That Can’t Be Right?
An alert reader saw the article which said, “if we got 50% of the jobs we quote but don’t get, we could more than double our sales by getting them all, even if their average cost sheet margin was 15% less”.
Our reader’s natural response was “that can’t be right as you can’t increase profits by cutting prices by 15% since that’s more than our total profit margin for the month”. To see the reality of this situation, you must think about what the printer will spend to produce the work. Generally, a commercial printer will spend about 60% of the invoice dollars on paper, buyouts, factory wages and commissions, leaving 40% to pay for the overhead, the front office, the rent of the building, the depreciation of the equipment, etc. Thus, if the printer is now selling about $100,000 a month, they are generating $40,000 (40% of $100,000) contribution to overhead every month. Which, if it is large enough to cover the overhead, produces profit.
Who’s Leading Your Sales Effort?
Ask any owner who leads their company’s sales effort and more than likely the answer will be “me.” Yet, in many instances the owner as sales manager may not be the best solution. The owner’s role (CEO) should be providing strategy and focusing the entire company’s structure to support that effort. In our industry, the individual leading the sales team should be spending 100% of their time on developing marketing efforts; developing sales strategy and tactics which support the CEO’s direction; supporting their sales team through joint calls, training, and creative pricing strategy; recruiting new sales and support talent; and in their spare time, selling.
Knowing Your Costs
“Those guys don’t know their costs, and that’s why they won the bid,” is a common lament which has been heard in our industry for decades (if not hundreds of years). As the authors have suggested aggressive pricing can be an effective tool – if one truly knows their costs of operation.
But, what are your costs? They clearly include the amount that must be paid to buy the materials and buy-outs, the amounts that will be paid to the folks who do the work, and the commissions paid to the sales rep. But what about the overhead—the cost of the building, the machinery used or the front office—don’t they cost money too?
quoins2pixels—the bi-weekly, nuts and bolts management newsletter
Graphic Media Alliance is proud to share this publication which is short, easy to read, but totally focused on the nuts and bolts of the actions that will increase your profits. quoins2pixels is written by Bob Lindgren and Joe Polanco. Bob and Joe have spent decades in the printing industry, and throughout their careers, they have counseled hundreds of company owners on a variety of management topics. As a value-added service of Graphic Media Alliance, they are available to expand on these articles, or aid with projects.