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Sales Strategy & Management

You Can’t Build Profits Without Forecasting Your Sales

How building your foresight will give you the tools for building a profitable business.

Pavlo Phitidis

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It was the beginning of another year. The December holidays felt like they were months ago. Already work was becoming overwhelming.

Charlotte held the hard-earned post of regional operations manager in one of South Africa’s biggest tile retailers, she had been with the company for eleven years. For some time she had felt she needed a change.

She also had a creative side that never found expression in the day-to-day humdrum of operations. For three years before she started her own business, Charlotte had been keeping herself busy over the weekends.

Every week she would collect the broken tiles that were discarded as a result of careless material handling – dropped boxes, forklift damage incurred during the long journeys from manufacturers all over the globe. She only collected the decorative tiles with colours and patterns to suit the tastes of eclectic South African consumers.

The tile pieces were taken home to the garage where Charlotte’s other life took over. On the walls and floor were tile mosaic patterns expressing emotions and images that would appeal to the homeowner.

Her journey into the world of mosaics began on a trip to Chartres, France in 2004. There she visited La Maison Picassiette, a home covered completely in mosaic made of broken ceramic tile. The care, dedication and beauty evident in the work inspired her so deeply that she decided to make mosaics.

Inspiration and passion are key attributes needed when starting a business which she certainly had in large doses.

In 2006 she left her previous employer on good terms and started her own business. She produced mosaic kits including the mosaic pattern, tile pieces, tools and materials needed for home mosaic enthusiasts to create their own pieces of art.

In 2010, her business was generating an annual turnover of R13 million with exciting growth prospects.

Managing costs

Few retail suppliers are pure cash businesses; terms of payment often sit on both sides of your business model. Retailers demand payment terms and you want their business.

On the supply side, Charlotte sourced the broken tile pieces from her previous employer. Her orders were made up of broken tiles collected in nylon bags or end of range whole tiles which she broke up into the fragments.

The relationship was invaluable. Charlotte could order as and when she liked and the pricing was reasonable. The biggest distribution centre of the retailer which supplied stores across the country was a convenient 12km from where she lived.

The early years saw her learning the lessons that cannot be avoided. At first she marketed her product too broadly. Not everyone likes the idea of buying a mosaic kit.

During the first two years, Charlotte worked hard to understand the consumer market.

Turning your business to face your customers and not your ideas is a very humbling and difficult task to achieve.

She found a market and matched the products she developed to retailers that she could market to.

In 2008, the impacts of the global credit crunch began to bear down on the global economy. The South African economy responded soon afterwards. In order to sustain her growth, Charlotte had to innovate. This meant two actions.

First, she had to get the price of her materials down. At the same time, she had to broaden the range of products she had under specific price points and increase the range of designs to appeal to established customers. Her first trip to China was being planned.

After two weeks in Guangdong, China, Charlotte arrived back in South Africa with her first order placed. She found a range and variety of tiles that fitted exactly what she needed and at prices that were almost 30% cheaper than her current line of supply. It was a dream trip.

When I met her in 2011, her annual turnover was a solid R18,7 million.Charlotte complained that while her turnover had grown and things were looking good (she was about to list her products with a national garden product retailer), turnover was not translating into the profit margins she once enjoyed. She was in a terrible cash crunch.

[box style=”gray,info” ]The Importance of Not Letting First Sales Go Bad[/box]

Sales forecasting

I ran the diagnostics on her business. We included the numbers, a site visit and business systems evaluation. What I discovered sent a chill down her spine.

Charlotte’s materials inventory, work-in-progress and especially finished stock ratios were a mess. After additional analysis, we discovered that the problem lay with the Chinese inventory. The levels were too high and cash was tied up in what increasingly looked like unsaleable stock.

Before importing from China, Charlotte procured locally. At most she would have a three or four day delivery cycle. Her ability to order ‘just-in-time’ was on offer all-the-time. While this was great for the first few years of her business, the demands and pressures that led to her having to import required a different approach.

China required an increase in the size of the average order and she also had to endure long lead delivery times, as the tiles were transported by ship.

Despite her experience, the stock she ordered often arrived when the season for its demand had passed. Mosaics have a fashion and novelty factor and so we quickly went to work on developing a system to create an inventory order foresight capability. It’s called a sales forecast.

Charlotte had to prepare a forecast on sales over the next year. The forecast needed to specify sales into product units. For the first time, she could get a sense of what the future plan of the business would look like. Supporting the forecasted sales was a promotional plan, something she had never aligned against a forecast.

With our ability to read the market signs and present them in product units, we developed an inventory ordering capability that took into account the manufacturing and delivery processes from the Chinese suppliers.

Included in the February orders were samples for the development of products for the following summer season. This allowed Charlotte to move to a point with her retailers where she could pre-sell the season’s products before placing orders from the Chinese manufacturers.

Forewarned is forearmed

The power of doing a well thought out sales forecast in your business provides you with advantages that you would never have thought of. In Charlotte’s case ‘forewarned is forearmed’.

Today Charlotte’s business generates a consistent R27 million with an average stock turn of around 1,4, dramatically down from the terrifying 3,2 that we first discovered. Goods are almost completely sold before they are even ordered. A nice place to be. And profitable too.

[box style=”gray,info” ]Become a Sales Process Master[/box]

Sensing the future

Forecasting isn’t about mind-reading. It’s looking to the future, and then using the numbers to make intelligent decisions today.

Stock sense

What does your inventory look like, and is it hurting your business?

Toolbox

Build your forecasting tool

Create 12 columns marked with the months of the year.

Row 1

Identify all the activities this year that will impact sales e.g. school holidays, strike season, elections, the seasons etc.

Row 2           

Forecast the business from your current clients.

  • Organise your profitable clients. It’s likely that the top 20% of your clients make up 80% of your sales. If you are dealing with consumers, segment them and identify which segments make up your 80% of sales.
  • Forecast their performance this year: Take a view on growth given the poor economy — say 10% and take your 20% customer segment and grow their revenues over the period by 10%.

Row 3

Forecast sales from new clients against your product/service range.

  • Take all your products or services and do the same — segment them into the top 20% that brings in 80% of your sales. List them over the 12 month period.
  • dentify what promotional activity you want to implement this year and locate these activities over the 12 month period.
  • Take a view on what new sales you will generate against your top 20% products/services in response to your promotions.

Row 4

Aggregate your sales forecast for this year by adding the expected sales from current customers to the hope for sales of the new customers responding to your promotions over the year together.

You now have a forecast

It will never be right. Every month register what sales you brought in and compare to what you thought you would bring in. Did you over- or underachieve?

Ask and interrogate why and in so doing you develop the intuition of foresight through a most useful tool called the forecast. Do it now and it will serve you beyond your dreams.

Pavlo Phitidis is the CEO of Aurik Business Incubator, an organisation that works with entrepreneurs to build their businesses into valuable assets. Pavlo is a regular commentator on entrepreneurship on 702 Talk Radio and 567 Cape Talk Radio. He can be contacted at www.aurik.co.za

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Sales Strategy & Management

(Podcast) Are All Prices Negotiable?

Person, socialisation, product, place – what are the key differentiating factors between those who negotiate price and those who don’t? And who determines the value of a product?

Nicholas Haralambous

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What is up for negotiation? When should you be negotiating prices, and when should you be open to negotiating prices with your customers?

Person, socialisation, product, place – what are the key differentiating factors between those who negotiate price and those who don’t? And who determines the value of a product?

Listening time: 8 minutes

Related: (Podcast) Phone Calls Often Solve Email Problems

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Sales Strategy & Management

Sales Leadership: The New Frontier

The Leadership skill of Influencing people increasingly trumps “hard selling techniques” as people enjoy the feeling that they are forced into buying a certain product less and less.

Dirk Coetsee

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“Once upon a time only certain people were in sales. Every day, these folks sold stuff, the rest of us did stuff, and everyone was happy. One day, the world began to change. More of us started working for ourselves- and because we were entrepreneurs, suddenly we became salespeople, too. At the same time, large operations discovered that segmenting job functions did not work very well during volatile business conditions-and because of that, they began demanding elastic skills that stretched across boundaries and included a sales component.” – Daniel Pink

The transformation of sales persons to Sales Leaders is not only the essence of this article but increasingly becoming a necessity, considering the skills demand required to convince people to buy your product or service within an modern environment wherein the consumer is spoilt for choice.

Related: 3 Strategies For Closing Sales Without Picking Up The Phone

In general staples in the make up of old school sales training was and in some cases still is: Product knowledge, fielding sales calls in a friendly way yet creating urgency, learning the ability to overcome client objections and of course do not forget the all-important methods of upselling.

All those elements of selling are still important in general yet “soft skills” such as active listening, handling conflict, and above all removing the emphasis from selling a product or service to selling an enhanced lifestyle or life experience has become the new frontier for the sales game.

The Leadership skill of Influencing people increasingly trumps “hard selling techniques” as people enjoy the feeling that they are forced into buying a certain product less and less. The “parrot method” of drilling sales scripts into the salesforce of the company is slowly but surely becoming obsolete as people want to feel that they are being cared about and considered within the sales process as individuals. “Caring for the other person is the only leverage in any conversation”, Gary Vaynerchuk says.

The above theory calls for a balance between Sales Leaders whom inspires their sales teams to create a personal, professional, and vibrant environment for their customers wherein which they are highly motivated to buy, and Sales managers whom monitor the key sales metrics and checks that sales procedures are being followed. In the modern world both Sales Leadership and management are needed at each end of the balancing scale.

Still, to this day an unfortunate large proportion of sales people are like lambs put to the slaughter, within some situations, as the only weapon taught to them is product knowledge and wearing a smile and then suddenly a very unhappy customer unleashes their anger upon them, and now the poor sales person has no knowledge in terms of how to deal with conflict, generally speaking. How to cope with and overcome conflict and other negotiation skills has become paramount in sustaining very good client relations.

Ethical Leadership is also strongly put forward as a necessary component of any sales training or course through this article. Sales techniques filtered through the companies Vision, mission statement and value system to test its validity and alignment to the companies’ culture can be increasingly effective as opposed to simply applying generic methods of selling which is not always aligned to the company ethos. A high level of ethics amongst Sales Leaders can ensure that after sales promises are kept and that the product sold is in effect as good as propagated by the sales person.

Related: The 5 Best Actions You Can Take To Improve Sales Calls

When a servant leadership culture is prevalent within your company it goes a long way to ensure that your sales people create a caring and positive experience complimented by an enhanced after sales service. Servant Leadership within a sales context is to put the customers’ and teams’ purpose above the individual team members purpose and that by itself is a potential multiplier of sales performance.

A highly important factor within the context of sales performance is the sales Leaders’ ability to formulate the right questions to be asked of the client in order to create a very pleasant experience. Statements in general can be quite dangerous as it is normally viewed as final and very hard to take back once communicated. Questions on the other hand requires an answer and when posed in a caring way can quickly establish rapport with a client.

Subtle nuances picked up by the Sales Leader through asking the right questions can greatly assist in creating positive client engagement. A practical example would be to refrain from the very obvious question of:  how are you? People are so used to being asked this question that they are not likely to give you a very open and honest answer and will be likely to provide you with very generic answers such as, “Fine thank you, “Well thanks and you”, and so forth.

By very simply changing the question to: “How are you feeling today? “, the very perceptive Sales Leader can relatively easily pick up on the client’s emotional state and adjust the conversation from there in order to create rapport.

In Summary, this writing actually asks one question to all CEOs’ and/or boards that must take their companies forward towards a desired future state: Do you want sales people and managers whom are likely to maintain the status quo, or do you seek Sales Leaders whom will challenge the status quo and will always be willing to ask more of themselves in terms of increased skill levels and performance?

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Sales Strategy & Management

You Have Less Than 7 Weeks Left To Turn Your 2017 Around

Implement these 5 steps and achieve 2017 revenue targets and set up a great start to 2018.

Charles Hsuan

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It’s no secret that 2017 has been tough for the majority, with less than 7 weeks to go before business winds up for the year. I’ve summarised an effective sales plan that will help you accelerate your way to success before the year ends.

Referred to as the “championship rounds” in boxing, the last few meters of a 100M sprint, be smart with the last bit of mental energy you have left and sell, sell, sell.

Implement these 5 steps and achieve 2017 revenue targets and set up a great start to 2018.

1Be Laser Focused on Your Customers

You’ll never be one size fits all to everyone, review your client base and define 3 to 5 groups of customers that your business serves, and solves problems for.

Grouping Map

  • Customers that behave similarly, have similar problems and face similar circumstances.
  • Define the groups by age, volume, category, geographic location, and similar demographics. The more components you assign to each group, the better you understand them, and effectively communicate your services to them, ultimately solving their pain points.
  • Personalise with a name it e.g. Sarah is a 30-year-old white collar worker that lives in the urban area, earns R30 000 a month in household income, she sends money back home each month “Black Tax” to support family members that lives in a rural area.

Related: Have We Lost Our Face-To-Face Sales Ability?

2What Goes Through Their Minds Before Making a Purchase?

  • Whether it’s subconscious or psychological, people buy solutions to problems, especially in a tight economy.
  • In order to stay relevant to your customers yesterday today and tomorrow. Continue to evolve and develop your products and services to ensure you are solutions driven.

3Build The Right Pitch

As each of your customer group face their unique challenges. Build a pitch that positions your communication for each customer group to maximise effectiveness.

Follow these 5 important pitch building steps

  • Who is the consumer?
  • What is the pain point that you’re looking to solve?
  • What is the setback for your consumer to not have that pain point solved?
  • What do you do to solve that pain point?
  • What is the result for your consumer, of having that pain point solved?

Once you’ve built the pitch, utilising them adequately, and start selling!

4Implement Your Strategy

This revenue-generating strategy has 2 aspects: hunting (Active) and farming (Reactive)

  • Hunting takes on the form of outbound action. Searching, meeting and engaging with your potential clients. In short, stepping out and finding your customers.
  • Farming is more reactive, it is known as inbound selling. You farm by leaving breadcrumbs that lead your customers towards your services. This is done by generating practical content and using digital platforms to attract attention towards your services or products.
  • Build a calendar for your hunting and farming activities, for the next 12 weeks, and specify tasks for each day.

Related: Savvy Sales Skills To Grow Your Franchise Footprint

5Execute, Measure, Adjust

  • Hunting: Make 10 calls before 10 am each day, make use of a sales script, this forms part of your daily activities.
  • Farming: Schedule a week’s worth of social media content to post.
  • After week one find out which group gives you the best response, tweak it & carrying on.

This plan will help you to notice which approaches yield the best results. You’re able to remove what doesn’t work and focus your time on what leads to the most sales. May this help you turn the last 7 weeks of the business year into a profitable one.

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