More Sales, More Profits – Not so Fast

Each and every day I hear “if I only had more sales I’d have more profits…”
While not in disagreement with this notion it is not necessarily the pathway to enhanced profits.

Our company assists many clients with marketing, media strategy, and new and better promotions. This is all great but there is other ways to “get more profits”.

Utilizing Current Expense Categories

I’ve suggested to our client base to take a harder look at their expense categories utilizing “new and different perspectives”. My motivation for delivering this message is after watching several clients increase their bottom line significantly (up to 25%) without sales not going up.

So how did they do it?

I’ve watched and assisted several companies enhance their bottom line.

The following is a list of what they have done:

  • Cross Training Staff which reduced the amount of staff and increased productivity.
  • Tracking Key Sales & Expense Numbers weekly
  • All larger supply and repair items go onto a purchase order to be approved prior to spending. This gives time to pause before committing.
  • Menu Work
    • Analyze menu mix and remove slow movers and high cost items. Maybe slow moving items can be eliminated without disrupting the Brand.
    • Cutting Down the size of the menu which should translate into cutting down the amount of prep work.
    • Drive a low product cost and higher gross margin dollars on feature sheets.
    • Change/Evolve menus at least twice a year if not quarterly.
    • Take a hard look at your inventory levels. Too much inventory can cause wasteful usage and spoilage as well as tying up precious cash.
  • Additional Management Compensation for achieving key cost items is inherently important. Having them and you track this daily, weekly and monthly is mandatory for best results.
  • Initiating discussions with key vendors in regards to finding more “cost efficient” products.
    You don’t know until you ask-this is a guarantee. I don’t suggest you try to “beat them up on the price” but rather take the route of cost efficiency.
    You will be pleasantly surprised by the results. Possibly look into a professional buyer to set up a purchasing program as well.
  • Take a hard look at the Marketing Direction and Expenditures. I won’t say traditional mass media doesn’t work but the cost is somewhat “prohibitive” today.
    A strong social media presence is best practices today. I also like themed promotions being done on a regular basis.
  • Look at your Cost of Management. I don’t advocate people losing their jobs but you need to be more cost efficient. Hourly supervisors may be a better bet.
  • Shop all accounts at least annually, including credit card processors.
  • Give staff more autonomy in their departments and encourage them to bring their ideas to the table, instill a sense of ‘ownership’ within your team.

I believe there are other ideas. These are the ones I’ve seen work well. I have a few rules that I feel you should follow:

  • When going through this process focus on picking up the dollars and not the pennies.
  • Do not be indiscriminate about adjusting cost factors. Do your due diligence prior to making bigger changes.
  • Any change that may impact the customer experience is not to be done. This holds true for employee morale and engagement.
  • Be sure to explain to all concerned (your staff) about why you are making these cost changes and why this is a positive impact to them.

Every company must do this. It is the prudent thing to do. It is to be a positive impact to your staff, vendors and guests. If you don’t feel it will be an enhancement then you should not make the changes.

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