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Sales Mix – Make Your Sales Work for You

Updated: Dec 8, 2022

Your top line is important. Nobody would argue that, but if it is your primary or only focus, one day you may find yourself backed into a corner financially. Many other financial and operational strains in your business can be addressed by planning your future sales efforts to optimize your sales mix, without sacrificing top line results. Here are the top three business challenges that a strategic sales plan can help you manage effectively.

Accounts Receivable – Though it may not show on your profit and loss statement, one of the primary concerns of small to medium-sized business owners is cash flow. Depending on the type of business you own, improving your accounts receivable turnover rate might be just the way to relieve some of that cash flow related stress. If 90% of your customers have payment terms that are Net 30, this means that while you’re paying your expenses during the month, you do not have the income to support them. When negotiating future contracts, consider pushing for shorter payment terms or even weekly invoicing as opposed to monthly. If your offerings are in the service industry, you could also request half payment in advance, with the other half due at the end of the project. With regard to existing relationships, it may be worth offering a discount for early payment to relieve your cash strain. If your business is one that sells to both individuals and other businesses, try to shift your growth focus to individuals who will pay at the point of sale instead of via invoice.

Concentration Risk – Landing a huge new customer is one of the most exciting times for any business owner, but seller beware: if one customer makes up more than 20% of your annual revenue, you are putting yourself and your company at risk. Diversification of your customer base protects you from losing a large chunk of your revenue at a moment’s notice through increased competition or even your customer going out of business. While it is certainly less effort to increase revenue from an existing customer than to land a new one, it is worth the additional investment of your sales team’s time to ensure that you’re protected.

Seasonality – Similar to accounts receivable, seasonality plays a major role in cash flow for many businesses. When meeting with your sales staff, discuss the potential for expanding your product offerings or customer base to those who would have opposite needs from your current target market. For example, real estate photographers in New England may perform 70% or more of their annual work in the spring and summer months but could market to ski resorts or other properties that specialize in winter activities to ensure their revenue and cash flow are more evenly spread throughout the year. Brainstorm and get creative! Your services or products are likely valuable to more than just the market you targeted when you began operations.

Take some time to do a deep dive into your specific business challenges and identify possible resolutions related to your sales mix. Maybe you will pull back on sales of a particular product or to a particular customer in favor of another, or you might diversify your marketing efforts to a new target market altogether. Regardless of which adjustments you decide to make, remember to create goals, track the financial impacts of the changes, and incentivize your sales team to push the right revenue, not just any revenue.

If you’d like to speak with Jessica about your specific financial challenges and how adjusting your sales mix can help, e-mail her at jessica@lmc.group.

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