3 Reasons Why You Shouldn’t Focus on Sales Without Thinking About Profitability

One of the best pieces of advice I ever received about doing business was the simplest thing I ever heard: Charge more than it costs. And while this seems simple and maybe a little unnecessary to state, an alarming amount of small business owners do not charge more than it costs. And because they don’t, they aren’t profitable in their businesses… which is a big problem because profit is how we keep score in business.

As a business coach and mentor, I work with hundreds of small business owners every year and prior to working with me, many of them have no idea how to experience profit in their business, other than lowering expenses. And while, yes, lowering expenses can create profit, it shouldn’t be the only way that this occurs. Profit should also occur at the transactional level. And every single product or service you offer should have a profit margin built in.

Keeping this in mind, I’m really excited about this week’s episode of Incredible Factor TV from Amanda:

“Hi Darnyelle. First let me just say that I love you so much for sharing your brilliance via Incredible Factor TV. I have made so many strides in my business. Thank you. Now for my question – what’s more important, profit or sales?”

Check out my response to her question in this week’s video:

As I shared in the episode, this is one of those “chicken or the egg” kind of questions. You see, they are both important, and if you’re asking yourself that question, it could mean that you business is in trouble.

Here’s what I mean: Profit is how we keep score in business BUT there’s no way to experience profit if sales don’t occur. And sadly many small business owners put too much focus on sales and not enough on profit. Sales in and of itself shouldn’t be the focus. It has to be the right sales in large enough numbers to positively impact the goals a business has to ensure that growth is the result.

If you’ve been focused more on selling and less on profitability, here are three reasons why you might want to shift:

1. You’ll undercharge. If your pricing isn’t right, you won’t charge more than it costs which will mean that achieving a profitable return on a sale becomes a problem. In my opinion, every single sale should be profitable. And the only way that can happen is if you do two things: 1) have a clear indication of your costs and expenses by the product/service line and 2) make sure that the amount of profit you desire (or need) in your business is a part of the pricing formula you use to validate your profitability. In my workshop Get Paid, I teach business owners how to package, price and close more sales in their business and as a part of the program, we offer them a pricing formula that ensures that profit occurs on every transaction.

2. You’ll work too hard. When you’re not thinking about being profitable, your prices will barely meet your needs. Remember, you are an expert, a specialist, not a generalist. And while the amount of latitude you have for products may be slim (think MSRP), you should always focus on having a margin of at least 40% and sometimes 60% so that you’ll not have to work so hard to sell more. I’ll admit, this is a new way of thinking and it’s a new way of growing a business. But I maintain, if you’re not going to charge more than it costs, not only will your business not grow, you’ll work way too hard for way too little or worse, just enough.

3. You’ll leave money on the table. Profiting by the transaction is key to making sure that you don’t leave money on the table. Without thinking about profit at the transaction level, you’ll make it much more challenging to experience growth in your business.

So, now I want to hear from you. What’s your two cents? Do you agree that sales and profit are equally important? Do you share a different perspective? How have you made sure that you consider profit every time you position a product or service for sale?

©2017 by Darnyelle A. Jervey. All Rights Reserved. Darnyelle A. Jervey, MBA, The Incredible Factor Business Optimization Coach and Mentor, is the founder of Incredible One Enterprises®, Incredible Factor University® and the Leverage Your Incredible Factor System®, a proven step-by-step program so you experience financial and spiritual abundance in your life because of your business. For more information and a FREE audio CD “7 Critical Mistakes Even Smart Entrepreneurs Must Avoid for Clients, Connection and Cash Flow!” just fill out the form below.

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