A company should always be aware of its sales figures regardless of how large or small the organization is. This is because those figures could provide valuable insight into how it is performing over a given period of time. For instance, they could show a company where it has room to grow or which products to get rid of. Let’s look at some other reasons you want to make sure that you never disregard a sales report.
Poor Revenue Numbers Could Indicate a Strategic Error
Let’s say that your company decided that there was so much demand for its brand that it needed to open a second location. However, let’s also assume that the second location was only doing half the sales that the first location was. This could indicate that there wasn’t as much demand as you thought there was or that customer service is lacking there.
It could also indicate that whoever is overseeing the second location isn’t doing a good job in his or her role. Regardless of what the problem is, you won’t be able to spot and resolve it without constantly reviewing and knowing your numbers. By letting a problem linger, it could result in even worse sales in the future. That could result in letting employees go, selling off assets or having to file for bankruptcy.
Sales Numbers Could Be the Basis for a Loan or Investment
When a company asks for a loan, a lender will look carefully at past, current and projected earnings and sales. If your business doesn’t know its numbers, it is likely that it won’t be able to provide accurate information to a lender. Ultimately, that party won’t be able to determine if your organization is worth taking a risk on.
Failure to have accurate sales numbers may also mean that investors won’t be interested in putting their capital into your company. In the event that an investor did choose to partner with your organization, he or she may feel compelled to ask for a larger amount of equity. Alternatively, the investment into the business could be smaller.
Your Sales Numbers Determine What Products or Services to Offer
If you discover that a product isn’t selling well, it generally isn’t worth keeping on store shelves. This is because you are wasting money ordering and storing merchandise that will never be liquidated. If the product is perishable, it may be necessary to spend money to dispose of it once it spoils.
Your sales numbers should also help you figure out what types of services to offer your clients and where to provide them. For instance, you may find that it isn’t worth your time or effort to plow driveways more than 10 miles from your home. You could also determine through analyzing sales figures that customers don’t need their lawns mowed often enough to offer it as more than an add-on.
By ignoring prior earnings information, you won’t be able to see what your customers want or if it is feasible to give it to them. Even if a product or service does sell well, if there isn’t enough margin on each sale, it might not be justifiable to offer it. Again, you won’t know whether this is true or not without knowing your numbers.
To be a successful business owner, you need to know how how many customers you have, what they buy and what the margin on each sale is, which is why it’s important to have a CRM in place. Otherwise, you will be making decisions regarding your company based on nothing more than a gut feeling. While this may be effective in some cases, it rarely works out as a long-term strategy. If you need help looking at your numbers, don’t hesitate to hire an accountant.
