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The Self-Delusion of Growing Sales – to Solve Profit Issues

By Sid Chadwick, Chadwick Consulting, Inc. – 04/18/2024

Published in American Printer : “A president seeks advice on improving profitability in a struggling web plant. Through a simple accounting revelation, they uncover stark differences in customer value. Sid's article highlights the need for profit-focused strategies and departmental accountability when facing economic challenges.”


“Every few months a leader has to step back and question what he and his organization are doing”…..Sec. of Defense, General Jim Mattis, Call Sign Chaos, p.175.

 

INTRODUCTION:


The president of a sizable Web-Plant, specializing in promotional brochures and catalogs, in extending an invitation, wanted to be sure I understood up front:

 

We don’t like Consultants.”

 

As I was ushered into their Boardroom, I found myself in a room of about twenty-some managers and senior executives, with one open seat…for me.

 

Their president explained their dilemma. Simply – We are out of capacity, with no more capacity available to grow either sales or profits…..and profits - are no better than break-even.”

 

What should we do…?”

 

I turned to their IT group at the table, and asked, “Do your current accounting records show  ‘Value-Added dollars -for each customer’s revenues,’ as well as an ‘industry classification’ for each customer, such that you can list, in descending order, all customers, by industry classification, showing their collective classification’s  Value-Added Revenue %’s…?”

 

His response: “We’ve never shown that, but we can….would take us about two hours.”

 

They took me to a modest lunch, asking what I thought we’d see from their IT group when we got back, reminding me they didn’t like Consultants, took a ‘quickie’  Plant Tour, and we were back in their Boardroom, with everyone receiving their IT Department’s printout that showed:

 

All Customers’ Revenues. and Value-Added $’s, organized by Customer Classification Group (e.g., Ad Agencies, Higher Education/Universities, Gun Manufacturers, Ladies Fashions, Retail, etc., etc.) – in descending order.”

 

At the top, highest Value-Added Customer Groups - were Italian Gun Manufacturers, and Italian Designer Clothing Label names. At the bottom, showing near zero and even negative Value-Added numbers -  were American Automotive Aftermarket Manufacturers.

 



The Boardroom suddenly seemed unusually quiet; several folks even seemed uncomfortable.

 

I asked, “With this new information, what do you think we should do?” 

 

To my surprise, the room remained quiet. (There was an ‘elephant in the room’….!)

 

Their president, in a somber tone….spoke up, “Those bottom accounts are mine….that my CSR’s service for me, and for which I receive a commission….!” 

 

…….As you were told up-front before your visit…. we don’t like Consultants.”

 

Later, their V.P. of Sales asked me what he should communicate to his Sales Reps and CSR’s.

 

I suggested he make sure they know who your Top Ten Value-Added Customer Classifications are going forward, and that he should meet privately with his president – for resolving the “lack of profit customers” issue.

 

SUMMARY:

Regrettably, any company that pursues adding sales, and then equipment and capacity, in order to add more sales – and so on, to…. eventually make a profit, gets “caught” – in the negative macro-economic cycle (called a “Recession”)  – that’s always waiting, and eventually occurs.

 

Profit improvement is a department issue – not just a company issue. Too many departments have no goals or strategies to improve profitability, have no graphs on the walls – showing department performance. I’ve observed and know – too many lost presidents – after they face the reality  – they didn’t think would ever catch them.

 

This deadly game is not just for companies – but is also true for countries – as the U.S. is projected to add another $2 Trillion to our indebtedness, that one day - does come due.

 

Who’s in charge of leadership in your organization – for improving profitability….?

 

 

I’ll tell you what leadership is. It’s persuasion and conciliation and education and patience. It’s long, slow, tough work. That’s the only kind of leadership I know.”……..from President Eisenhower, per Sec. of Defense, Gen. Jim Mattis, Call Sign Chaos, p.19.



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