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Old 26th February 2010, 04:37 PM   #1
NRGCREATOR
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Default Sales/ growth rate advice

Hello group, i am new here and am hoping someone out there can give me a little advice.

The situation: I am the sales AND customer service manager for a small business that has been around for 8 years. We distribute alternative health care supplies. Our market mostly consists of acupuncturist. Part of my pay included a bonus program. To reach my goal i must grow our sales by 20% based on the same month of the previous year. At first i had a budget of 1000 a month to do this. However, due to the current economic situations, that has been revoked and now have no budget. My bonus program is set up to where every month i meet my goal, i receive $500, each consecutive month, the amount goes up by $100. I really like my job, but my bonus program seems delusional at best and is very frustrated with it; to the point where i have to fight with my self to not put in my 2 weeks notice. I have tried to reason with our "CEO" and he will not budge and feels it is very fair.

Question:
Is there some sort of equation or formula i can use that will project what a normal growth rate is or can anyone of give me some advise? is my boss insane or am i just being a Baby?

any and all feedback is truly appreciated.

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Old 27th February 2010, 08:10 AM   #2
Biz Optimizer
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Default sustainable growth

There is a formula for sustainable growth - the amount the company can grow without further capital investment. You can find it on the internet. But sales growth is harder to quantify.

If you are competitive in price/performance, or if your market is already saturated, it is hard to grow. If you have competition in a saturated market, you are going to have to show your company to be a BIG price/performance leader in order to gain 20%. If you have untapped markets - or price/performance advantage - the sustainable growth rate above will hold you back.

While the spending big money approach feels good, sometimes it is the creative things you do without funds that garner the biggest results. Good luck....

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Old 27th February 2010, 02:11 PM   #3
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Default Not Equitable

For management to take away your tools (budget) and expect you to meet the same goals defies logic. GIving you the $1K/monthly budget implies that management felt it was necessary in order to meet the goal. Now suddenly it's not necessary?

To remove tools and then not adjust expectations or compensation is not equitable.

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Old 1st March 2010, 11:35 AM   #4
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Thanks for the reply. I'm not sure if the sustainable growth formula will work for us in that we don't have shares or stock holders or a payout ratio. the only type of payout would be the owners draw. Am i missing something?

Our market is not necessarily saturated, but we do have very fierce competition that has much more money for advertising and such than we do. We also have a very specific and small market, so the shares are limited. We are extremely competitive in our pricing. I feel we have used all creative and out side of the box thinking in the past 6 months, and have implemented those ideas, which have increased sales, I'm just not sure how much longer this sort of thinking can sustain any sort of growth rate without at least some funds to implement other ideas and tasks that demand some sort of funding, like marketing, SEO, updating website and so on. Any additional thoughts is again appreciated!

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Old 1st March 2010, 11:41 AM   #5
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Even before with the 1K a month, i only hit my goal about 50% of the time. As explained previously, we have fierce competition that has much more resources and money than we do, and our market is very ,limited. although we can compete with pricing, there are other factors that put us behind in that we can not offer free shipping like everyone else, our website is very out of date, and we do no marketing what so ever (not since the budget was taken away at least) or SEO.

its nice to hear its not just me being crazy about this. I tried to explain this to my CEO and he basically laughed it off saying it can still be done.. What im looking for is some sort of tangible formula, or theory that has been published i can show him to make him realize this is delusional.

any thoughts on how to clarify/ renegotiate the demands better on my part?

thanks again for your reply!

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Old 1st March 2010, 09:47 PM   #6
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Hi RGCREATOR!

If you don't mind me saying so, with over a decade of experience online and literally ... well, let's just say lots and lots of sales.. I think you're doing it totally backwards, but that's where most get tied up.

The good thing is that you have a strategy. I recently wrote an article that may help you with this. You can view that article about website marketing, strategy and tactics here.

The absolute best way to do this is to figure out WHERE you want to be in a year and in three years. Make those two points to focus on. I used to say 5 years ,but in today's climate, that is a little too far out.

Now, what steps are you going to take to get there?? That's the big question you need to figure out. What is your average customer worth in sales?? If, as an example, it's $20.00, and you want to reach $1,000 in sales, you need 50 customers. Therefore, if you want to reach $10,000, you will need 500. So how do you get them.

You can do this on a small budget by directing all of your ads on getting a free download from your website. Be sure that visitors sign up to your opt-in e-mail list to get the download. With a list, you can continue to market to them for a real low monthly cost. It's really simple. But I can also tell you that it works. Tried it! Tested it! Proven it!

Good luck! Let me know if I can be of more help!

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Old 2nd March 2010, 08:54 AM   #7
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Default

Quote:
Originally Posted by NRGCREATOR View Post
Thanks for the reply. I'm not sure if the sustainable growth formula will work for us in that we don't have shares or stock holders or a payout ratio. the only type of payout would be the owners draw. Am i missing something?

Our market is not necessarily saturated, but we do have very fierce competition that has much more money for advertising and such than we do. We also have a very specific and small market, so the shares are limited. We are extremely competitive in our pricing. I feel we have used all creative and out side of the box thinking in the past 6 months, and have implemented those ideas, which have increased sales, I'm just not sure how much longer this sort of thinking can sustain any sort of growth rate without at least some funds to implement other ideas and tasks that demand some sort of funding, like marketing, SEO, updating website and so on. Any additional thoughts is again appreciated!
Some owners pay themselves in stock - as opposed to payroll for tax reasons. If not, the payout ratio is 0. It will still tell you your ability to grow without outside investment. This is important, as it sets a ceiling to what you can do without further investment - regardless of advertising success.

Likewise, your old advertising budget SHOULD have been bringing in a certain amount of business. If your advertising budget was working for you, dropping it should quickly reflect in your numbers. But very few companies have actually measured what advertising returns what - and therefore know what provides their biggest returns. Dropping it should give you an idea of how effective you have been- if you are still growing - maybe that money wasn't being well spent and you could acknowledge that to the boss - give him some options to do some limited testing of other approaches and see if their returns justify a bigger investment. You might find that free promotions/publications/lectures return more - revenue per dollar spent. But you have to measure results and use those results to justify spending more.

But I have been in many failing companies that had convinced themselves they had done all the creative thinking they could. When in fact, it is hard to scratch the surface of all the possibilities. Fresh eyes can usually walk in, and within hours, find 6-10% profit - and many ways to increase revenue.

If your SEO is that bad, does anyone internally know enough to add keywords to your site? May not be perfect, but paying for it doesn't ensure perfect either.

The budget being cut SHOULD tell you and your boss a great deal about what is happening and give you an OPPORTUNITY to demand a higher return from your efforts/money in the future. And if you have measured returns of advertising, it should be no problem to present a cost/benefit analysis that shows him what he is losing.

I suggest you take the opportunity to find the cost/benefit - and when you come up an unarguable one - present it to him and you'll be surprised at the mountains that will get moved when you suggest spending 1 dollar returns 10. I also suspect you'll be surprised at how effective some free promotions/publications and such are. Likewise, I suspect you'll also be surprised how inneffective some those ads are we paid the most for and are most proud of. Measuring results is very enlightening.

You can spend a great deal of time debating the "fairness" - but life isn't fair. Or, you can see it as THE REAL OPPORTUNITY it is to find the REAL revenue drivers - the real cost/benefit and take your company and your career to whole new levels! Find this answer and I suspect your future comp plans will be much more rewarding.

McDonalds wouldn't have found the "value meal's" huge increase to their overall profit even though it reduced the profit on the individual fry/drink if they hadn't tried it - measured it - optimized it. So, I suggest you use this opportunity to - try it - measure it - optimize it. When you come up with a formula that works, the boss will listen! Good luck!

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Old 7th March 2010, 02:28 PM   #8
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Thanks for the reply and all the related examples. i found your post to be very helpful and have a lot in the works with a new attitude. I really appreciate everyones time to read and reply to my post. be well!

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Old 21st February 2011, 11:55 PM   #9
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Thanks Ed. I will definitely try your suggestions.

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