, think again. I have coached and mentored a number of folks who routinely sell this way.
I remember a conversation with the late Marvin Spike from ASI (he was amazing by the way) about this very subject and he said, “Cliff, always remember, profit is not a four-letter word.” So true. It is imperative that we, as business people, show a profit.
Marketing At Lower Costs
Another way to increase your profitability is to look for ways to lower your costs—especially on self-promotions. For example, when you speak with your suppliers find out what products they have on close-out. Look at what they are offering, determine the client audience you want to target with the product, and develop a theme, copy and distribution method. Reach out to our industry’s great packaging suppliers and share your vision with them. They can be amazing resources to help you package your campaign.
I developed a program some time back where I purchased some pizza cutters at a substantial discount because the supplier was discontinuing the item. I packaged a pizza cutter in a pizza box (also discounted by the vendor because it was a self-promotion) and targeted 12 potential buyers whom I wanted to reach. If I had not told the supplier it was a self-promotion and had not used a closeout item, the piece would have cost me about $25; instead my cost was about $7. The results of the campaign generated $27,000 in initial business at a 54-percent gross profit. The long-term value of that inexpensive campaign was approximately $175,000 at more than 50-percent gross profit.
Think about how you can parlay this example into profit when creating marketing campaigns for your clients; it is the same principle as a self-promotion. For example, I developed a campaign for a foot doctor who was trying to increase referrals. He had a $2,000 budget. We used a plush bear on closeout decorated with a hangtag and materials bought at a hobby shop. My cost, using closeout merchandise and the efforts of some great vendors, cost me $350. I charged $1,945 and realized a profit margin of 64.8 percent. The best thing was the result: the client showed a 45-percent increase in referrals the next quarter as a direct result of the campaign.
Your Ultimate Exposure
All of this said, keep in mind that everyone is going to have a different idea of what being “profitable” is to them. I ask you to think before you provide a quote to a client. Be sure you have included all the value-add items and remember your exposure. Your exposure is your cost of goods; you are responsible for that. For example, if you sell a $1,000 order and your profit is 25 percent, your exposure is $750. On the contrary, if you sell it at 50-percent profit, your exposure is only $500.
Also consider what would happen to your profits if you sold exactly the same dollar amount as you did last year but with different margins. Look at the potential incremental effect on your bottom line. For every $100,000 in sales:
- A five-percent increase in margin puts an additional $5,000 in your pocket
- A 10-percent increase in margin gives you $10,000 more in profit
- A 15-percent increase nets you $15,000
By adding value and selling solutions, along with selling products, you can see amazing jumps in your profits. What could you do with an additional $500, $1,000 or even $2,000 in your pocket?
Thumping your chest and bragging about what you sold definitely feeds the ego, but selling profitably at every opportunity, by selling your creativity, value and innovation … that feeds families.
Cliff Quicksell, Jr., MAS+, serves both as a consultant and acting director of marketing for distributor iPROMOTEu. He has been in the promotional industry for more than 30 years in various capacities. Additionally, Quicksell is president of his own international speaking and consulting company, speaking, coaching and consulting on ways and methods that companies can grow, expand and prosper. He has helped and spoken to audiences in more than eight countries and has published two books and more than 800 articles on sales, marketing and creativity. He can be reached at 301-717-0615, via email at email@example.com or on his LinkedIn profile.
Image: Cliff Quicksell
Learn More Tips To Small-Business Profitability
Cliff Quicksell, MAS+, will present “Ten Small Secrets To Small-Business Success And Profitability” during The PPAI Expo in Las Vegas. In this one-hour session, you’ll discover how to get out from under the A-B-C pricing stigma, learn to reevaluate your brand’s current look, feel and positioning, and understand how to move your business upward with increased sales and profits. Add the free session to your show schedule on Thursday, January 12 from 9-10 am at the Mandalay Bay Convention Center.