Reasons for a Business to Business Sales Person - Assignment Example

Assessment Task 1 - Written Report: Name: Tutor: Subject: Date:  Identify reasons (operational variables) for a business to business sales person (e.g. Manufacturer’s rep selling to retailers) not achieving sales targets. i. Motivation Motivation is one of the key factors that a salesperson or business needs to have to perform to its highest level. When a salesperson is motivated to reach a certain set of goals, he/ she will always ensure that the target is attained by the end of the given period. When this factor lacks in any business or salesperson, there will be a problem in achieving the targets. When the salesperson is not motivated, he/she will not keep up with the customers’ demands and hence will always fail to provide customers with the necessary information required to persuade them to buy the products of the firm. Sales people with this characteristic will always be resourceful to the company (Ryals, 2015). ii. Time management Managing time is an essential component in marketing. According to Chase, (2012). When the salesperson or business does not keep consistent on the time of operation, there will be dissatisfaction from customers and hence chasing away potential customers. When there is a lack of consistency in the time of business operation, there will be a lot of problems between the business and its customers. This will create a loop hole for competitors to snatch away customers and hence the sales targets are not attained by the business. A sales person who manages time well will have an added advantage since customers will be served at the consistent time thus satisfying their need and finally the business will achieve the sales target. iii. Misalignment of goals and expectation When a business or a sales person set certain goals, they should be realistic and achievable. When goals are misaligned, there will be a problem of choice and preference is the business operation and personal life of a sale representative. When this exist in a business, there will be a lot of difficulties in dealing with the customers. This will create dissatisfaction among the customers and hence no sales are made when there is no customer. The sales target will not be attained if the expectations were to have the sales people setting achievable and aligned goals. The set goals should have room for a certain factor so that there will be a clear expectation and achievement of those goals. When the sales goal is $50K the goal should be given a factor of 10% so that the sales person has to make sales of between $45K and $55k (Chase, 2012). iv. Work ethics Sales people normally have problems with their work ethics; this should not be condoned in a business if the sales target are to be achieved. When sales people behave in an unethical manner, they should be given restriction so that they will not be able to underperform. When sales people are not acting professionally, there will be a problem faced by the customer since their need will not always be addressed due to the unethical manner in which sales people operate (Reamer, 2012). Commission paid to sales staff is a great way to minimize cost for any business. However there are drawbacks, discuss the drawbacks of paying only commission. Unpredictable Expenses When a company pays its workers through the commission, there will be uncertainty in the budgeting of the company’s expenses. The sales people at times may sell more goods and hence need compensation that might be out of the budget for the company. This will lead to over expenditure in the business and sometimes the company might not be in a position to compute their financial muscle. Over-Aggressive Approach The sales representatives may be forced to use over-aggressive approach to ensure that they can get the products of the company being bought by the customers. This occurs since the sales personnel may want to 4raise certain amount of commission at any given time. This may occur for a short time hence the stability of the business is at risk. The business will not be able to control its incomes and budget on sales. Explain if policies and procedures will assist a business (e.g. suppliers and manufacturers) to minimize operational costs such as staff expenses. Policies made by the business will play a greater role in the creation of a balanced environment in business. When there are policies set in a business the operations were undertaken by the business will be easy to manage. The business will be able to create a stable budget for its expenses and income. Unlike when there are no policies on sales and operation in a business, there will be a lot of misunderstanding in the running of the business hence operational cost will be high due to errors made and the unnecessary expenses. Identify all the operational costs for a company (According to Federal legislation-for example taxes) when employing staff members as casuals, part- timers or full-time staff. Sales commission Accounting expenditures Insurance cost Office Supplies Rent cost Property taxes Travel cost Assessment task 2- Written project: Calculate stock turn for a Pharmacy business if Total sales for the year = $ 2 000 000 Average inventory at retail prices = $ 250 000 Benchmark = 7- 8 (depends on the demographics of the market and the marketing the proposition of the pharmacy) Stock turn = total sales per annum average inventory $ 2 000 000 $ 250 000 = 8 If the stock turn of a business is very high for example the dairy with a stock turn of 95 x then it means the dairy is a low-margin, high stock turn business. Discuss the advantages and the disadvantages of business with a rapid stock turn. Rapid stock turnover indicates that the business is selling more goods and hence has to purchase more to equal the rising demand. There are many advantages of high stock turnover. Also, there are limitations to this. The following are advantages and disadvantages of rapid stock turn. High income- when a business is selling more units at any given time, then it is raising more income. When the business starts with 2000 units and by the end of the first month it has sold 5000 units, then it means that there is an increase in the income of the business. More negotiation power- when a business has a high stock turn then the supplier can be convinced to sell good to the business at a relatively lower prices since the supplier is relieved from storage expenses and other expenses when the buyers are not buying at a faster rate. Holding cost- when a stock turn is rapid, the cost incurred while storing goods is avoided by the business. High expenses- a business will incur high expenses when dealing with slow moving stock since storing the products and safeguarding them is costly. The business will not be able to get quantity discounts and other discounts associated with the rapid stock turn. Lost sales- when stock turn is rapid there will be difficulty in keeping up with the needs for all customers hence the business will lose sales to those type of customers who are not satisfied with the type of goods in the shelf. Develop strategies a business can implement to reduce stock that is not selling in a business. (Reducing “creeper” cost). Centralizing inventory- for a business to reduce stock, it has to centralize its storage location to avoid other expenses in maintaining those storage locations. Elimination of obsolete stock- the business should take necessary steps to reduce or even eliminate stock that is not selling in the market and avoid the purchase of such products in future. Improve forecasting- the business has to improve its forecasting in the purchase of stock. This will help the business in avoiding a stock that will not move. Give examples of types of businesses that stock un-productive products because their target market expect them to have it in stock as part of their product range. If they do not stock these products, then the possibility is great that sales in the business might decrease. Pharmaceuticals Supermarkets Chain stores Assessment Task 3 Average stock at retail prices: $500 000.00 Total sales: $ 2 000 000.00 Calculate stock turn: total sales per annum average inventory = $2000000/$500000 Stock turn= 4x Calculate Monthly stock turn = 4/12 Monthly stock turn = 1/3 Calculate: Ideal stock value for January – August Month Stock Budget Sales January $ 33 333 $ 100 000 February $ 31 667 $ 95 000 March $ 33 333 $ 100 000 April $ 36 667 $ 110 000 May $ 40 000 $ 120 000 June $ 53 333 $ 160 000 July $ 51 667 $ 155 000 August $ 58 333 $ 175 000 Assessment task 4 Calculate the average mark-up of the goods in this business. Mark-up = sales – cost of goods $2 000 000 - $1 000 000 = $ 1 000 000 Calculate the gross profit margin for Prices. Gross profit margin = revenue – cost of goods sold / revenue = $1 000 000/ $2 000 000 = 50% Give some strategies the business can implement to reduce C-O-S (cost of the goods) i. Renegotiation of contracts The business should consider renegotiating its contracts annually to make sure that they can get a lower price quotation from various contractors. ii. Application of total cost of ownership to increase efficiency The business should ensure that its suppliers are scrutinized each and every time to determine the cost of goods that they are supplying and then comparing them with other suppliers. iii. Customer enquiry Customers should be asked if they are comfortable with certain levels of cost of various goods. They can give their views of various prices of products hence the business can reduce its supply or ask the supplier to reduce the cost. If the Gross Profit Benchmark for this type of business is 40 %, discuss if this business is in trouble? The gross profit benchmark of 40% is a good profit margin since the business can cover its cost of production and be able to compete with others as an investment. This means that the business can raise a gross profit of $ 200 000. This enables the firm to offset its expenses and raise sufficient revenue. Explain if it is more important to monitor and manage sales targets (turnover) or is it better to monitor and manage costs of the goods/services you sell. From a financial point of view, it is better to monitor and manage the cost of goods rather than managing the sales target. A business should consider ensuring that it is buying goods at a lower price to increase profits unlike having made a lot of sales but a few profits due to the high cost of goods. If the business wants to change suppliers (decrease in cost) why is it important to have business policies and procedures in place to assist with this process? Changing the supplier requires that the business consider a lot of factors that will come up as a result of changing the supplier. When the supplier is changed the quality of the products will change. This will require the business to review its policies on the quality of goods that are sold to their customers and that of the new supplier. This process will require a lot of changes in the supplier policies of the business. Calculate the net profit margin before taxes for this business. Net profit margin = Net Profit / Total Revenue $60 000/ $ 2 000 000 = 3% Identify internal variables in the business that can decrease the net profit margin of this business. The increase in prices - when prices of goods in the business increase there is a higher chance for customers not being able to continue buying those products hence a decrease in the net profit margin. Amount of inventory The valuation of stock does not necessary mean that the business will be in a position to raise such kind of sales given that there is an occurrence of financial crisis or changes in the market demand. The business will not be able to raise the projected sales hence a decrease in the profit margin Increase in employee cost When workers demand more salaries and wages, there would be a decrease in the profit margin of the business since more money is spent on expenses. Assessment task 5 Explain how benchmarks or industry standards can help the business to keep expenditure under control. When an industry performs benchmarking, it can ensure that it remains competitive in the industry since it has to compare itself with others. When the firm is not performing to the required level, it has to control its expenditure to ensure that it increases its profit margin. When firm is performing well in its domain in the industry, other firms will try to emulate the same hence policies of expenditure control are implemented. Identify and list procedures in a business that will assist the business to develop an an accurate income statement for the business. (You can go line per line) Use of organizational charts Internal controls Financial statements Tax filling Budget process Assessment task 6 Given=Product A, B, and C: Budgeted sales for 2008 are based on half the variances between the budget- and the actual income (sales) for 2007. Use the budgeted sales of 2007 as the base (starting point) to forecast sales for 2008. Sales forecast = (total cost of stock*mark-up/100) + total cost of stock A = $700 000* 8/100 + $700 000 = $ 756 000 B = $300 000*-14/100 + $300 000 = $258 000 C = $ 640 000* 17/100 + $ 640 000 = $748 800 Calculate total sales. (Forecast) $ 756 000 + $ 258 000 $ 748 800 = $ 1 762 800 Calculate gross profit. (Budget and actual for 2008) Budget gross profit = budget total sales – budget cost of goods $ 1 762 800 - $ 990 000 = $ 772 800 Actual gross profit = actual total sales – actual cost of goods $ 1 640 000 - $ 1 000 000 = $ 640 000 Calculate the gross profit margins (Budget and actual for 2008) Budget gross profit margin = gross profit / total sales $ 772 800 / $ 1 762 800 = 44% Actual profit margin = $ 640 000 / $ 1 000 000 = 64% Calculate the net profit before taxes (Budget and actual for 2008) Budget Net profit= gross profit – expenses $ 772 800 - $ 274 000 + $ 27 260 = $ 471 540 Actual net profit = $640 000 - $ 283 000 - $ 33 000 = $ 324 000 Calculate the net profit margin for Pricewise (Budget and actual for 2008) Budget Net profit margin = net profit / total sales $471 540 / $ 1 762 800 = 27% Actual net profit margin = $ 324 000 / $1 640 000 = 20% Reference SPARVERO, E. (2015). Finance and Budgeting. Sport Facility and Event Management, 55. Brooks, R., & Mukherjee, A. K. (2013). Financial management: core concepts. Pearson. Schönbohm, A., & Zahn, A. (2012). Corporate capital budgeting: Success factors from a behavioral perspective (No. 21). Beiträge zur Controlling-Forschung. Callen, J. L., Khan, M., & Lu, H. (2013). Accounting Quality, Stock Price Delay, and Future Stock Returns*. Contemporary Accounting Research, 30(1), 269-295. Smith, D. J., Gradojevic, N., & Irwin, W. S. (2011). An analysis of brand equity determinants: Gross profit, advertising, research, and development. Journal of Business & Economics Research (JBER), 5(11). Gaskill, L. R., Van Auken, H. E., & Kim, H. S. (2015). Impact of operational planning on small business retail performance. Journal of Small Business Strategy, 5(1), 21-36. Ryals, L., Abdollahi, S., & Marcos, J. (2015). The Skills and Competencies of Sales Leaders: A Survey. In Marketing Dynamism & Sustainability: Things Change, Things Stay the Same… (pp. 11-14). Springer International Publishing. Reamer, F. (2012). Essential ethics education in social work field instruction. A blueprint for field educators. Field Educator, 2(2). Read More