Have you ever noticed how at business networking events all the focus seems to be on sales, elevator pitches, trying to sell a product or service in the few minutes available, gathering business cards for follow up and generally doing a lot of talking and not much listening.
Asking if someone has found a new supplier at these events that can save their company money generally results in a hesitation and a look that says, “I’m here to sell, not to buy”.
This may be a perfectly reasonable response for people who are attending the event with no other responsibility than selling but, for business owners or senior managers with purchasing budgets, buying better can be much more effective than trying to sell in a crowded bazaar.
Let us assume for the sake of this article that an SME has a net profit margin of 8%, which means that for every €1000 of sales the business is left with €80
Let us also assume a sales level of €500,000. This would give a net profit before tax of €40,000
A 25% increase in sales to €625,000 would be required to increase the net profit by €10,000
To add €10,000 to the bottom line by cutting costs would require a 2% reduction in costs
The question is this, is it easier reduce costs by 2% than it is to increase sales by 25% ?
This may be a little simplistic as economies of scale could make come into play but, at this level of turnover, it is likely that extra sales person would be required, which would negate this advantage.
A sale must travel the exhausting route through the Profit and Loss account to get to the bottom line. A cost saving goes straight to the bottom line, a much faster journey
So perhaps a second mantra to Sell! Sell! Sell! Should be, Buy! Buy! Buy! BETTER