How a profitable sale can kill your business?
By Bernard Jansen, Brand Consultant
There’s this trick question in accounting: Can a business go bankrupt despite being profitable?
The answer is not obvious for a marketing type like myself – but it is “yes”. It can, because profit isn’t cash. Profit is an academic number on an income statement. It’s not the cash you have in the bank. Profit doesn’t pay the bills.
One trick questions lead me to think of another after a discussion with a client who is aggressively chasing sales.
The question: Can a highly profitable sale kill your business?
I believe the answer is yes.
Because a sale – a profitable, lucrative sale – can trick you down a path your business isn’t geared to go. Running a sustainable business requires backing each sale up with the full focus of your business. A sale is only the tip of the iceberg. In order to be a sustainable business – one that can make a profitable sale again and again, each sale must be backed up by an operational effort, backed up by a marketing effort, and – crucially – backed up by the same brand focus.
Clearly a sale must be backed up by strategic intent. Not just operational intent, but also marketing and brand intent. If it’s not, and you just sell to anyone that places an order, even at rich margins, you leave yourself exposed to competitors that take a more focused approach.
To put it simply, if you do 10 highly profitable sales to 10 different clients, each buying the same product but for different reasons and each telling a different story about why they bought from you, then you loose brand focus. You loose marketing traction.
Ideally, you want 10 customers buying from you for the same reason and telling others the same story why they bought from you. This builds brand power.
It’s like throwing darts. Even if you miss the bulls eye, you want to group the darts together, giving your efforts intent and empowering you to make coherent changes to get closer to the bulls eye. Throwing darts all over the board – even hitting good areas – gives you no clue as to what you are doing right, what you are doing wrong, and how to repeat it again and again.