Focus on Top Clients

Do you treat all customers the same or do you treat them differently? Do you know which clients generate substantial sales and more importantly, which customers generate substantial profits and cash flow?

In order to determine the relative importance of your customers, rank each customer in terms of the following criteria:

  • Sales
  • Profitability
  • Payment history.

1. Sales

How much and how regularly does the customer spend money with you? Is sales revenue stable, increasing or declining?

What is the sales revenue per month over 12 months or more? To calculate sales revenue, first identify the products sold and then the number of units of a product sold x selling price per unit. Then deduct any discounts granted.

2. Profitability

Look at profitability by product purchased and then adjust or reduce for discounts, delivery and returns. When we talk about client profitability we are referring to gross profit. Gross profit is equal to sales less the cost of buying or manufacturing stock.

The calculation of the cost of sales for a wholesale or retail business is very different to that of a manufacturing business.

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Published on  online in October 2012

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