The most effective way to control the growth trajectory of your business is to align five financial levers with your marketing, sales, and service initiatives.
The five financial levers are:
- Product & Service Mix
- Size of Sale
- Number of Sales
- Seasonality
- Cyclicality
Let’s look at them in more detail.
1. Product & Service Mix
Your product and service mix dictate the range of your offerings. Consider whether your focus will be narrow, catering to specific products or services, or broad, positioning yourself as a comprehensive financial solutions provider.
2. Size of Sale
The size of your sales is influenced by the market you operate in. Serving middle-income families might result in smaller sales compared to targeting high-net-worth clients.
3. Number of Sales
The variety of products you offer often correlates with the volume of sales. A broader product mix typically leads to more sales opportunities.
4. Seasonality
External and internal factors contribute to seasonality. External seasonality, like the holiday rush in retail, affects businesses universally. Internal seasonality arises from managerial decisions, such as staff vacations impacting revenue during specific periods.
5. Cyclicality
Markets fluctuate in cycles, experiencing periods of expansion and recession. Understanding these cycles is crucial. For instance, the automotive industry sees shifts in sales based on economic conditions, with luxury car sales rising in prosperous times and fuel-efficient vehicles gaining traction during economic downturns.
Summary
Mastering these five financial tools empowers you to harmonize marketing, sales, and service efforts. Tailoring products and services to the preferences of your target market, like high-net-worth clients, results in larger individual transactions and potentially fewer sales. Embracing fee-based income models can help mitigate the impact of seasonality and cyclicality on your business.
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