Featured, Sales Tip

Beyond Product – Alternate Ways to Grow Revenue

Mar_SalesArticle-03

I am sure that many of you reading this month’s article are curious to see if there are some ways to grow your revenue that you haven’t yet explored. Maybe not…but it’s often worthwhile revisiting some to see if something’s been overlooked or merits another look.

As a business consultant and sales trainer, I often get asked to share my elevator speech. The part I want to share is what I do for my clients…”help them make money or save money; it just takes many different paths.” I say that because I just want to remind everyone that finding ways to save money is also one way to grow revenue. More on that later.

While I will be addressing some other methods for increasing revenue, I’d like to start out by briefly discussing the obvious route…promoting/adding more services. Product is great but it’s just one revenue stream and the competition is fierce and margins declining. If you ask a car dealership where they make their money, they’ll tell you that the real profit is in servicing cars, not selling them.

As I’ve written many times before, if your clients aren’t buying furniture right now, they have a greater need to maintain what they already own. I’ve addressed this in the past but I am still amazed at the number of dealers who aren’t taking greater advantage of the opportunity to increase their sales, gross profit, and capture greater market share by offering relevant services.

Selling services usually have a faster sales cycle, meaning that dealers can generate income and get paid quicker. The G.P. on services is typically higher than on product. If you’d like more information on services, you can request a copy of my article called Why Isn’t Your Sales Staff Selling More Services? (jheilborn@indeal.org).

Selling service doesn’t mean that a dealer has to have the facility or the staff. Some dealers shy away simply because of a lack of expertise or ability; preventing them from offering the service. Some companies just aren’t in a position to add the internal resources required to offer a service in-house. In any case, it just requires finding a reliable outsource partner and identifying a list of services relevant to your clients and market. Whether in-house or outsourced, services can help generate income for a dealership and increase market share.

To help identify the services you may want to offer, start by asking some questions:

1. Does this service create or provide a unique competitive advantage for the organization?

2. Is the service contributing directly to business growth or expansion?

3. If your organization were a start-up, would you build this capability internally?

4. Would companies hire you to perform this service?

5. Is there a sustainable flow of business/revenue to warrant offering the service?

Let’s look at some other ways to add some profit to the bottom line.

Sales Velocity – Increasing Deal Value

For those of you unfamiliar with the term, Sales Velocity was developed by Altify in 1988. “Sales velocity measures how long it takes your sales team to move deals from opportunity to close. It’s a valuable sales metric for companies of all sizes because it lets sales leaders forecast revenue, evaluate their sales process, better equip their sales reps, and find ways to accelerate their sales cycle.”

Sales Velocity uses a formula with four variables;

  1. Number of Opportunities
  2. Deal Value
  3. Win Rate
  4. Length of Sales Cycle

Since I’m writing about growing your revenue and not just Sales Velocity, I want to focus on just one variable; Deal Value. In a perfect world, every project would allow for a fair and profitable margin; but that’s not the reality. Dealers are taking jobs at record low gross profit; often not enough to cover much more than their costs and commissions. The challenge is to find ways to increase the margin and still be competitive. Not every order needs to be six figures to be meaningful. Finding larger projects is great but increasing the value of each order often means you can make the same or more revenue even with fewer orders.

Suggestive selling can increase Deal Value. Selling accessories like art, lamps, desk accessories, marker boards, signage, and planters can be a very nice add-on to every sale and these products can often be sold at a higher GP, improving the overall margin on the sale…but the salesperson has to ask…and as often as possible. One dealer made up branded paper pads with a checklist of twenty-one accessory products for the salespeople to hand out to clients; lunchroom to the boardroom. If the salesperson doesn’t ask or remember to go through the list with the client, the checklist might get the client’s attention later.

Recommendation #1 – If you don’t have a nice checklist, add a line to the bottom of proposals that reads, “Please allow 10% of your overall budget for artwork and accessories.”

At the very least it can open the conversation and it can lead to other opportunities as well.

Recommendation #2 – An old retail trick is to add $.99 (99 cents) to the end of every unit. It adds up quickly and seldom gets pushed back…even in competitive situations.

Discounting

Obtaining a better discount from manufacturers can be very helpful to increase revenue but more often than not these days, the competition may receive a similar or identical discount. Getting more discounting doesn’t always mean more profit; just a lower price to the client.

Discounts that often get forgotten or unused are discounts for early or 100% payment upfront. Some manufacturers still offer a 1 or 2 percent discount for payments made between 10 or 20 days after receipt of the invoice. I know of one dealer (who has sworn me to secrecy) who receives an extra 5% discount for paying the invoice in full with order placement. This can put a strain on cash flow or lines of credit but it can also increase the profit on a job.

Rebates

Another traditional way to increase revenue is by receiving rebates from the manufacturers. Most manufacturers are willing to offer a rebate for committing to and reaching agreed-upon sales goals.

Dealers who belong to a group like INDEAL benefit from pre-negotiated discounting and rebates but rebates can also be negotiated with manufacturers not part of a group. Dealers who create their own Primary Line List should make discounts and rebates part of their conditions for making a manufacturer a Primary one.

Budgets and Financials

Budgeting isn’t glamorous but monitoring the budget and comparing it to the sales forecast on a regular basis can help dealers protect their profits. One of my favorite indicators? Analyzing each line item in the budget as a percentage of sales. If the percentage goes up even a little you need to know why. It is important to look for any changes or anomalies on a regular basis in order to be able to make adjustments to the budget while it’s still possible.

Monitoring cash flow accounts receivable, and DSO on a regular basis help dealers identify their financial status. Getting too dependent on a line of credit can also lead to problems, not to mention the extra expense. Interest payments can negate a lot of the revenue from a sale.

Health and Wellness programs

There is a lot being said about health and wellness programs these days, including workplace safety. They are important and should not be ignored as they offer several key benefits:

  1. Keeping employees healthy leads to greater productivity. Greater productivity can lead to more sales and added production.
  2. There are cost savings associated with not needing to hire temporary replacements.
  3. A formal health and safety program can be instrumental in preventing injuries thus lowering workers’ compensation claims and premiums. Keep in mind that your company will end up paying increases on your workers’ compensation premiums every time they submit a claim. In fact, for every dollar that an insurance company spends on a workers’ compensation claim, your company will end up paying premium increases between 150% – 200% in the two to three years following your claim. Those are bottom-line dollars. If you are paying $50,000 in workers’ compensation premiums, how much does your company have to sell just to cover that cost? If your average GP is 20%…$250,000.

Anything you can do to lower your costs is found money and incorporating an employee wellness program into your organization can make a significant impact – and is easier to implement than you may think. INDEAL Cares, a charitable organization with a vision to transform the health and wellbeing of employees within the commercial furniture industry in North America, provides guidance for organizations looking to start or enhance wellness programs and offers free resources to sustain their efforts. This initiative was created to support the industry, regardless of INDEAL affiliation. You can learn more here.

For your clients:

After you have your house in order, you can take this idea to your clients. Tell them how a good health and wellness program can benefit their bottom line. Once you’ve had that conversation it is easier to introduce the products and services you offer to enhance their ongoing health and wellness; ergonomic products, air purification systems, COVID, and other pathogen-related products. Keep in mind that even once COVID has passed, there will always be allergens and pathogens in the air.

If you haven’t already, start to target the HR managers for your clients. Many of them have a separate budget that they control specifically for health and wellness. This is often an untapped opportunity.

Growing your business is not necessarily the same thing as growing your revenue.

All change is not growth, as all movement is not forward.

– Ellen Glasgow, American Novelist


Jim Heilborn is INDEAL’s Training and Development Consultant specializing in the office furniture/products industry, working nationwide with dealers, manufacturers, and service providers. Jim has been associated with INDEAL since 2011, focused on training and dealer development. Jim can be reached at jheilborn@indeal.org.

Share on facebook
Share on linkedin
Share on email

RELATED ARTICLES

Need More Info?

ABOUT GLOBAL

orem ipsum dolor sit amet, consectetur adipiscing elit. Phasellus bibendum eu quam vel cursus. Mauris lobortis elit sit amet urna faucibus, in vestibulum sem sollicitudin.