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10 Errors to Avoid in Sales Part 3 – Giving Away Your Profit

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10 Errors to Avoid in Sales Part 3 – Giving Away Your Profit
A post from our Sales blog

      Written by John Boddington

How do I maximise profit when selling?

I must admit, I have a taste for fast food. Left up to my own devices, I would eat far too many take away meals. While I now strive to keep that in moderation, it means that I have made the occasional visit into a McDonald's. And I really respect their business model. Without fail, they try to upsell. If you order a burger, they offer you a meal combo. They are always trying to increase their profit.

This is now not just something McDonald's do. Almost every food chain now does a similar thing, and it is something that is instilled in the staff's initial training. Every client is offered the chance for them to buy more. They are trying to upsell to every client. It is a habit.

So why do all salespeople not try to upsell to every client? Regardless of the industry you are in as a salesperson, I bet there is something that you can add. While in office automation, if people bought a copier from us, we tried to offer the service agreement. The same can be done in motor vehicle sales, with services included, and they can also offer things like sports packs etc. I have even heard dentists upselling, while doing one job, offering veneers etc.

For every client that is not offered the chance to upgrade, or buy an extra service or product, you are giving away profit. There is another way to lose profit though, and that is through discounting. Every company or trader has a set price, and that price is usually systematically worked out based on things like target profit margins. Any reduction in price, or discount offered, means that you are missing the profit intended. Even big deals, if discounted badly, can mean no profit gets earned by the company.

The Effects of Giving Discount

There are going to be situations when you feel that discounts might need to be given. But if so, are there ways to minimise the profit lost?

Minimise the Profit Loss

Many years ago I used to sell websites, as well as a software package that both hosted the site and also allowed the client to make manual changes to their website. The client bought two things, the site design itself, and then the accompanying software, which they paid for monthly. It was a number of months before I was in a position that if I did not give some kind of discount, I was going to lose the deal. I offered to take off a portion of the monthly fee for the software. After the deal was done, my boss went through the numbers with me. It actually made more sense for us to give what appeared to be a bigger discount on the site design itself, and retain the full monthly fee. By discounting on the monthly fee, over two years we lost more than if I just gave a discount on the site design.

It was a lesson that I learned at the time, and one I strive to avoid to this day. Ever since, I have ensured that I understood what made up my costs, my profit etc., on any product that I was selling. That way, I could always look at ways to ensure that I tried to retain as much profit as possible. My simple rule of thumb: try not to discount! But if you do feel obliged to offer something, for whatever reason, are there ways to retain as much profit as possible. Perhaps keeping the price the same but adding something small on top means that the client still feels they have got something more for their money, but so have you!

So, as a salesperson, are you retaining profit by doing everything you can not to discount? Are you making extra profit by trying to upsell to every client? If not, you need to start now.

Help your staff understand what makes them profit

If you are a sales manager, do your staff understand what makes them profit? If not, explain it properly to them! Are your salespeople trying to upsell or cross-sell on every deal? If not, train them to do so. Have it instilled as part of their initial training, like McDonald's and the other fast food chains do.

If this has made you think about ways to make more money yourself as a salesperson, or to think about your staff selling more, why not look into sales courses that specifically add value in this way? Your staff might seem fully competent, and are closing deals, but can they close at bigger profit margins? I am sure you want that!

Sometimes, while rushing around actually selling, or helping your salespeople, it is difficult to take the time to think about the opportunities that exist in your own role, or those of your colleagues, and where there are opportunities to upsell, and this gets neglected. So can taking the to think about the alternatives to discounting. We can help with this, and maybe ten minutes of good thinking time can increase the profits you earn not only now, but for the rest of your life.

What do you think? Let us know what you think in the comments below.

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