I Want More Sales Dang It!
These days, there are so much focus on SEO and SEM in general, hey don't get me wrong, both are important for driving traffic to your website and necessary to do. But I also think that it’s time to discuss and address the number one reason why businesses are not profitable and it has nothing to do with sales.
This takes me back to something that Suzie Orman said a few years ago that's been embedded in my brain: “It’s not how much you make, it’s how much you keep that matters. Same goes for companies who are in business or looking to be sold
Okay, so let’s apply that concept to business. It’s not as much about sales volume, as it’s how much net profit you take home. Case in point, in 2006, we had a spectacular year. Wish it was 2006 again....I'm digressing here.
Okay, back to my story.
In 2006, we just grew 170% over 2005 and it was all hands on deck. It was a good year and we paid a lot in taxes due to our growth. In 2007, we grew another 50% year-over-year, I should be elated, right? I was, except when I discovered that I’d only/kept half the profit I did in 2006! I called up my tax accountant and my closest financial confidantes and asked how that could have happened. I sold more stuff and made less money?
Translation: I worked harder and had less to show for it. "Say What?"
This really was an eye opening experience. We started combing thru our expenses with a fine tooth comb. And by fine, I mean really fine, I know where all the money went and at the time, it made sense to spend it. But the real lesson here is that we could have timed it better. Most of our expenditures were related to business expansion, the cost of moving into a larger facility, new hires, and new equipment. All necessary, but we could have been wiser at planning and at budgeting so that we could manage our growth instead of letting it manage us.
We could have waited to bring on new staff until we truly could not do without. We could have suffered in the smaller warehouse instead of doubling our space. Lots of should haves and could haves. My main point of sharing this here is get you think (and rethink) about your growth strategy. Understanding that you need to have key processes and systems in place so that if and when your business does grow, it’s because it was thought through and planned for, Not because you're reacting to the elements in your environment.
Think Zappos. How many companies sell $840+ million and barely ink profitability or have $100 million in revolving line of credit and access to VC money. Yes, they've reinvested back into their company all those years and yes, they are making money now and have access to an even larger pool of resources (read: Amazon.com). It’s a great success story, but most of us don't have this type of access and therefore we need to be vigilant about our finances.
To read more on being profitable, please visit my blog.
Do you have experiences and stories like this (growing pains) that you can share with Practical Ecommerce Readers?