First Quarter “Red Flags”

The first quarter of 2015 has ended.

Tom Egelhoff

The first quarter of 2015 has ended. The 30-day accounts receivable should be in hand and now it’s time to review how your year is beginning. Here are a few things to examine that will get your off to a better start.

Average Sale

Average sale is like your blood pressure: numbers moving up or down indicate health or show medication is needed. Are your average sales up or down from the same time last year? If you are not keeping track of average sales, then start. It’s a great indicator of customer traffic, impact of buying decisions, and sales performance.

If sales are down, is there an identifiable reason? It’s not always the economy so look deeper. Have you reduced advertising? Are Internet sales having an impact? Are you pricing things properly?

If your average sales number is up then, chances are, you’re doing a lot of the right things.

Sales to Traffic Ratios

How many people leave your business without making a purchase? Sales conversion is the lifeblood of most businesses. They came in for a reason. They have a problem or need and it’s your job to alleviate that problem for them.

Your sales staff might need some customer service help or sales training. The most common mistake of salespeople is failure to ask customers to complete the order. I know that seems ridiculous, but many salespeople are just afraid to take that step.

Customer Service – Prepare the Customer

Good customer service is the best service you can deliver day in and day out and still be profitable. You prepare the customer’s expectations with your advertising and marketing message.

Are you exceeding customer expectations? How on earth do you have any idea what the customer is expecting? They may expect you to send a limo to take them to your store.  You need to define what they should expect before they ever enter your business and then live up to what you told them.

Inventory Control

Is your inventory turning over at an acceptable rate? Do you have any products or services that are not pulling their weight? Have you identified your ideal customer by their demographics such as income, education, needs, etc.? Do the products you carry match up with your customer profile?


Inflation over the past year has been around 2 percent on average. Check your invoices. Have your suppliers raised their prices? Have utilities increased in cost? Insurance? Healthcare costs? Rent?

All these things have to be passed on to the customer in the form of price increases. Not every cost can be passed on but if your supplier wants more, your choice is raising prices or reducing profit.

Most people will not even notice a 2-3% increase or notice the things they buy on the grocery shelves cost slightly more than last year.

If I have a $15 item and sell 100 of them I make $1,500. If I raise the price of that item to $25, I only have to sell $60 to make the same income. Looking at it another way, I could lose 40 percent of my customers and still make the same income just by raising one price.

Some Final Thoughts

Business is a numbers game. There are a lot of plates to keep spinning at the same time to make it work. Knowing your numbers and how to change them to your benefit will keep the doors open and customers happy.

Red Flags are not a bad thing. They are detours and “under construction” signs while you repair the road to success. Follow the signs.    

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