Sales vs Profit

I have a habit which I do without thinking.

Many like to praise me for it, though it can also really get under the skin of people who are made to feel uncomfortable by it.

My brain always wants to know, “what’s not being said” during a conversation.

This gets turned up, the more enthusiastic people are in telling what they have done.  I start to suspect that information is being hidden.

One particular person I used to work with, would regularly list the targets he’d hit.  His “drive” and “passion” for what he did was a regular feature in his narrative.

I (nor anyone) couldn’t avoid hearing about the sales he’d achieved, also the fact he was responsible for having taken more in sales than anyone else in the history of that business.

Here’s what it looked like.

Over 4 years, there was a total increase in sales of £117k with very little difference in the number of visitors (this was a catering facility located at a popular visitor attraction).

Let’s not argue about how impressive that is.

But here’s the bigger picture…

Somehow, he’d lost control of all the other metrics, meaning in 4 years he’d taken a business with sales of £500k and profit of £107k to a business taking £619k returning only £58k.

I’ve tried to track down who coined the phrase “sales are vanity, profit is sanity”, (I use it enough, but so far I’ve been unsuccessful if you know please share)

Although this is a simplified picture, if he had managed to maintain the profit at 21.34% in Yr4, it would not have been £58k, but £132k.

So, I need to state the obvious here and say that there are a number of details which need considering:

1. What’s not being said?  

You see, I realised I was never hearing about any of the core KPIs (especially profit), only the sales.

My instincts became heightened when at times where I would start to question the business, I would start to hear comments like:

“how can we not make profit when we’re bringing in the cash?” (very easily in fact…)

or

(and this is my least favourite) “you have to speculate to accumulate”.

My guess is what started off as a drive to do good but left unchecked, it led to this situation.

2. Poor people management

It’s not fair to lay the entire blame for this situation at the door of one person.

The individual’s line manager bought in to the narrative of success, and my predecessor was apparently too intimidated by this person to raise it.

When some future discrepancies became evident regarding the financial management of this particular business and I had to escalate them even higher up the management chain, the lack of attention to detail and the desire to protect friendships persisted. 

It felt like everyone preferred to keep their heads in the sand, rather than acknowledge a charitable enterprise on a downward slide.

3. Talking the talk

People talk the talk of ego fuelled busyness when they know deep down that they’re not achieving results.

They want to distract, deflect, charm and excuse.

This often works hand in hand with poor monthly reporting practices of not seeing the bigger picture and then following the trends.

If we zoomed into a budget on a weekly or even monthly basis, we’d see small fluctuations and not always in a consistent trajectory (we can all recognise this in our home finances – all it takes is a speeding fine, an electric bill, a lost PE kit and a new pair of varifocals in the space of a day or two for the expenditure to momentarily skyrocket).

Many times, I’ve experienced situation where these fluctuations are not considered in the wider context of the bigger picture because no-one’s looking. 

Are they necessary one-off expenses or symptomatic of an out of control spending culture?

Across a period of one or two months, fluctuations in the figures might be meaningless, but repeated poor performance over a long period cannot be ignored.

4. Putting it off until ‘next time’

Trigger warning re unproductive meetings…

Where concerns are flagged, these will often considered for the duration of a meeting and then not discussed again until next time, where the pattern is inevitably repeated (anyone else been in board meetings like this?).

Worse still, the person responsible can end up on the defensive, listing hypothetical reasons why targets weren’t reached. 

These are then discussed at the expense of devising a coherent plan on how to mitigate the difference.

At times I find it difficult to understand how people don’t see that a lack of awareness is so problematic.

But maybe like everyone else, what we do day-to-day has become such second nature it can become hard to see what is a well-honed skill and what’s “common sense”.

I know I can be guilty of this.

Information is power, be it good or bad.  We cannot change the past, but we can learn from it and use it to make better decisions in the future.

So, to recap:

• Profit not sales – ALWAYS
• If someone is being too enthusiastic about their ‘passion’ and / or using bullshit management speak, they might be trying to hide something
• Check the culture.  Is there a history of poor performance and of managers being afraid (because they’re ill equipped/disinterested or both) to tackle it
• Zoom out so you can see the bigger trends over a longer time period, shot term fluctuations aren’t always helpful
• If something isn’t going well, it doesn’t mean that you’re a terrible person!  Own the situation, identify the reasons and MAKE A PLAN!