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If your firm has a list of all upcoming contracts that show the bids and estimated profit margins, watch this overall return percentage on future work to spot trends and potential problems.
Examples of sales backlog trends you need to watch for include:
- Increasing sales, dropping margins: This is worrisome to see the overal profit margin dropping. That means customers are not buying your more expensive goods, opting for the cheaper items.
- Dropping sales, increasing profit margin percentage: it is great that your profit margin percentage is increasing but you are losing volume. Is this due to fewer customers, customers ordering less, missing customers, etc.?
- Fewer customers: The backlog may indicate a spike in the profit margin within the backlog, but after analysis, it is reflective of a drop in number of customers dominated by only one with high margins. No one regrets getting new orders but they should be concerned when they are coming in only from very few sources.
- Dropping profit margins: Another trend to watch for is an overall drop in the profit margins projected for the next few months. That may indicate customers leaving the more profitable segment of your market and taking only the cheap work or someone else in the market is taking this segment away from you. Find out.
- Orders from new customers: Obviously watch for resulting orders from bids to new customers. If there are none, you are winning none. If you are getting all you bid, you are bidding too low.
These are just a few of the trends to watch, measure and question.
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