Difference Between Sales and Business Development: 8 Business Metrics
business enthusiast, thinker and workaholic
“You only have to do a few things right in your life so long as you don’t do too many things wrong.” — Warren Buffett
Well, it is nice to start with a quote from none other than the great “Wizard of Omaha”, but maybe it is too egoistic? Hope by the end of the article I get to hear some of your thoughts about this, don’t forget to leave comments on quoting the legends like this. After this braggadocio it is pretty obvious where I am aiming with the difference between sales and business development — not to downplay any great salesman, I have nothing but admiration for successful salespeople but business development is a whole new ball game people.
What I mean by that, well the business of selling is a great virtue of few and even greater persistence by most of the others.
While I admire those who find this “something” inside them and successfully use it to actually make sales process an interesting piece of work, I usually deal with those that merely prey upon customers. And, to be honest, there is nothing wrong with that tactic, if it delivers — but is not the topic of this article, nor am I aiming to talk about sales pitches, tactics, etc. If you’re hoping to read about this, I believe there are plethora of other writers here that can teach you a lot about that topic, unfortunately, I am not one of them. On the other hand, if you wish to read more about business development I am glad to help.
“Growth is never by mere chance; it is the result of forces working together.” — James Cash Penney, founder, JC Penney
Again, I have to agree on both of these — a quote from J.C. Penny and this interesting image from Unsplash. Good business development is never a result of a single force, but rather combination of forces working together on a common goal — but and here is a huge BUT, in majority of cases, and by that, I mean successful cases, like the one you are trying to be, it is under the leadership of a single person. That single person should have the vision and the ability to develop a business. Maybe you’re thinking of a CEO, but in no way should those roles be confused — you should definitely have the support of your CEO but this steering wheel is given to the business development manager and it is his sole responsibility.
“Now we’re talking business”
If I haven’t lost you by this page, I believe I have your full and undivided attention. I really hope because we can now feel the difference from the headline. Business development is not just a business of sales numbers going up, skyrocketing and huge egos — even though you’ll certainly see some of it. It is a responsibility, a huge one if you ask me — to deliver WHAT? It is always about delivering results, but in the case of business development, it is more about delivering a perfectly sane business equation. Not just one, but 8 basic business equations.
- Total Assets = Liabilities + Equity
- Net Income = Revenues — Expenses
- Break-Even Point = (Sales — Fixed Costs — Variable Costs = $0 Profit)
- Cash Ratio = Cash ÷ Current Liabilities
- Profit Margin = Net Income ÷ Sales
- Debt-to-Equity Ratio = Total Liabilities ÷ Total Equity
- Cost of Goods Sold = Beginning Inventory + Cost of Purchasing New Inventory — Ending Inventory
- Retained Earnings = Beginning Retained Earnings + Net Income or Net Loss — Cash Dividends
Each equation is harder than the next one. Not harder to grasp or to calculate but harder to achieve, and then to achieve in the long-term — but so is life.
We will break down each one of these equations, and believe me when I say, the easiest part is to figure out what is needed, but to actually get down and dirty and deliver what is needed — that is where great business developers shine.
1. Total Assets = Liabilities + Equity
Meaning, all of the things your business owns (property, cash, inventory, acc. receivables and equipment) will, in the end, equate to the obligations you must pay (lease, merchant acc. fees, debts, etc.) plus the portion of the business that actually belongs to the owner or usually the stockholders.
So-called “balance sheet” equation.
2. Net Income = Revenues — Expenses
Looking at net income is basically deduction of your incurred costs of generating revenue from the revenue itself. At the end of the day it all that you’re left with — nothing more, nothing less.
3. Break-Even Point = (Sales — Fixed Costs — Variable Costs = $0 Profit)
Break-even point, or the first sign that you are actually doing a good job, or at least going in a good direction. Meaning, all of your sales minus the fixed and variable costs of conducting that same business now leave you with nothing, zero, zip. and you will be happy about it, believe you me — it will make you more than happy. The first time your new business or your new business model reaches the break-even point you’ll feel invincible. It is a very strong feeling, very addictive feeling and I hope you feel it a lot and a lot of times throughout your career.
4. Cash Ratio = Cash ÷ Current Liabilities
This should come naturally to most of you — it is an equation of how much money you have at your disposal. Take care of this number, always look after it — this will either save you or break you.
5. Profit Margin = Net Income ÷ Sales
We talking more serious business now. Maybe the most important number for any business developer out there. Why? This equation tells you about your status in the world. At the end of the day, if I want to see how successful I am as a business developer — just take a look at my profit margin. My profit margin tells you the exact net income earned on each dollar of sales. This is where all these fine people from the sales department come in, and when they close their deals and drink their champagne all it matters is how much of that money is kept in.
6. Debt-to-Equity Ratio = Total Liabilities ÷ Total Equity
This is a sneaky one, always keep eye out for this one — divide all of the costs to the outside parties (acc payable, principal payments, etc.) with how much of the company actually belongs to the owners and if what you get is high number — it shows you’d rather issue debt than stock. Depending on your situation it can impact you a very strong or little bit less — if you’re looking for an investor a high debt-to-equity ratio makes it more difficult.
7. Cost of Goods Sold = Beginning Inventory + Cost of Purchasing New Inventory — Ending Inventory
Easy one, but easily overlooked until it is too late. This equation helps you determine how much you spent on manufacturing your goods.
8. Retained Earnings = Beginning Retained Earnings + Net Income or Net Loss — Cash Dividends
One for the owners to calculate, but usually one that is sacred to you also :)
If you came this far and enjoyed it — then follow me — because this will be one helluva ride for you. If this keeps you interested, motivated and makes your spider-senses tingle you’re made for the world of business development.
Make sure you read the next part in the series, and until next time — best of luck in all of your adventures!
Subscribe to get your daily round-up of top tech stories!