How What You’ve Forgotten Could Cost You

Posted on December 8, 2019 | Author: Doug Phares

Business processes are usually born of necessity, and we value them highly. We pay top dollar for consultants to help optimize these processes, we integrate them into our structure, make them routine, and then we just...stop doing them.

Take, for example, a conversation I had with a colleague. His organization had taken the time to drill into the exact right price for their product. It was an average within a range determined by volume, and it was the “right” price for them to grow sales, cover overhead, and still yield a reasonable profit.

They taught their whole team to know these parameters and why there were important and then gave everyone the ability to manage their territory pricing as needed. It worked.

Sales looked good, costs were fine, and they were hitting the profit number. Considering this problem “fixed,” the management team turned their attention elsewhere, and time passed. About a year later, they noticed margins were taking a sudden turn the bad way. Glancing at sales activity, it all looked fine—the top line was growing. But after a second bad quarter, they got deep into cost structures.

As it turned out, two new salespeople, who didn’t have the culture or discipline of the old guard, had been really throwing them off. They inherited the “use your judgement” on pricing philosophy with none of the background to understand the parameters. Had someone been watching the old “average unit sales price” they had tracked so firmly a year earlier, this would have popped up right away.

While they fixed it quickly, it also cost them significant profit for two quarters. So what do we learn here, other than to be more careful when hiring salespeople?

Don’t obsess over your numbers, but have a way to monitor “things you know have to happen.” Get a calendar and toggle a reminder every month, quarter, or year to check elements like this.

As we talked about in an earlier post—if you are watching too many metrics every day, they can start to blur. Just find a way to check back in to make sure problems you’ve already solved don’t become problems again.

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