5 reasons to have a sales plan

A sales and stock plan will grow your gross margin.

Catherine Erdly is Founder of Future Retail Consulting

Often when I talk to clients about planning out their sales, they tell me that their goal is to sell as much as they possibly can. In other words, they don’t set themselves a sales goal.

This is an understandable mindset because it’s easy to think that the most important thing is to be pushing sales as much as you can – but I believe that a sales plan is the most important thing that you could do for your business to grow your gross margin and I’m going to tell you five reasons why.

Linked to a sales plan is a robust stock plan that will allow you to map out the stock in your business effectively. In the second part of this article, I will share how to put together a basic stock plan based on the sales plan you set yourself.

Reason 1 Targets

It’s very hard for you to hit a target when you don’t know what the target is. Imagine that you’re trying to fire an arrow at a target but you’ve been blindfolded so you don’t know where the target is – it’s much harder to hit.

It’s the same with your sales target – if you put a concrete number against what 'selling as much as you can' means then already you have a real possibility of hitting it – because you know what you want that number to look like and you can plan how to get there.

People often get nervous because they feel like they don’t want to say a number in case they don’t hit it and then they'll feel demotivated. I think it’s far more important to put a stick in the sand to say “this is how much I want to sell this year, or this month or this week” and to really commit to it. To commit to a concrete number, one you can focus on, is much more powerful than just saying “I’m trying to sell as much as I possibly can”.

Reason 2 The Process

The process of planning your sales is in itself a really creative and thought-provoking exercise. I have produced sales plans for businesses turning over more than £400 million. I’ve done it time and time again, four times a year. Usually we would plan out a season, we would put together what we would call the 'building blocks', outlining what we’re committing to as a business for our sales and how we’re going to do it.

We would look at which products we thought were going to drive the sales, what new initiatives we thought were going to drive the sales and where we thought those sales were going to come from. All of those pieces put together meant we had a clear picture for what we wanted to achieve.

Now did we get it right? No, absolutely not. I don’t think I ever created a sales plan and then looked back at that period and thought “that’s exactly what happened”. What it did do was get us to focus as a company on what we were going to do to drive those sales.

The whole sales planning process is very creative – it gets you to zoom out, take the big picture view of your business and really engage your creative thinking around what you’re trying to achieve and how you’re going to achieve it. It’s a really valuable exercise.

Reason 3 Cash Flow

Planning out your sales helps with your cash flow because ultimately it's very hard for you to work out what expenses you can have in your business – including paying yourself – if you don’t know how much money you’re going to have coming in. Having a forecast mapped out gives you an idea of what you think is going to be possible which will help you plan lots of other things accordingly.

If you know your peak periods then you might have a better idea of when you'll have cash in your business to purchase your stock or pay out other expenses, so it’s really crucial to start understanding your sales forecast.

Reason 4 Stock

Again, on a very simple level if you know which months are going to be your peak months you’ll have an understanding that stock needs to be incoming in order to hit the sales for those months.

The more you look at your sales by month and the more you have an idea of how you think they’re going to pan out – based on history, your experience, based on the kind of business that you’re running – then you can start to understand when your stock needs to come in. Your stock should always follow your sales so it’s very hard to plan your stock correctly if you don’t have a plan for your sales.

We’ll talk more about the stock piece later in this article!

Reason 5 Motivation

Working towards a planned-out goal, based on your knowledge of your business and customers, is really motivating – especially when you smash that goal!

If you say my goal is to 'sell as much as I possibly can' how do you know if you’ve ever achieved that? How do you know what success is? It’s hard to sustain your motivation in that scenario.

If you said your goal was to make £1000 and you actually made 10% more than that, you can really celebrate and review what went well so you know how to do it again!

If your goal is just to grow, to make more sales, you can never have that moment where you can actually pop the champagne cork – say “fantastic, we did it”, and we all deserve that as business owners!

Having a goal is very motivational and it’s a crucial reason why I believe that planning out your sales is one of the most important activities you can do in your business.

Free Plan Your Sales Challenge

Join Catherine Erdly in the Future Retail ‘Plan Your Sales’ challenge that kicks off on May 10.

You’ll be joining hundreds of other businesses and retailers who have already signed up in a private Facebook group, so there will be lots of opportunities to learn together.

Catherine will be walking through the exact process she used to plan sales for businesses like Paperchase, Coast and Laura Ashley, and showing you how the planning process can give you insight and control in your own business.

And it's going to be fun! Lots of opportunities to ask questions, and even the chance to win a coaching call with Catherine worth £275.

Read the article "Stock is cash, so get a grip!" here...