Sales

How Long Will it Take to Double Your Sales?

Doubling your sales is an ambitious goal for most business owners, but is this practical and if so, how long will it take?

It is not as difficult as it seems if you break it down into smaller components, such as the average percent increase that is needed each year to double your sales. Here are examples of how long it will take in years to double your sales based on your compounded growth rate percentage:

Growth Rate      Years to Double

5%                          14.2 Years

10%                        7.2 Years

15%                        5 Years

20%                        3.8 Years

25%                        3.1 Years

30%                        2.6 Years

40%                        2.1 Years

50%                        1.7 Years

 

Even a modest 15% growth rate will double your sales within 5 years, which is very reasonable. If you are able to keep your growth consistent for another 5 years, then you will double your sales again, which translates to a quadrupling of sales from your base. For example, a company with $1M in sales will double to $2M in 5 years and in another 5 years will double again to $4M.

Always do the math when figuring out how to achieve your sales goals to make sure you are on track.

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The One True Business Formula for Success

There are dozens of formulas and ratios that a business can use to determine success and profitability. However, there really is one that is most important and should be used repeatedly . . .

Sales – Expenses = Profit

Keep on repeating this formula over and over again and you will do just fine.

 

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Instead of Taking out More Debt, Do This Instead

One of the first ways most people try to cover a financial shortfall is to incur more debt. Whether this is to support a struggling business or even on a personal level. This may be a solution in some cases or may be used in conjunction with other financial methods. However, there is another solution that may work to solve your shortfall.

Reason for shortfall: Simply put, there will be a shortfall when your income is less than your expenses. Sometimes this is temporary or seasonal and you may be able to predict a shortfall based on business patterns.

The debt solution: Usually, most businesses turn to debt to smooth out the shortfalls. While this may be a viable solution, it should be well though-out and other options should be explored.

Alternative solutions: Aside from needing funds to support a large purchase, if your income is not enough to cover your expenses then instead of first choosing debt, here are a few other options:

Sales: Focus on increasing your sales. An increase in sales will help to increase your bottom line results. Will your expenses increase as a result? Most likely yes, but so should your profit. Aside from industries that have a poor cash conversion cycle, which is a topic all by itself, the additional business activity should help to offset your financial shortfalls.

Expenses: Small businesses should always be conscious of what they are spending their money on. Based on observation, small businesses do not usually spend their money excessively, but they may spend allocate it to areas of their business that do not generate a benefit, such as poorly spent advertising dollars.

Profitability by service/product/client: It may come as a surprise, but most likely there are several aspects of your business that are really not that profitable or may not be profitable at all. If that is the case, then by eliminating these activities your profits will increase as you can focus on increasing sales of higher profit services.

Don’t always go for the “easy” solution, but perhaps a simple, more sweat-producing, long-term solution to help the finances of your business.

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Increase Sales or Cut Expenses?

What should be the focus? Should we increase our sales or cut our expenses? All of the marketing and self-development gurus tend to focus on increasing our sales, but other financial experts want us to focus on cutting costs and debts. Who is right and what should we do? Let’s look at the pros and cons of each:

Cut your expenses and debt: Being aware of our expenses and cutting unnecessary expenses is a smart move, along with reducing debts. However, cutting expenses will only go so far because you need to incur expenses to support your business operations. Reducing debts is also a smart move, but this should not be done to the detriment of using up all of your cash, otherwise you will go right back to increasing your debts.

Increase your sales: Every business should look for ways to grow their sales, as a business tends to naturally deteriorate over time. An increase of sales can and should lead to an increase of profits, but not always. Many times, a business will increase sales activity, but their profits may actually decrease, stay flat, or only increase incrementally. The main reason for this is due to the fact that a business needs to spend money on marketing, people, technology, and infrastructure to be able to support higher sales.

The optimum solution: Instead of focusing on either or, you should focus on both to some degree, which is what the most successful companies do. Instead of just growing your sales haphazardly, you should focus on growing your sales profitably. To accomplish this you will need to perform some simple math to make sure that you are focusing on profitable services and products and delivering them in a profitable way as not every dollar of sales is equal. Better profitability will also allow a business to have excess cash to help pay down debts and not get into more debt. Without a focus on profitability, a fast growing company will tend to have cash flow issues, and companies that focus on cutting expenses tend to cut themselves into irrelevancy.

How Healthy Are Your Sales?

There are many ways of measuring risk, but did you know that your sales concentration may be placing an unnecessary risk to your business? This also applies to sales professionals as well.

I have seen it over and over again, whereas a small business relies heavily on one or several large customers, and then the customer disappears. Sometimes multiple large customers disappear at the same time. Either they go out of business, cut-back due to a slowdown, have management changes, or other various changes happen that are beyond their control. This will all impact your business as your sales now plummet.

As a good rule of thumb, you don’t want to have more than 10% of your sales from one customer. It creates more risk than necessary because you never know if or when things will change. There is an adage known as Murphy’s Law that states, “Anything that can go wrong, will go wrong.” Additionally, you don’t want to rely heavily on one referral source for new business either. Murphy’s Law applies here as well.

What should you do to minimize your risk? First, never build your business around one or a few customers. This may be the case when a business is relatively new, but over time it is a huge risk. Secondly, assess sales per client to acknowledge who the large customers are. And thirdly, you need to market your business to decrease your risk of serving a few large customers.

A healthy business is constantly looking for ways to reduce risk. This not only decreases your chance of set-backs, but increases your odds of insuring ongoing success.