Hello there! My name is Raymond Huan, and if you think that by increasing the sales of your business it will solve all of your problems? You’ve got to think again. In this video, I will share with you the dangers of doing that and how you can overcome that.
If you think increasing the sales in your business will result that most or if not all of your problems within the business? I would like to challenge that. Time and time again, case studies have proven that companies with astounding phenomenal sales have always fallen behind, gone bankrupt or even closed at the back of other internal problems that they have. Let me give you two examples of companies which despite astounding growth rates, failed to resolve their respective challenges.
The first one is Coolest Cooler, now Coolest Cooler is the company that designs or has re-designed the ice cooler as their product and they have incorporated a lot of the tools that many families who go out to a picnic would love to have incorporated in an ice cooler. They raised up $13.3 million for more than 60,000 people in a crowdfunding space.
The next company I’d like to bring to attention is the Pebble Smart Watch. Now, that company is more familiar to most of us. Pebble sells smart watches that tracks your daily activity and reports them in your phone or in your computer, depending on where you like to have it. One of their offerings they raise over $20.3 million from close to 80,000 backers. To these companies they did not expect to raise that much, they raise up multiple times their intended target. From their perspective, they pre-sold the product by so many more times their target, they would be phenomenally estatic with all the cash and funds available for them to develop the product. That is the dream and that is the goal for many business entrepreneurs. To be able to not only pre-sell the product, to be able to sell and exceed multiple times their intended target. Now, you are indirectly ‘flushed with cash’.
So where are they today? Well, Coolest Cooler is still trying to find ways to deliver to tens of thousands of backers who have pre-ordered the cooler from the crowdfunding space. There were rumours that Pebble was facing financial problems when they laid off a quarter of its employees in 2015 and has since been bought out by its competitor Fitbit. Both of the companies, both Coolest Cooler and Pebble were both young and they have tremendous sales and they were ambitious in their growth. So what went wrong? Why couldn’t million of sales, save these two fast growing, potentially promising companies from trouble?
There are few reasons for that:
- More sales does not equal more profit.
Both Coolest Cooler and Pebble have phenomenal sales, but as the stories played out, it did not just work for them.
- It doesn’t mean that if you have more sales, your business can support it.
Can your business scale?
Can your current operation support the increase in sales?
Coolest Cooler experience problems in production. They found that they could not produce that many products to support that many clients within that budget. So you have to take that into account and identify if you dreamed or if you wished that your business could double and triple in sales. Can your business support it? Can you provide the level of service as you do with your current clients, to say, your business expanded by two times or three times its size. Will your current infrastructure struggle to meet it? If you can’t scale your business, you will not be able to support the increase in sales.
- An increase in sales or injection of cash into your business does not resolve the fundamental problem that your business has.
Coolest Cooler had a production and operational issue. They did not anticipate, they didn’t budget properly, they did not anticipate the cost of producing that cooler itself. They had the risks which they put up on site, but they did not anticipate that the cost of producing the product would blow out to such an extent that they would not be able to supply to all their backers.
Pebble on the other hand, had a cash flow management issue. They grew too fast. They could not handle it and they were bleeding cash through the management itself. They thought they can resolve the problem by pre-selling the latest product and getting all that cash into the business, they could work things out. It’s been proven time and time again, if you have an injection of cash into the business it will not solve your problem. It just merely buys you a little bit of time, but your problems still exist. The more sales you do to solve a cash flow management problem, as with Pebble, is a temporary fix. It doesn’t solve the root cause of the problem itself.
From my experience, if you as a business owner think that by having more cash in the business solves the problem. It will just make the problem bigger, if you look at the two examples that highlighted to you in this video, their problems were millions of dollars big. By having people invest and pre-purchase their products, they have millions.
To summarise it is dangerous to think the sales trumps everything.
- It does not mean your business is more profitable.
- It does not mean that your business can support it; and
- It does not solve the fundamental problem that your business may be showing right now.
So do not be deceived, it just smooths over, it does not resolve anything. Having in increase in sales is a good thing to have, so long as your system in the business can support it and is in line with the plans that you have for the business. If you’re not too sure, whether your business can support a further increase in sales of maybe 2 or 3 times its current turn over, or if you like to know more you can contact me or visit my website at the links at the end of this video.
I authored a book titled ‘$20k to 2 million in 2 years’ in which I talk about the challenges fast growing businesses would face as they go through the journey of exponential growth. You can click on the and get a free preview of the book here.
Thank you very much for watching.