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Focusing On Sales Dollars Can Hurt You

Updated: May 28

Something that keeps so many businesses stuck at their current level is they become experts in the wrong numbers. Looking at the wrong numbers blinds them from studying and learning from the right numbers. These businesses are often surprised when they begin to look at the right numbers and see:

  • What their most profitable products and services are

  • What is really bringing profit to the business

  • Who their largest and most profitable customers are

  • What defines those customers

Often, unknown to the business, their best customers are already buying their most profitable products. Because they are so focused on sales numbers, the most important numbers, which could give them this vital information, get overlooked. Looking at sales dollars blinds them from looking at margin dollars. But you can't take sales dollars to the bank. Lesson: Focusing on sales dollars instead of margin dollars can keep you stuck. What is the difference between sales dollars and margin dollars? A business may have one million sales dollars in spices, but the spices only costs them one-half million dollars to buy. This gives them one-half million margin dollars (50% gross margin). That same business has one million sales dollars in cooking oil but the oil costs $900,000 to buy. This gives them $100,000 in margin dollars (10% gross margin). This business would be wise to brainstorm how to sell more spices. So often, your business niche is right under your nose. Lesson: Your business already has a niche. You just haven't recognized it. Using my three-step process for exploding profitability is helpful:

  1. Recognize where your business produces the most margin dollars.

  2. Focus resources in those product niches.

  3. Stay true to this margin dollar focus.

It may be that step three is the hardest to do. Why? The flashiness and "bling" of sales dollars are intoxicating. In the eyes of the world, it is all about sales. Telling others you had $100 million in sales sounds more lucrative than $50 million.

BUT, IT IS POSSIBLE TO MAKE MORE MONEY WITH $50 MILLION IN SALES WHEN YOU UNDERSTAND MARGIN DOLLARS. Success leaves clues. The clues you learn by becoming the expert in your margin dollars will help you develop your customer niches. More on that in my next post! Study to see where your margin dollars are! Harry T. Jones P.S. Want to receive Cultivating Impact weekly emails in your inbox? SIGN UP HERE. P.S.S. Reply to this email and let me know if this thought impacts you.

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