Company A and Company B currently have identical sales numbers. However, there is a big difference in having equal sales from a numbers standpoint and what the quality of those sales are to each business. The quality of the sales is much more important to the financial strength of the business and the potential value. There are at least three areas that indicate sales quality and that should receive attention from the company leader.
- Profitable Sales– There are many companies who have grown sales tremendously that have gone broke. Many reasons can cause a growing company to go out of business such as, outgrowing the infrastructure of the company or running out of cash. Often times the reason is producing sales at a loss or very low gross margins. Great care should be exercised in determining the companies variable and fixed costs to ascertain the breakeven point and an adequate margin needed to produce sufficient profits. Sales can then be priced appropriately.
- Diversified Sales– Especially important to sales quality is having sales that are adequately diversified. Norm Brodsky has stated that ,”whenever most of a company’s customers have a critical defining characteristic-such as being in the same industry or having the same owner-that company risks losing a huge amount of business all at once. That vulnerability might also affect its value when it’s time to sell(Brodsky, p. 73).”
- Long Term Sales– The sales that result in a business of high value are sales that are built on strong customer relationships. These are sales that are not fickle and in danger of going away from month to month but instead are the result of years of trust, making sure customers are never taken for granted but rather treated with the respect and gratitude they deserve. Sales supported by these types of customers form a foundation that can enable a business to survive tough times and eventually sell at the highest value possible.
Strive for sales quality by making sure sales have adequate profit margins, are diversified, and long term through excellent customer relationships.
*Brodsky, Norm, (October 2016), INC.