Are your sales people focusing on sales or profits?

Neville on his motorcycle

When a sales person thinks about the success of their sales efforts they are usually fixated on the top line dollar value often losing sight of the costs and other related (hidden) resources needed to support sales. Needless to say, this can be extremely dangerous.

I have been riding motorcycles for more than 40 years and am always learning new tips about safety. (Am I giving my age away?)  OK….so I’m just 50  plus tax!

The Target Fixation Trap

I recently rode my motorcycle from Toronto to Northern Alaska, close to the Arctic Circle and back via Vancouver and San Francisco, a total distance of 11,000 miles (~ 18,000 km) in 29 days.

When riding extreme distances on long and lonely roads, a rider tends to “zone out” and focuses on what’s in front of the windshield rather than constantly being aware of going on around.   It’s called TARGET FIXATION and it’s dangerous!  When a rider fixes his gaze on what’s in front, he loses his peripheral vision which is essentially a blind spot resulting in not seeing, for example, an animal running into the road.

It’s also a very common problem amongst pilots. Search the internet and you will see lots of articles about this phenomenon.

I attached a sticker onto my windshield that said “SCAN SCAN SCAN” which I kept on for about a week until it became a habit.

As an executive business acumen trainer and coach, I constantly hear about managers making reference to how well they are doing (or not doing) in sales. The target fixation being the word “sales.” So what’s the issue? The issue is that a business can generate lots of revenue without being aware of the other resources needed to support an increase in sales. Some examples include staff burnout, cash flow, gross profit, cost control etc.

wide open road

Sales versus profits

There are of course, many other metrics and ratios that leaders need to measure but here is one that tends to elude many operators. It’s called Operating Leverage which means that you will want your operating profit to grow at a higher PERCENTAGE rate than sales. If profits grow at a lower percentage rate than sales, it means that the operating costs are increasing at a disproportionate rate to sales.

Final message: Stop focusing on gross sales alone and be aware of other resources (Cause & effect) that are being affected when the top line increases or decreases.

If you’d like to know more about how to educate your account managers to understand the financial impact of their decisions so that they can make more profitable sales, decisions let’s talk!  CLICK HERE to book your appointment.