Sales Maximization Vs. Profit Maximization
Maximizing profit and sales are two major concerns of business owners, but many business managers fail to realize that sales maximization does not always mean profit maximization. Ignorance of the features, differences and cause-and-effect relationship between these two objectives can give you a false sense of improving profitability.
Sales maximization refers to plans and strategies employed by a business to increase its sales or revenues to the highest attainable level. Profit maximization refers to plans and activities involved in the company's effort to boost net profit to the highest possible degree given the company's current resources.
The primary responsibility of a marketing or sales manager is to achieve sales targets over a given time period. In addition to achieving sales targets, a sales manager is expected to maximize sales to provide growth and increase profits. Profit maximization is a task that falls into the hands of a general business manager or CEO. That person is the one who is in control of all aspects of business operations. He must plan, organize, direct and control all business resources to earn the highest attainable net profit.
Sales maximization is an activity that concentrates on revenue transactions and can be accomplished by employing various sales strategies and programs. Profit maximization entails a more complex program of business plans and activities that does not concentrate on sales alone. It encompasses both revenue and expenditure transactions. A business manager must increase revenues, decrease expenses or do both to increase net profit.
The thought that maximizing sales will help maximize profits is not always true. An increase in sales is associated with an increase in cost of goods sold and other expenses. Profit maximization is not achieved if marketing and overhead expenses incurred in sales maximization exceed the gross profit generated by the additional sales.
Profit maximization is the long-term goal of all business owners. Business managers constantly strive to generate the most profit over the life of a business, using all resources under their control. Sales maximization programs can be implemented for many reasons and at various times, but they are not done continuously. The start of a business, during lean seasons and at times when there is excess inventory are examples of those times. Sales managers may refrain from maximizing sales without the consent of general managers to avoid a possible shortage of business resources such as inventory and manpower.