Open Library is an open library of educational information. Decrease in revenue in business: reasons and methods of opposition Years there is a decrease in sales

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Often such a situation arises: at first glance, everything is done with high quality, advertising is developed and launched, but the target audience, that is, the people on whom the product is targeted, are in no hurry to buy it. In this case, many business owners are perplexed as to why sales fell and where they made a mistake, overlooked something or failed to work.

Even if your business is organized correctly in principle, there can be at least four reasons for the decline in sales. If you know why sales have fallen, you can analyze the situation and quickly eliminate the shortcomings.

In this article, you will learn:

1. 4 main reasons why sales are falling
2. 9 reasons for the decline in sales in the online store

4 main reasons why sales fell

Reason 1. Incorrectly chosen sales strategy and tactics

So, let's look at the first reason for the drop in sales. It should be noted that it is one of the most common and obvious. The company or outlet has already identified a portrait of a potential client, formed a target audience, analyzed the state of the market and understood exactly who their product or service is aimed at. But there are still no sales. Accordingly, profits too.

First, you need to analyze the chosen sales strategy and tactics in order to understand why sales fell. It is likely that they simply do not fit the chosen market segment, or the strategy and tactics are very complex. As a rule, to improve the situation, it is enough just to objectively look at what you are doing from the perspective of an outside observer. Then you will understand why sales have fallen and you will find a way out.

Reason 2. Poor pricing policy

According to some marketers, the main parameter for the consumer when buying is cost. But this point of view is wrong. Of course, the price is important, and the buyer always pays attention to it. However, he mainly thinks about how the purchase of the product will benefit him and what problems he can solve with the help of it.

As an example, we can give a situation when a person enters a store, the assortment of which has over 200 phones. But it doesn't matter to him. A potential buyer is looking for a model that fully meets his requirements. A professional salesperson will build a dialogue with a client in such a way that he will sell the phone. He will demonstrate the models chosen by the buyer from the advantageous sides, talk about the advantages of the company and let him know that the purchase should be made here. If your staff is customer-oriented and always covers the quality of the goods from the point of view of the buyer, then your sales will not decline. Think about it now when analyzing why sales have dropped.

Reason 3. Unclear warranty conditions

When a person makes a purchase, he must understand that the goods that did not suit him can be easily returned. The order of the return procedure itself is important here - the simpler it is, the more the buyer trusts you. Nobody wants to get involved with paperwork to get their money.

In accordance with Russian consumer protection legislation, goods must be returned within two weeks. As a rule, 14 days are enough for a person to understand whether he likes a thing or not. Whatever happens, if the buyer wants to return the product, he will somehow bring it to the seller. The law will agree with this provision, since the client is always right.

In this regard, when thinking about why sales have fallen, you should pay attention to this parameter as well - perhaps you provide customers with unclear warranty conditions. Adjust them to make them clearer and more transparent. Your target audience should understand that it will be possible to return the product without any problems if something happens. She will regard this point as your significant advantage.

Remember that returns are inevitable in any retail outlet. If you make them work for your reputation, then you will not think about why sales have fallen.

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Reason 4. Wrong time, wrong place

Why did sales fall? It can be quite difficult to answer this question, and often the problem lies not in you as a bad seller, but simply in the unfortunate location of the outlet. So, if you understand why sales fell, and found out that this happened for the above reason, then what to do?

Of course, changing the location is much more difficult than eliminating another cause. However, this factor greatly affects the business, and therefore if your sales have really fallen and the store is unsuccessfully located, it is still better to choose a more passable place.

Also, the product can get ahead of itself - another reason why sales fell. That is, the audience is not yet ready to perceive and use your product. It is appropriate here to give an example of the largest company Apple, whose products were simply not in demand for many years - consumers were not ready to make innovative solutions and advanced technologies. It often takes time before a product becomes familiar to the user and becomes clear to him. Alas, it can be very difficult to rectify the situation.

So, we looked at 4 factors that can cause sales to drop. Note that we have focused only on the main and most common reasons for the decline in consumer demand. In reality, there may be much more of them, and this should be taken into account. But if you know about the mistakes that entrepreneurs often make, then as a businessman you can learn from them and avoid such mistakes in your practice.

Managers' mistakes that lead to sales decline

Mistake 1. Late purchase offer

So why did sales drop in your case? Often, managers make the mistake of continuing to persuade the client to purchase a product when he is ready to do so. A purchase offer is a whole art, and here you should remember about certain nuances and subtleties. The procedure can be compared to fishing, when your active action must be performed exactly on time and not a second earlier or later.

If your company employs a competent and professional sales manager, then most likely he knows exactly how to offer a customer a product or service.

Mistake 2. Talking to the buyer not about the benefits for him, but highlighting the benefits of your company

You are proud of your company, the products and services you offer. Of course, any sales manager should love and believe in what he is promoting. This is the key to successful sales. But the psychology of the client is such that in the acquisition process he is only interested in his own benefit. Not your product or service, but the benefits and benefits that he will receive after purchase.

In this regard, when conducting negotiations, a professional manager must highlight the value of a product or service to a potential buyer. This approach will allow you to further increase your implementation. And now it is possible that your sales fell precisely because of the illiterate actions of the staff.

Mistake 3. Being ashamed to touch on the topic of cost

Often, managers are shy or afraid to voice the cost to the client. Especially if they themselves consider it overpriced and know that competitors are offering lower prices. Managers are afraid to hear from a potential buyer that he is not ready to purchase a product because of its high cost. It is the seller's doubts that may be the reason why sales fell. The client feels that the specialist is not sure of what he is saying, and this raises doubts in him at the decision-making stage. “Am I doing everything right? Perhaps they gave me little time to think? Should I ask for a discount? "

How can a manager deal with the fear and embarrassment of negotiating a price? There are two ways:

• train confidently to talk about the price;
• process responses to the “Expensive” objection and do so until they become automatic.

Mistake 4. Use complex phrases and terms in a conversation with a client

Often, sales managers, especially inexperienced ones, use abstruse phrases and specific terms in conversation, long and difficult sentences. What does this lead to? The potential client gets tired of perceiving such information, ceases to delve into what the manager says, and the deal breaks down. It is possible that your sales fell for this very reason.

Why do managers of many companies speak this way? To demonstrate to the client your professional level and knowledge of the topic. But what is more important - to show the potential client that you are competent and well versed in the matter, or to sell a product or service? If it is in your best interest to sell products, explain yourself so that the person understands exactly what you mean. This will significantly increase the likelihood of a successful transaction, and you will not have to analyze why the sales fell.

Mistake 5. Getting into a dispute with a client

Arguments on any occasion are a hallmark of our mentality. Why should you never enter into a dispute with a customer under any circumstances? Everything is very simple - the person in this case simply will not make a purchase.

Even if the client is clearly wrong, do not argue with him, unless, of course, you are interested in selling a product or service. Buyers are often wrong. But you know very well the properties and characteristics of your product, and not a client who has barely got to know the product. When you express your point of view, then, of course, you are pursuing noble goals - to prove to the buyer that the product is really of high quality and sell it. But you should be careful to voice your opinion so as not to provoke a conflict. If you argue with many buyers, then this may be the reason why sales in your company have dropped.

Why sales fell during the crisis, and what it can lead to

The strength of any business can be significantly affected by the economic crisis. One of the most vulnerable forms of entrepreneurship is mediation, including trade. Wholesale companies are constantly balancing between the requirements of manufacturers and the demands of buyers, and the slightest deterioration in the market situation can lead to a failure of the entire system and serious financial difficulties for the company. That is, another reason why sales fell may lie in the onset of the financial crisis.

Here is the order in which the difficulties in the channels of movement of goods manifest themselves and how the participants who are connected with each other in trade relations - retail stores and wholesalers - react to them:

Decreasing customer demand

So, your sales have dropped. With problems in the economy, demand among buyers falls - in the country and at the global level. This is because organizations are losing jobs, wages are delayed, and there are difficulties in obtaining and repaying loans. That is, everything is interconnected.

Retailer gets less money from selling products in stores

This is immediately reflected in the costly retail business. When working capital it is getting smaller, it is more difficult for a retailer to take and give out bank loans, pay salaries to subordinates, pay rent for retail premises and run advertising campaigns.

In such situations, store owners reduce retail prices and increase advertising activity. The costs of these activities are transferred by retailers to wholesale organizations- the retailer requires the wholesaler to further reduce prices and extend the loan term.

Of course, threats to change a wholesale supplier and demand the delivery of products on terms of sale are extreme measures. But they cannot be ruled out. In this case, the reaction is determined by the financial condition of the company and its position in the market.

Among other things, a retailer whose sales have dropped is starting to get rid of some of the products with the least liquidity. Because of this, the wholesaler cannot offer the entire range of goods to the end customer.

If there is an economic crisis in the country and sales have fallen, especially if the outlook for the future is unfavorable, the retailer chooses a liquid product to the detriment of the margin. This causes a change in the assortment in retail outlets - cheaper products prevail on the shelves.

Often, retailers also tighten requirements for the costs of wholesale companies to promote their products in retail chains. Such protections for retail trade are justified.

Difficulties also affect wholesale

If sales in the wholesale trade have fallen, it becomes more difficult to return receivables to suppliers. In addition, the company's stocks are also accumulating due to the reduction in retail orders. As a result, the turnover of accounts receivable and stocks of goods decreases. This, in turn, leads to deterioration financial indicators companies.

Since the company is forced to reduce tariffs on wholesale in order to keep sales at the same level, to give customers additional discounts and increase the cost of promoting goods, its profits are sharply reduced. A company whose sales have fallen finds itself in unfavorable financial conditions, in which it becomes more difficult for it to take out and repay loans, and a cash gap occurs.

The wholesaler begins to experience a deficit in finance, and therefore cannot effectively and quickly adapt to the changed crisis conditions of the market, maintain an assortment range that is in demand among buyers, and fulfill obligations to partners. Consequently, the profitability of the business decreases and the financial problems increase.

9 reasons why online store sales dropped

So, you are wondering why the sales in the online store have fallen. This is where you need to look at the latest research and analysis to determine why your store is not seeing more deals and no customer demand. And immediately we note that it is quite difficult to maintain a leading position in the online trading market.

For three years, Qubit has been collecting customer reviews and complaints from 400 sites. As a result, it was possible to identify 10 main reasons why sales from online stores are falling, as well as to form a portrait of a buyer and his expectations, which often do not correspond to reality.

Below are the 10 most common customer complaints about online shopping according to Qubit research.

1. Price.

It is possible that your sales have dropped due to overpricing. As a rule, customers are the ones who most often complain about them. The research results show that the most common claims among buyers are “too expensive for the product presented” and “too expensive for me”.

Based on Nomis Solutions' metrics, shoppers are 7.4 times more sensitive to online pricing than brick-and-mortar prices. Therefore, you should take care of the competitiveness of your prices in relation to other companies in the market. It is also important to have a unique selling proposition. You need to have something that other businesses don't have.

1. Assortment range.

Today, a large number of people prefer online shopping, and there are a number of reasons for this. One of them is a wide range of products and the ability to choose what you like. Customers who shop online want to make finding a product easier than shopping in stores. That is, even at the initial stage of website development, you should take care of a clear user interface of the store and provide users with a convenient and quick search for the desired positions.

According to the researchers, the product mix needs to be improved by investing in resources such as a recommendation engine, new and seasonal product listing, and “related products” grouping.

When analyzing why sales have fallen, be sure to pay attention to this indicator and correct the situation, if necessary.

1. The size.

If your online store does not have useful and accurate sizing charts, then this may be another reason why your sales have dropped. At the same time, their presence greatly helps the buyer to find his bearings and choose the right product. As an owner of an online store, this saves you from the problems associated with returning products, giving money to customers and from negative emotions on their part.

1. Waiting period.

When thinking about why sales in your online store have dropped, pay attention to this parameter. The average customer is impatient and aggressive. He wants the site to load in no time. Complaints about long download times are very common today. This indicator is really important, and its value will only grow in the future. That is why you should definitely take care of a sufficient download speed of the Internet resource.

1. Search on the site for the necessary information.

Buyers are very angry if the search engine on the site does not work at the level of Google. In order not to irritate customers, improve and develop the tagging system on your site, add advanced search parameters.

1. Availability of products.

Users often complain that the site does not have the products they need. Despite the fact that such complaints have decreased since the last study, this factor can also contribute to a drop in sales in the online store. First of all, customers are dissatisfied with the fact that the desired products are not on the site or they have already ceased to be released, but they are still presented in the assortment. Customers often hope that online stores will have a large selection and a wide range of products. If this is not the case for you, then it is likely that sales have dropped due to this.

1. Navigation.

Analyzing why sales have fallen, evaluate the structure of the site. Objectively look at the navigation. It is possible that it is difficult for customers to navigate and find the goods they need. Make sure that the information about popular products and sales is clearly visible to users, and the site interface is clear and simple, which allows easy navigation through the sections.

1. Discounts and sales.

Customers are often unhappy with the fact that it is difficult to find boxes for entering a discount code on the site. If you are running a promotion, a discount on coupons or codes, make sure that the person can quickly navigate and understand what's what. If customers have difficulties using your Internet resource, sales will drop.

Note that a number of online stores today impose time limits on the purchase of certain goods, due to which the sensitivity of customers to prices is reduced.

1. Images.

Your online store should look aesthetically pleasing. If you are analyzing why sales have fallen, then it is possible that your site is not attractive enough. The results of eye-tracking studies indicate that visitors first perceive the page visually, examine it, and only then read the text. In other words, beautiful and high-quality images on the site are very important.

The data obtained in the course of the research indicates that the client seeks to view as many photos and images of the product as possible before making a purchase. In addition, he is more interested in seeing how the clothes look on models. The more high-quality pictures and video content you add to the site, the more you stimulate the client to buy.

How to find out why sales fell: analysis and control

According to the formula of Ron Hubbard, who developed one of the most successful management technologies, control is always equal to income. When you start to control and carefully analyze a particular process, you influence the situation, saving your strength, money and increasing efficiency. The sales process also needs control and analysis.

In order not to wonder why sales have fallen, continuously track:

• how many potential customers have contacted you - the number of people who entered the trading floor, the number of phone calls or visits to the official Internet resource;
• how many deals and checks were made, the number of real customers, that is, who made a purchase. This indicator is necessary to calculate the conversion and assess the professionalism of sellers;
• in what volume the average deal was carried out or the average check was issued. To obtain this value, the total daily sales volume is divided by the number of transactions and broken checks;
• seller conversion rate. The parameter indicates professional level your employees, their knowledge and ability to use the technology of transactions.

If you are analyzing why sales have fallen, then first of all assess the degree of control over this process. If you are not effectively monitoring and controlling the implementation, then you cannot influence the indicators. Only a tenth of the clients tell their senior management about conflicts and disputes that have arisen, allowing the leading manager of the company to eliminate the shortcomings. The rest of the dissatisfied buyers simply refuse to cooperate with the company further.

So how do you control the work of salespeople? First, take a look at how they communicate with customers. Often, companies, analyzing why sales have fallen, reveal that the sellers are primarily to blame for this. Perhaps they are impolite with clients, ignore their requests, or are overly intrusive. Do not forget that if you do not control discipline, then after a while you will see that you missed out on profits due to a decrease in performance. The sales process is managed using two tools - motivation and control.

The most effective means of supervision, according to many managers, is the installation of a video surveillance camera with a microphone in the sales area or in another area where sellers work. The presence of video cameras allows the manager to monitor the work of salespeople online, assess the situation in the hall and, in general, determine why sales have fallen.

There is nothing surprising in controlling subordinates today, and this method is successfully used by many modern enterprises. That is why, if you want to find out why sales have fallen, it is definitely worth installing video cameras and figuring out what the matter is. If you, as a business owner, understand that sales have fallen due to the fault of employees, you can impose on them disciplinary action or simply dismiss, taking others in their place.

The next stage of control is the introduction of daily reporting for sales managers. That is, the responsibilities of employees will include the daily filling of special forms, where information will be displayed about the volume of products or services sold, the number of calls made or presentations made, and it will also be necessary to enter plans for further activities or some other important data for your company. ... All this information will later be useful to you to evaluate the results of both a specific employee and the entire department.

Another effective method to understand why sales have fallen is to visit the company under the guise of a "mystery shopper." Thanks to this technique, you will be able to assess from the outside how the company is working, putting yourself in the shoes of the client, and find out why your sales have decreased.

First, a legend is prepared and agreed with the management of the enterprise, and then they pay a visit to the company under the guise of a "mystery shopper". This allows you to understand whether the service is of high quality, whether the employees are qualified, and also to feel the atmosphere trading floor through the eyes of the buyer. Checking out competing firms will help you find out their advantages. Using this information, you will attract new buyers who yesterday chose other companies, and you will understand why sales in your company fell.

How to increase sales after a fall

So, you have found out why sales fell. Your main task now is to improve your performance. That is, existing customers should consume more of your products or use your services more often. In addition, it is worth working on attracting new customers.

Attracting new buyers

In this case, you can entice customers from competitors or develop new market segments. Both in the first and in the second case, you should use certain marketing tricks. The table indicates the tools for implementing each of the above methods. However, some of them are universal.

Increased sales through existing customers

There are also two options for implementation here - work on increasing consumption and increasing sales conversion.

Increase in sales conversion

1. Improve the quality of service. The store must have high-quality service so that customers return to it again and again. A good salesperson will sell anything. A bad salesperson will fail to sell anything. There is intra-company marketing - the attitude of an enterprise to its personnel. If you create favorable operating conditions for your subordinates, then, accordingly, you get more income and do not wonder why sales have fallen. Don't forget about things like learning and motivation.
2. Pay attention to merchandising. Your sales and profit directly depend on how the goods are laid out on the shelves. There is an arm's length rule in marketing. Perhaps your sales have dropped because you don't follow it. In accordance with this rule, the buyer in 80% of cases takes a product, which is easy for him to reach. If the item is located above or below this level, the sales volume will be insufficient.
3. Carrying out sales, promotions, issuing bonuses. But remember that thanks to such events, you will increase conversion, but only for the period of their validity.

Increased consumption

Everything here should be aimed at increasing the average check. In this case, sellers:

1. Increase the cost. By raising the prices of goods, you increase the size of the average check. But the conversion may decrease. Accordingly, your sales and profits will not increase. To avoid such a situation, keep in mind that the slightest change in prices must be justified. That is, it should be clear to the buyer that you increased the cost not because you wanted to, but because you changed the packaging for a more convenient one.
2. Offer additional or related products or services. After your client has decided on the product, you can draw his attention to related products. Let's say you sold a bracelet. In this case, it is appropriate to offer a beautiful gift box. The client will not spend a lot of money on such a purchase, but the total check will become larger, which, of course, will only benefit you.
3. They run loyalty programs. The loyalty card will not increase the average check size, but the number of purchases made by a person in your store will increase. There are several types of discount cards - bonus, accumulative, privileged. Each has its own purpose, but all of them are primarily aimed at increasing sales.

What is the principle of the loyalty program? Let's say you are a grocery store owner. If a person makes a purchase in the amount of 1000 rubles or more, you give him a loyalty card. There is a similar outlet next to your store, which does not have its own loyalty program.

Where will there be more clients? Of course you do. People who have your loyalty card will regularly visit the store in order to receive bonuses, discounts or gifts - everything is determined by the type of card. That is, with the help of such programs, you tie buyers to yourself, and they willingly come back. Accordingly, your sales and income grow.

The suddenness and magnitude of the crisis puts companies in great danger, which do not act quickly and decisively. The severity of the crisis requires an understanding of its causes, a thorough analysis of the specific situation, decisive action and prompt monitoring of the results. This book contains practical advice on all these aspects.

To overcome the crisis, we cannot limit ourselves to mass layoffs and price cuts. According to the author, it is necessary to move to active sales and income actions in order to mitigate the harmful effects of the crisis and ensure the survival of companies.

The crisis that breaks out is a crisis of sales and profits, not a crisis of expenses. They stopped buying goods and services. People are afraid to spend cash. Why is this happening? After analyzing the macroeconomic aspects of the crisis, the author has developed 33 effective solutions related to specific business issues. These practical solutions can be quickly implemented by moving to active sales to mitigate the impact of the crisis on your company. In addition, the author presents the reader with his vision of the consequences of the current crisis in the long term.

Effective and ineffective methods of dealing with the crisis

Despite the many tips and tricks, the same standard solutions are offered to overcome the current crisis that are applied in a period of stability: innovation, growth, expanding market share, etc. Unfortunately, such advice is not only useless, but also dangerous in a crisis of this magnitude. Solutions that require large upfront investments and generate revenue only after a few years will do little for companies to weather the crisis. They can put companies at even greater risk. Today we need solutions that can be implemented quickly, that deliver immediate results, increase income and turnover in weeks or months.

Supply and demand

When talking about a crisis in demand or sales, we need to make sure that we understand the relationship between supply and demand - this is the only way to find optimal solutions. For a better understanding of the current situation, let us first of all consider the relationship between supply and demand during the period of recent economic growth. During this period, demand in many industries exceeded supply (available production capacity). This imbalance is shown in Fig. 3.

Rice. 3. Supply and demand in the period of recent growth

When demand consistently exceeds supply, it is called a "supply market" ("seller's market"). The following features can be observed on the supply market.

• Since the production does not keep up with the demand, the delivery time increases. As a result, delivery terms become an important purchase criterion for customers.


• Managers are committed to overcoming production and supply chain challenges. Issues such as customer service and spare parts are relegated to the background.


• The price is rising. The fact that demand exceeds supply suggests that market prices are too low and companies are not taking full advantage of the opportunity to raise prices.


• It is easier for sellers to work - they simply "distribute" products.


• Salespeople become arrogant in dealing with customers, who will be able to "take revenge" on them when economic growth stops and a new crisis begins.

Of course, there should ideally be a balance between supply and demand. But in reality, this is very rare. Most often, the balance is achieved only for a short period of time between economic growth and recession.

Today, the decline in demand has occurred unexpectedly and on a huge scale. Let's say that demand during the economic downturn fell from 110 to 75 (100 is the average demand in the long run). That is, demand fell 32% from its value of 110 during the growth period, and compared to its long-term average, it declined by 25%. During the current crisis, this is a very realistic situation for many industries and companies. While demand was falling, supply or output initially remained unchanged at 100. According to the International Monetary Fund, in the first quarter of 2009, production capacity was used by 69% in the United States (the lowest level since 1967) and 75% in Europe. ... The situation shown in Fig. 4 is very close to reality.

Rice. 4. Falling demand during the crisis

What are the implications of these significant changes? If earlier we talked about the seller's market, now we have a buyer's market.

• Companies do not use their production capacity and the capabilities of employees in full force, which leads to reduced working hours, layoffs, etc.


• Inventories are growing: manufactured goods that have not yet been sold are in warehouses, factories and shops.


• Companies are forced to cut prices due to low purchasing power of consumers and increased competition. In addition, the need to reduce prices is caused by internal problems: it is necessary to get rid of surplus goods.


• Immediate cash flow is far more important than new investments. Potential buyers are conserving cash to survive by skipping purchases and cutting costs.


• The task of the sellers is to increase sales. As consumers hesitate about spending money, this task becomes much more difficult.

So, we have shown how today's high supply and low demand economic crisis affects the business aspects and the profit of enterprises.

Factors affecting profit

Crisis management methods must take into account all three factors affecting profit: price, sales volume and costs (fixed and variable costs). Let's give a simple example of the influence of each of the factors on the company's profit. Let's say the price of a product is $ 100 and the sales volume is 1 million units. Fixed costs are $ 30 million and variable costs are $ 60 per unit. Given these parameters, the income is $ 100 million and the profit is $ 10 million. Thus, the product is profitable, and the sales income (or margin) is 10%. How does a 5% change in each factor (ceteris paribus) affect profits? The answers are given in table. 4

Table 4. Influence of factors on profit

So, if the price is increased by 5%, then the profit will increase by 50%. If we manage to increase the price to $ 105, while maintaining the same sales volume, then the profit will increase by 50%, that is, up to $ 15 million.On the contrary, with a 5% decrease in the price, with the same sales volume, the profit will decrease by 50 %, that is, up to $ 5 million. The percentage change in profit is ten times the price change, that is, the price leverage effect is ten.

Variable costs are the second, after price, profit factor. If we reduce unit costs from $ 60 to $ 57 (that is, by 5%), then profit - all other things being equal - will increase by 30%. However, if variable costs increase by 5% (from $ 60 to $ 63), then profit will decrease, respectively, by 30%. Therefore, the price leverage effect is six. Surprisingly, sales volume with a leverage of four has a much smaller impact on profit than price. A 5% increase in sales increases profits by only 20%, and a 5% increase in price by 50%. So, in both cases, the income is the same: $ 105 million. Thus, to increase profits, it is better to increase the price than the sales volume.

During a crisis, most companies experience declines rather than increases in prices and / or sales. That is, a 5% price cut has a much worse effect on profits than a 5% decline in sales: 50% versus 20%. In terms of profit, it is much easier to come to terms with a decline in sales than a decline in price. For obvious reasons. The net profit from each unit of goods decreases from $ 10 to $ 5. Since in our example the sales volume and variable costs remain unchanged (and fixed costs are unchanged anyway), profits fall by as much as 50%. The situation looks completely different if sales are down 5% (50,000 units). Then the variable costs will be reduced to $ 60 x 50,000 = $ 3 million - that is, the profit will decrease "only" by $ 2 million instead of $ 5 million.

If a manager is faced with a similar dilemma and can choose between two alternatives, then the choice is obvious:

• Alternative A: Reduce the price by 5% (for example, in the form of a discount) and maintain the current sales volume.


• Alternative B: Reduce sales by 5% and maintain the current price.

We discussed these alternatives with hundreds of managers in workshops. Almost everyone chooses option A, although this means that profits will be reduced by $ 3 million, that is, more than in option B. These managers justify their choice by the fact that they may not be able to return lost customers and their market share after crisis. In addition, they believe that sales, market share and therefore employment will be higher when choosing option A, allowing them to avoid downsizing. First, a crisis of this magnitude will provide an opportunity for growth for almost all companies that will manage to survive it without serious losses, as soon as the industries begin to recover.

Second, we show you how to avoid cuts in times of crisis more effectively than to maintain sales by sharply lowering prices (see Chapters 3, 5, and 7). However, if the company in stable periods has already tended to low prices and high sales volumes, then during the crisis this preference will manifest itself even more strongly. During a downturn, companies strive to maximize sales, utilize manufacturing capacity and employee capabilities. However, these preferences and strategies are damaging to profit in times of crisis, as evidenced by a study of the multiyear conflict between profit, on the one hand, and sales or market share, on the other.

Let's go back to our example. Even if the company manages to reduce both variable and fixed costs by 5%, this will still affect the total profit worse than a 5% increase in price. Together, both types of costs have a leverage effect of nine, and the price leverage effect itself is ten. In times of crisis, it is difficult to achieve price increases. But the same goes for holding and stabilizing prices. If the price is held at a certain level, for example, it decreases by 5% instead of 10%, then this will be reflected accordingly in profits. In times of crisis, cutting costs and keeping prices down deserve equal attention. In practice, things are different. Most managers intuitively focus on cutting costs. Moreover, many are striving to significantly reduce prices, and this is precisely what should not be done.

There is another way to compare profit factors. To achieve the same profit impact as 5% price retention, the following changes need to be made:

• reduce variable costs by 8.3%;


• increase sales by 12.5%;


• or reduce fixed costs by 16.7%.

As you can imagine, these changes are difficult to make during a crisis. But comparing the different methods provides valuable insight: it focuses on price as the most important factor in profit and shows why managers should use all price opportunities to increase or maintain existing profits during a crisis.

Our calculations show the relationship between profit and its factors in the most visual and simple way. The principle of “other things being equal” is generally not achievable in practice. The relationship between profit factors is usually more complex and largely depends on the specific situation, which is why it is necessary to carefully analyze each specific case in order to make the correct and most effective decision. However, the “other things being equal” principle is a good basis for studying the influence of profit factors.

Every factor - price, sales, and costs - has a significant impact on bottom line. Therefore, in times of crisis, managers must consider all three factors. For a product with a typical ratio of fixed and variable costs, price is the most powerful tool for increasing profits, followed by variable costs. Sales volume is somewhat weaker. So, the profit growth due to the price increase far outweighs the profit growth due to the increase in sales. During a crisis, attention should be paid to the opposite relationship: a decrease in sales is less detrimental to profit than a decrease in price.

In each case, the profit depends on variable costs. If variable costs are zero (for example, if we are talking about a standard software), then changes in price and sales volumes have the same effect on profits. Influence of variables and fixed costs the profit depends on their scale. For example, if we change the numbers in our example and set variable costs at $ 30 and constant costs at $ 60 million, then the effect on profit of both types of costs will be the opposite, that is, the leverage effect of variable costs is three, and fixed costs are six.

In many industries, today's crisis has resulted in declines in sales, prices and earnings by more than 5% or 10%. Moreover, the situation cannot be changed with just one profit factor. Therefore, we once again urge you to use all three factors to retain income and profits. The stronger the downturn, the more difficult it is to maintain profits using just one factor. In industries where sales or revenue have dropped by 30-50%, this is simply not possible. The situation becomes even more dangerous if prices and sales decrease at the same time. If both indicators are reduced by 5%, then income will decline by 9.75%. If price and sales fall 20%, then revenue will fall 36%. If we are talking about a 30% reduction in price and sales, then income is reduced by 51% (Fig. 5).

Rice. 5. Impact of simultaneous price and sales volume reduction on income

If both prices and sales fall at the same time, and this often happens during a crisis, this will have serious consequences for both income and profits. As a result, attempts to improve all three factors should be aimed at preventing the biggest threat - bankruptcy. The most important task for managers is to understand and calculate the relationship between these factors in order to avoid irreparable mistakes, for example, excessive price reductions.

Impact speed

In addition to the magnitude of the impact of price and sales on profits, the rate at which all three factors are affected is also very important. In Chapter 1, we talked about the sudden drop in revenue and sales for managers. Any delay in taking "rescue measures" could threaten the company's survival. How quickly do the three factors affect profits and cash flow? In fig. 6 shows a diagram of the impact on funds.

Rice. 6. Impact speed

The fastest and most efficient solution is price. Unless a company is contractually or legally prohibited from changing the price of its products or services, it can make the change immediately. The implications for sales and revenue are quick to show. For example, when it comes to a gas station, the price can be changed at the push of a button on the computer: the display shows the change, the customers react accordingly, and after a few hours these actions will affect sales, revenues, cash flow and profits.

In addition, in this and many other cases, changing the price does not require costs, that is, no initial investment is needed to increase profits. Of course, the feasibility of this decision and the end results depend on the specific business model of the given company. If the company must hold a certain price for long period due to contractual obligations or does not have the right to change it until a new catalog of goods is printed, then the implementation of the changes and the receipt of results will take much longer.

With regard to cost reduction, as a rule, an initial investment is needed, which initially negatively affects the money, but over time allows you to optimize costs. For example, downsizing is often associated with high payoffs, as are other cost-cutting strategies such as reengineering business processes, restructuring an organization, or automating production. The initial investment problem should not be underestimated. Roughly 80% of all companies are now implementing cost-cutting programs. However, those with little cash are unlikely to fully finance these cost-cutting methods. A dilemma arises: While cost cutting is vital to a company's survival, not all companies are struggling to save money and can afford to spend on it. The speed of implementation of cost-cutting programs is influenced by many factors, such as the employment contract. The middle graph in Fig. 6 shows this example.

Of course, in some cases, you can really cut costs right away and get results quickly. For example, if you urgently agree with clients about more favorable terms purchases, the results can be obtained as quickly as in the case of a price change. However, in most cases, cost savings are associated with significant investments and produce the desired results much later.

Sales volume affects profits at about the same rate as costs. Advertising campaign takes time to prepare and implement. Any positive effects from its implementation appear only "with a great lag." If you want to increase sales, the first step is to recruit and train salespeople. This takes time and money, and the results will not appear soon. New employees will only be able to increase the company's sales and profits over time. But there are several sales methods that deliver results faster without requiring an upfront investment. For example, a reorganization in the sales department. The shaded area in the right graph in Fig. 6 shows just this example.

All solutions that require little initial investment and have an immediate positive impact on the company's cash are especially effective in times of crisis. Price change is the most important method. Cost cutting and sales retention programs are challenging. For these two factors, many decisions, before yielding positive results, often lead to an initial reduction in money, since they require significant investment and time.

An important aspect of the speed of impact of various decisions is related to cash flow. In times of crisis, cash takes on much more importance than in stable times. According to Klaus Kleinfeld, general director Alcoa, in times of crisis, "cash is everything." Profit is absolutely essential for the company as it provides cash. The most important thing is to make more than you spend. However, in the short term, profit and liquidity (cash) are completely different concepts. A profitable company can go bankrupt, although this is rare. In other words, cash is like air and profit is like food. If you are short of air, you will suffocate after a few minutes. And without food, you can live for several weeks.

Cash in times of crisis is of particular importance when it comes to accounts receivable. On the one hand, during a crisis, the likelihood of non-payment by customers is much higher. “Our losses from unpaid bills have skyrocketed,” says Michael Piper, CEO of Franke Holding. On the other hand, in times of crisis, it is much more difficult to get insurance against non-payment of debt. When sellers are in dire need of timely receipt of money for their goods, many payments are delayed due to the fact that buyers do not have enough cash.

Ineffective solutions

During every crisis, people always appear who claim to know the solution to all problems. Over and over again we hear the same platitudes: “Every crisis is an opportunity for development, you just need to use it”, “Innovation will solve all your problems”, “Be brave and the crisis will make you stronger”, “Act more actively, and you will achieve victory. "

Let's list the growth strategies that are considered effective during a crisis:

• innovation;


• entering new markets (new market segments, new countries);


• diversification (expanding the range, areas of activity);


• acquisition (merger) of enterprises;


• vertical integration;


• a completely new business model;


• professional development of employees.

According to a study by a renowned business consultant, “customer orientation, an efficient business process, an agile organization with experienced employees and a clear strategy, and an accurate definition of the core business” are the key success factors in times of crisis. Moreover, a partner of the same consulting firm says: "In the coming months, we plan to make changes that will force us to change the definition of the company's core business."

Another very popular standard solution is to increase market share. In a recent survey of six companies in crisis, their leaders gave the same answer: they want to use the current crisis to increase their market share. This strategy has been popular for many years in the automotive industry, where competitors have always targeted 120% or 130% market shares. We all understand how ridiculous this is - the sum of market shares will always be equal to 100% (both in hard and in good times). Not all companies will be able to gain market share. For every position won, there is one lost position. Striving to increase market share during a crisis is very dangerous, except for a few really powerful companies. Managers must remember that their company's survival during a crisis depends not on market share, but on cash and profits.

While all of these recommendations can indeed be effective strategies in the long term, during a crisis they will not be able to produce quick results for two reasons. First, these strategies are resource and cost intensive. Secondly, they bear fruit only after a considerable time, usually after a few years. During a crisis, as we have noted, most companies need solutions that are quickly implemented and have a positive impact on sales, income, cash and profits - in a few weeks or months.

A few successful companies are likely to be able to bring innovative products to the market now. But if a company is just embarking on an innovative project, it will need large investments in research and development, and the innovative product itself will not be able to be brought to the market earlier than in a few years. In other words, investing in innovation will not help a company survive during a crisis. In fact, new innovative projects can jeopardize the very survival of the company. The same goes for entering new foreign markets or market segments. These growth strategies require a large initial investment that only pays off after a few years. Opening new foreign branches, including finding and training personnel, can take several months or years. Conversely, entering the market quickly and economically, such as increasing exports with the help of an importer or distributor, can generate additional income in short time... A recent study by Simon-Kucher & Partners showed that during a crisis, companies tend to export products to new markets instead of opening their own branches in those target markets. This tactic, which saves both time and money, is much more effective in today's environment.

The same goes for completely new business models and projects aimed at diversification or vertical integration. Such strategies force companies to work in new business areas, and this requires competence, market penetration and significant financial and time costs. Acquisitions are also not the most effective solution to current problems in a crisis. The business often suffers from the fact that managers are busy with the integration process after a merger with another enterprise. It is much more economical not to buy an entire company, but to entice individual employees or teams of employees from weakened competitors (for example, employees of the sales department). When a company weakens, the best employees often start actively looking for a new employer. A crisis is a good time to attract the most experienced and talented employees of your competitors.

Improving the qualifications of employees with the help of trainings seems to be effective during a crisis, since they have more time for personal development. However, in practice, additional trainings require new costs, and results are yielded only in the long term. Therefore, during the crisis, first of all, they reduce the budget for personnel training and development. If training can be organized at no additional cost (for example, when experienced staff with reduced workloads take on the role of coaches), this can be very effective.

So, traditional growth strategies are not suitable for achieving quick positive results in times of crisis. And a quick positive result is exactly what most companies need. However, within the framework of long-term strategies, traditional approaches can be effective. For example, if a company is planned to be acquired, it is easier to negotiate a bargain price in difficult times. Financially sound companies with stable production can take advantage of the unique opportunities offered by the crisis in this regard. However, even strong companies must focus on their core business to avoid problems. In times of crisis, managers must focus on getting their company safely through "storm and weather." So what do companies need to do over the next weeks and months? In the face of dangers and risks, companies must put aside traditional long-term growth strategies and make decisions that deliver results quickly.

In times of crisis, companies must focus on increasing profits and cash flow as quickly as possible. Short-term and long-term solutions should not be combined. Today every third company is struggling to survive. This is what we are talking about: survival - no more, no less.

Summary

In this crisis, the feasibility, consequences and speed of impact of decisions are critical. All decisions should be analyzed taking into account the aspects that we discussed in this chapter. Let's recall the main points.

• With revenue and sales plummeting, companies must use all profit-enhancing methods to overcome the crisis. The necessary improvements cannot be achieved with just one of the profit factors.


• Profit factors affect profits in different ways. Price has the greatest impact and sales have the least; therefore, it is more profitable to accept falling sales than falling prices.


• The simultaneous decline in sales and prices is the most difficult case that must be avoided by all means.


• Variable and fixed costs (together) affect profits in much the same way as price. Thus, cost and price optimization is equally important in times of crisis. However, most managers seek primarily to cut costs.


• The above considerations apply to typical products and typical spending patterns. In practice, the result always depends on a combination of specific conditions. This means that it is necessary to carefully analyze the factors of profit and their impact in each case.


• Profit factors are associated with different time and financial costs and each of them has its own speed of impact.


• Typically, price changes can be made quickly enough to have immediate results. The cost of changing the price is usually minimal.


• Cost savings often only work over a long period of time and typically require investments that limit the company's cash flow.


• The speed of impact and the cost of changing the volume of sales are closely related to the specific conditions of a particular company.


• Cash flow, or liquidity, plays a critical role during a crisis.


• Long-term improvement solutions (strategic market position and growth) are not suitable for overcoming the crisis. These include innovation, market entry, acquisitions, diversification, vertical integration, a completely new business model, and staff training. These growth strategies negatively impact the company's cash flow in the early stages of implementation and exacerbate the financial problems that most companies face. Moreover, these decisions give positive results only after a few years.


• This does not mean that it is impossible to use the unique opportunities of the crisis (for example, a favorable price when buying a competing company). But you should be careful not to exceed your financial capabilities and not be distracted from your main business.


• Given the scale of the crisis, companies should not pursue multiple goals at once. You need to focus on survival - increasing and retaining sales, income, profits, and cash. All attention should be directed to profit factors and their impact.

The effectiveness of decisions should be assessed soberly and objectively. Traditional guidelines that are effective in good times are misleading. What solutions can be considered effective in a crisis? How quickly can they be implemented? How soon do they give results? These are the critical questions.

Issues discussed in the material:

• What is the danger of a decrease in revenue for the company?
• What are the reasons for the decline in revenue?
• How to prevent a decline in revenue?

It is unlikely that at least one, even a completely successful enterprise, has never faced such a phenomenon as a decrease in revenue. And the reason for it is not always unprofessional actions of the company's management. From the article you will learn about what are the factors of reducing revenue, what is the danger of such a situation and how to prevent it.

The danger of reducing revenue for the enterprise

Revenue refers to cash received through the sale by a company of its goods, works or services. A decrease in income is expressed in a decrease in the flow of these funds as a result of both objective and subjective reasons. The value of profit for the enterprise cannot be overestimated, since it is this profit that is used to finance its activities. In other words, the income received from the sale of goods, works or services is the main material component of the well-being of the organization. Absence own funds, constantly replenishing and in circulation, will not allow the company to exist on the market for a long time.

At the same time, we note that in some cases the organization's management deliberately goes to reduce the proceeds from the sale of goods, works or services (for example, when conquering new sales niches, the company reduces the cost of a particular product or service).

Reasons for the decline in revenue

There can be many reasons for the decline in revenue. Let's consider the main ones.

1. Seasonal drop in demand.

   A number of consumer products are in seasonal demand. Few people need skis in summer and bicycles in winter. However, you should not be upset about this in advance. Organizations selling seasonal products have adapted to this phenomenon by calculating all the necessary actions and steps. Therefore, the financial results of the year for long-running enterprises do not depend on this factor of revenue decline.

   If you are just going to develop a new market for your products, then be sure to study the specifics of the implementation precisely in the context of the seasonality of the goods or services you offer. For example, the south of Europe is characterized by a decrease in revenue in the summer. Spain is widely known for its siesta, when shops are closed during the day and customers visit them less often. It is quite natural that this state of affairs affects their income. That is, too hot weather may well cause such a store siesta and drag on for a couple of months.

2. Loss of popularity of the product.

   The phrase about the fact that under the moon nothing lasts forever is probably familiar to everyone. Another, and very commonplace, factor causing a decrease in sales revenue may be the loss of customers' interest in the products or services offered. This situation can be caused by various reasons, ranging from the fact that your product is out of date, and ending with the activation of competitors offering similar products, but at a lower price. Do not discount the fashion, which is characterized by variability. The result of all this is a decrease in the volume of profits from the sale of their goods or services.

3. Leaving customers to competitors.

   Competition is good for consumers, but it is unlikely to please business representatives, especially small ones. Revenue can decrease at any time, while sometimes you are completely unable to influence the situation. The emergence of a strong company on the market offering similar goods and services will almost instantly lead to a drop in revenues. Dumping of prices by competitors threatens the same. And there is no insurance against such cases. If you also start to reduce the price, then you can lose even more revenue, and by getting involved in the fight with a more successful company, you can even find yourself without sales income.

4. Falling demand during the crisis.

   Perhaps one of the most dire situations an organization can face is a crisis or a decline in production. The crisis in any case means a decrease in the purchasing power of the population. This means a drop in the company's revenue. Moreover, often people refuse to spend money not because of their absence, but out of a desire to save money, put it off for the future, because it is not known what lies ahead and how long they will have to live in such conditions. Crises hit expensive goods (apartments, cars) most painfully, as well as non-essential goods. As a result, we again come to a decrease in the profits of the organization.

5. An oversupply of loans issued to the population.

   A number of experts agree that the cause of the crises (and hence the decline in company income) lies in the numerous consumer loans issued to everyone in a row. On the one hand, the available money and the ability to purchase expensive things with a deferred or installment plan increase the company's revenues, which have begun to decline.

   However, sooner or later the credit funds run out, the purchasing power of the client again turns out to be zero and entails a decrease in the company's revenue. At the same time, the family spends most of the budget on paying off debts. But nobody canceled the payment of utility bills, gasoline, communications, purchases of essential products. Thus, there is no more money left to acquire something for oneself and for the soul, and organizations note a decrease in their profits.

6. Imbalance in the assortment.

   Balancing the range of products offered by the organization will help to avoid a decrease in the volume of revenue. That is, the goods sold must generate income and participate in the turnover. In the second case, you can face a sufficient number of competitors, however, the demand for such products continues to remain high. For example, recently, thermal printing has become more and more popular among the population, in which drawings are applied to various goods - from T-shirts with personalized inscriptions to mugs with portraits of newlyweds.

   Due to the high competition in this area, the cost of the thermal printing equipment itself is not so high. But there are a lot of people who dream of a personalized mug or a one-of-a-kind T-shirt. Thus, the demand for this equipment will remain at its best for a long time. And organizations that have found their niche in this area must adhere to a sufficiently flexible policy. That is, the income from the sale of equipment should be about half of all funds received by the company. And in this case, there is no need to talk about a decrease in revenue.

7. Incompetence and passivity of employees of the enterprise.

   There is no difficulty in understanding this factor of revenue decline. The company's revenues are falling due to the fault of the staff. In this case, it is worth subjecting to a thorough analysis of the work of employees, first of all, sales managers. One can speak of their incompetence or passivity in the following situations: p>

   1. They advise customers on the products that are easiest to sell. In this case, the staff lacks the incentive to better perform their duties. That is, they are not initially focused on selling products that can bring the greatest profit to the company. On the contrary, managers offer customers what they prefer, because it is much easier to conclude a deal in this case.

   2. The salesperson's haste is driven precisely by his desire to avoid declining profits. However, in this case, without offering a full range of goods, the likelihood of depriving customers of the right to choose is high. Haste is characterized by inattention, which means that it may well happen that the most popular product will not be put on the shelves in time. As a result, you can easily come to a decrease in sales.

What to do to prevent a decline in revenue

An increase in revenue and an increase in financial results can be achieved by increasing the output or expanding the range of goods or services offered, the production of products with new consumer properties.

Despite the fact that the amount of revenue depends on industry factors, each company has its own own reasons her height.

The main points affecting the increase in sales and, accordingly, the growth of income from sales, are the following:

1. Fulfillment of obligations.

Compliance by the company with clear and unswerving fulfillment of contractual obligations is a guarantor of increased profit volumes.

Set specific tasks for the employees of the economic department:

• monitor the payments for products sold, as well as the performance of work in accordance with the calendar or production plan;
• analyze the receipt of money for shipped goods, services rendered in each structural unit and at the enterprise as a whole;
• to exercise control over the execution of all valid contracts.

Counterparties need to ensure timely delivery of goods and quality work.

It is also impossible to take into account revenue on time without monitoring receivables and payables. The company's task is not only to collect payments from customers and consumers, but also to fulfill its own obligations to partners.

2. Expansion of the customer base.

Revenue growth can be achieved by attracting new counterparties. That is, it is necessary to look for new customers to conclude contracts for the supply of goods (performance of work or provision of services).

You can attract customers by creating an in-house call center with professional managers who know everything about increasing sales.

Today, a very relevant way to communicate about yourself and your product is to create a company website. In this case, it is better to use the services of professionals who are able to resolve issues with registration and optimization of the resource.

By attracting new customers and counterparties, it is possible to avoid a decrease in revenue, on the contrary, by planning and increasing the company's profit.

3. Providing top quality products.

This issue is complex. It is important to both customers and the organization itself. If you pay sufficient attention to the quality of the goods sold, the work performed or the services provided, then you will increase the volume of the product sold, and hence the profit, while at the same time raising the prestige of the company.

If we talk about long-term prospects, then this criterion is given special attention. At the same time, we note that in comparison with the change in cost, improving the quality is a long process that requires significant financial (and not only) investments. In some cases, it may be necessary to re-equip production, master new technologies.

Each company striving to prevent a decrease in profits needs to analyze the quality and competitiveness of the offered goods (works, services), and also strive to improve these indicators. This result can be achieved by improving the organization of production and labor, deepening specialization, improving the technical level and qualifications of employees.

4. Optimization of prices and pricing.

The cost of goods or services is formed in accordance with the economic situation in the market, the cost price, the desired profit, established taxes, the qualities and consumer properties of the products offered. To calculate tariffs, a calculation is used for each type of product, while prices are influenced by an economically justified cost price, including taxes and fees payable.

Let's note the following points:

• The price is formed in accordance with the following factors - competitiveness, the level of consumer demand, the cost of producing a product or providing a service, and economic effect.
• In any case, the cost must be justified. The calculation of each type of product or work is influenced by material and labor costs, overhead costs and taxes provided by law.
• If a certain level of the company's profitability is not included in the price of products, then the probability of a decrease in revenue at each next stage of capital turnover is high. This situation will inevitably lead to a decrease in production volumes and a deterioration in the financial condition of the enterprise.

Due to inflation, costs are constantly growing. This is due to the increased cost utilities, prices for the necessary materials, maintenance of the property of the enterprise, etc. Accordingly, the beginning of each year is marked by an increase in the cost of goods sold and services offered by organizations, taking into account the percentage of inflation. The latest data indicate an average price increase of about 10-15%.

Hello! In this article, we will talk about the analysis of sales volume.

Today you will learn:

• Why analyze sales volume;
• How to conduct a sales analysis;
• How to manage the sales volume;
• What documents should be formed as a result.

Sales volume analysis tasks

Control - an integral part of the management process. Control is carried out by comparing two indicators: planned and actual... Actual indicators are obtained by studying the current indicators of the enterprise, for example, one of the most important indicators - sales.

Assessment of implementation allows you to identify the main market trends affecting the activities of the enterprise, assess the prospects of each product in the product portfolio, measure changes in sales volumes and determine the reasons for changes in this indicator.

In addition, on the basis of the information obtained during the analysis of sales, a sales policy is developed and adjusted, decisions are made regarding the promotion of products, and a price is set.

Thus, the objectives of the study of the volume of sales are:

• Assessment of the current activities of the enterprise, as well as the activities of individual divisions;
• Obtaining information for making strategic and tactical management decisions in the field of product, sales policy and marketing communications;
• Customer segmentation;
• Determination of the strengths and weaknesses of the organization;
• Identification of threats and opportunities of the external environment of the enterprise;
• Determination of promising directions of the enterprise;
• Management of the product portfolio of the organization;
• Sales volume management.

Summing up, it can be noted that the assessment of the quantity of goods sold, first of all, is necessary in order to identify a weak point in your organization and take corrective actions to improve the efficiency of the organization as a whole.

Methods for analyzing the company's sales volume

I would like to consider ways of analyzing sales for each of the tasks.

ABC analysis

ABC study- a tool that allows you to assess the contribution of each product unit of the product portfolio to the total profit.

• The purpose of the ABC analysis is to obtain information on the volume of sales of each product for further decision-making in the field of the company's product policy.
• ABC method should only be used by those companies that have more than one product unit in their assortment.
• As indicators for assessment uses the sales volume of each individual product for a specific period.

The basis of the ABC method is Pareto's law, which says: "20% of goods bring 80% of the profit." Thus, by defining these 20%, we will be able to manage 80% cash flow organizations.

An ABC analysis is carried out in 4 steps:

1. Write down all the products in your assortment along with the sales volume of each of them for a certain period... For ABC analysis, you can take quite long periods of time.
2. Rank products in descending order of sales... By the way, it is best to carry out the ABC analysis in Excel. In Excel, select the Data tab from the menu and then Sort. In response, the program will automatically arrange your products in descending order of their sales volumes.
3. Determine the share of sales of each product in total sales... The formula for this stage in Excel will be as follows: = C2 / SUM ($ C $ 2: $ C $ 6). As a result, you will have column D in our plate.

1. Calculate the share of each product in the product portfolio as a cumulative total... That is, we sum up the share of sales of each next product with the previous one. In Excel, this can be done using the following operation: = D3 + E2. As a result, you will have column E in our plate.

We finish the work by distributing goods into groups:

• Group A- the best-selling products, they account for from 0 to 80% of the sales volume on a cumulative basis;
• Group B- products with a good sales volume, they account for from 81% to 95% of sales on a cumulative basis;
• Group C- products with low sales are often unprofitable: over 96%.

Thus, in our example, strawberry and peach flavors have the highest sales. Their production volumes can be increased, and you should also work to improve the quality of the product.

Pineapple flavor is also in good demand, but this product requires investment in promotion and distribution to increase sales and get this product into Category A.

Blueberry and apricot yoghurt has very low sales volumes compared to other products. It is necessary to make a decision on the feasibility of the production and sale of these goods.

Analysis of sales dynamics

Having solved the strategic problem regarding the distribution of funds for marketing for each product unit of the assortment portfolio, you need to think about tactical measures to improve the efficiency of the company. For this purpose, the analysis of the dynamics of the volume of sales serves. It allows you to identify the main trends in the development of your enterprise.

Held economic analysis dynamics of sales volumes by comparing the indicator for the current period with the indicator for the previous one.

There are two types of assessing the dynamics of sales: general and structural .

The calculation of the general dynamics of sales is made according to the formula:

Sales volume for reporting period/ total sales for the previous period.

If the indicator is more than 1, then the dynamics of sales is positive, if less, then it is negative. This indicator serves to determine the development trends of your organization, to identify the seasonality of the market.

The structural indicator is calculated in the same way, but for each product, seller or store separately. This allows you to assess the contribution of each unit to the overall result, as well as to find the “weak” areas of the enterprise. Usually structural analysis is carried out after the general in order to find the reason for the decline in the overall sales results of the company.

Determination of the minimum acceptable sales volume

Are you going to market New Product and are already preparing a sales plan, but then the question arises: how to determine the required level of sales.

To determine the minimum sales volume, there is such a tool as the break-even point.

Break even - intersection of direct full costs with direct sales volume in price terms. It shows the volume of sales that is required to cover the full costs of production and sale of goods. That is, it reflects break-even sales.

In the event that sales are below the break-even point, your sales will not pay off. In the sales plan, you should indicate the indicator above the break-even point in order to cover costs and reach a profit. The break-even point is the basis of sales planning.

The break-even point should be calculated for each product. The time period for the calculation is best taken from 1 to 3 months, which will allow you to take corrective actions in time in case of deviations in the indicators.

Factor analysis of sales volume

After you have identified the deviation of the actual indicators from the desired ones, you need to determine the parameters that caused this deviation. For this purpose, a factor analysis of the sales volume is carried out. It is implemented by comparing actual indicators with planned ones.

The interrelation of reasons influencing sales volumes is determined by the following formula:

∆Np = ∆Nт + (∆Nнп гп - ∆Nкп гп), where:

• ∆Np is the difference between the actual and planned sales volume;
• ∆Nт is the difference between the output in the actual and the previous period;
• Nнп гп and ∆Nкп гп are the balance in the warehouse at the beginning and end of the term, respectively.

Let's take a look at the factorial method with an example. We sell strawberry yogurt. Sales data are presented in the table.

The influence of factors on sales is calculated by subtracting the base period indicator from the current period indicator.

Thus, in the current month, two hundred more units of products were sold than in the base one. The factors that influenced the change and the degree of their influence are indicated in the table.

We can also determine the effect of price on the sales volume of products, for this we use the formula:

Change in sales volume = (Present price - Target price (or price for the previous period)) * Current sales.

The resulting value corresponds to the change in sales volume under the influence of price.

In conclusion, I would like to note that in order to ensure the continuity of the organization's activities and the timely identification of deviations, it is necessary to regularly conduct a sales study using each of the described methods.

In addition to the current month, the forecast sales volume can be taken as the current one. The forecast can be made using subjective methods ( expert assessments, employee surveys and others) and objective methods (based on historical data, mathematical).

Objective estimates are considered more accurate, so we will focus on them, or rather, on a method based on forecasting based on historical data.

Volume forecasting using this method is carried out in three steps:

• Collection of data on demand, sales;
• Assessment of parameters that can affect demand (we take into account both internal and external reasons);
• Making a forecast.

Stages of sales volume analysis

Typically, sales are evaluated in four stages.

Step 1. It is necessary to determine the structure of production and sales of the company and assess the dynamics of the indicator.

In this case, it is best to assess the volume of sales both for each product (ABC analysis) and for each distribution channel (seller).

After that, you must identify the trends and rates of development of the enterprise. You must also conclude about the effectiveness of each distribution channel (each salesperson) and the profitability of the product units produced.

Step 2. Assessment of the uniformity of sales.

The formula for calculating it is as follows:

kV = (√ ∑ (х1 - хср) 2 / n) / хср, where:

• х1 - the share of sales for the first period in relation to the total indicator;
• хср - average quantity sold in%;
• n is the number of analyzed time intervals.

The higher the coefficient of variation, the more pronounced the uneven distribution.

Step 3. Identify the reasons that influenced the change in sales.

To do this, let us turn to the method of factor analysis.

We must determine the minimum volume of products that we need to sell in order to cover the total costs of the company. Accordingly, we turn to the method of calculating the break-even point.

Step 4. Calculating the return on sales.

Profitability- an indicator that reflects the amount of profit that you will receive for each ruble of income.

The number of products sold does not represent the amount of profit you will receive in the end. You can sell a lot of goods, but at the same time work “in the red”.

Profitability measures the effectiveness of your sales.

The profitability is calculated using the following formula:

Profitability = Net Profit / Sales Volume.

For example, we sold 100 packs at a price of 10 rubles per pack and received 100 rubles in profit. Our profitability was 0.1. This means that 10% of the sales volume of products in monetary terms is your profit.

It is necessary to calculate profitability not only for the reporting period, but also in dynamics.

Example. Last month we sold 90 packs at 12 rubles per pack and received 95 rubles in profit. Our profitability was 0.08. That is, thanks to a decrease in prices and an increase in sales, profitability in the current month has grown by two percent.

Control over the implementation of the plan for the volume of implementation

Sales control is another task of analyzing product sales.

It involves checking:

• Feasibility of allocating resources and tasks;
• The reality of the planned indicators in the current conditions;
• Compliance of planned indicators with current ones;
• The feasibility of the decisions taken to neutralize negative factors.

Based on this data, one of the following decisions is made:

• Take corrective measures to eliminate deviations;
• Change the normative (planned) indicators;
• Don't change anything.

Example. We serve yoghurt in two brand stores: one in the center of Moscow, the other in the Moscow region. This month we sent two boxes to a Moscow store, and one to a store near Moscow (we planned to sell this volume in a month). By the middle of the month, a box and a half remained in the Moscow store, and the entire volume of products was sold in the Moscow region. As a result, it was decided to deliver one more box to each store.

We carry out control. Firstly, the targets were not achieved in any of the shops. This means that they do not correspond to the present conditions (the problem can be both in the internal and external environment of the organization). Secondly, decision the delivery of a box of yogurt to a Moscow store is impractical. Corrective action must be taken.

How to prepare a sales volume analysis in the form of documents

As a result of studying the scope of implementation, you should have formed the following documents:

• A report containing an illustration and description of the main conclusions about the work done. Can be provided in the form of graphs, tables or text;
• "Register of problems and opportunities" - a document that describes the main threats and opportunities of the company;
• "Registry of recommendations" - consists of ways to eliminate existing threats by using the existing capabilities;
• Client rating (for companies working with corporate clients) indicating the volume and value of the purchase.