Reduce Your Direct Selling Expenses

When we break down direct selling expenses, the ratios of the individual line-item expenses vary from a consumer to a b-to-b catalog company. Ratios for both types of businesses typically are as follows:

For a catalog company to remain profitable, the selling-expense-to-sales ratio must be in-line. The ratio for a consumer catalog company is considerably higher than the ratio for a cataloger selling b-to-b. This is because the revenue per b-to-b catalog mailed is higher than a consumer catalog. It’s important to manage by the ratios. If the selling-expense-to-sales ratio gets out of line, most likely the income statement will show a loss on the bottom line. Profitability will be impacted. The more prospecting you do, the higher the ratio. Management may decide to tip the scales between mailings to the housefile vs. mailings to prospects in order to grow. This will increase the selling-expense-to-sales ratio. A company with adequate funding might be in a position to do this. On the other hand, it could mean disaster for a cataloger that has limited capital and is trying to grow too fast.