Tuesday, 28 August 2012

Sales vs cash flow vs Grossprofit

SME Owners

Lets have a close look at the above and the impact on your business, it is important for your
staff to understand also.

I have chatted before about sales mentality vs business mentality, here's what it is about, in a
 simple approach.

Many business/sales people say "how can I grow the business by turning away sales", the wrong type of sale could negatively affect the business trust me.
The first rule do not allow your GP% to slide, when this happens you believe that higher sales at lower than targeted gp% is the answer, no incorrect move.

Any one can drop their price, why then do business still not achieve their sales targets!
Level of profitability is the key, so if you want and need to make say, R50k npbt pm, work backwards,
-Normal sales target is say R500k pm, Gp% is say 60% operating costs pm areR250k (50% of sales)
leaves 10%( R50k pm npbt)
- Lets say GP% drops to 40% what sales do you have to do to achieve R50k npbt pm, go work it out.

Yep ok is it as simple as this, yes( their are always exceptions to the rule, I don't focus on this)

So Sales will have to be at R750k at 40%Gp with op costs static at R250k.

Till next time may the Force be with you, I am your silent partner helping you work on your business.

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