I was recently speaking with a group of bankers and it got me thinking – why do they measure success by sales?
Over the last few years most of the banks have reduced dramatically the help and support they give to small and medium sized enterprises. The service you get is based on your turnover. A static business with no future, producing old fashioned products or services but with a turnover of £50 million gets a dedicated manager and access to help and advice. However, a growing business with great margins, investing in the future and moving forward but with a turnover of only £1.5 million struggles to get past the telephone banking person and may even have to rely on automated services.
Anyone can sell. Selling and making a good profit is another problem all together and it is profit that is more important than sales. Which would you rather have, a business where turnover is £1million with profits of £600,000 of which £200,000 is invested in the future or a business with sales of £30 million and £200,000 profit ?
For the avoidance of doubt please give me the former every time – you can’t spend or reinvest sales. Often very high turnover businesses have very low net profit to sales ratios making them vulnerable to any downturn.
Large stagnant businesses are, in many cases just living out past glories before they disappear forever. We can all think of examples.
The answer as to why success is measured by sales is that it is an easy number which everyone can understand. It goes up – good, it goes down – bad. Easy.
Just because something is easy doesn’t make it right.
If we really want to look to the future then don’t assume the successes of the past can be extrapolated or that volume is necessarily the answer to business problems. Those days are gone.
Judge businesses (and individuals) by what they are doing and the potential they have not just their past ability to grow. The world has changed and let’s support businesses and individuals accordingly.
Any banking product states words to the effect of “past performance is no guarantee of future performance.” If this is the case why do banks and other organisations decide on the future service to customers based on past results?
It’s not what you earnt or did in the past that counts, it’s what you keep and what you invest in the future.
If you want to look at this further we have both manufacturing and service simulations to enable everyone to be more effective then please contact us for details – https://www.wellsassoc.co.uk/contact/
If you want to be kept up to date with blogs and other matters please subscribe to our newsletter http://www.wellsassoc.co.uk