surges

Most business owners probably don’t think of sales surges as a problem. But in fact, sudden sales growth can create a crisis.

By Roy Rasmussen

If you’re not prepared for a rapid increase in sales volume, you may quickly find yourself short on inventory or short on staff. This can lead to customer service complaints, refund requests, cash flow problems, bad publicity, worker dissatisfaction and employee turnover. Growing too fast is one of the top reasons companies go out of business, with two-thirds of the fastest-growing companies end up shrinking, getting sold off or failing entirely within five to eight years, Kauffman Foundation research shows.

On the other hand, a well-managed sales surge can propel your company to financial success, provided you avoid some common pitfalls. Here are four keys to preparing for a profitable sales surge.

Types of Sales Surges

In order to effectively manage sales surges, it helps to know what types of events can trigger a spike in sales. Sales surges can happen for a variety of reasons, says SPS Commerce.

Some reasons are predictable. These include holidays, seasonal demand cycles and sales. Other reasons are less predictable. For instance, one of your product advertising campaigns might suddenly go viral, driving traffic to your site or store. For some products and locations, even a change in weather can spark a sales surge. For example, a winter storm in an area that normally doesn’t get much snow may drive sudden demand for shovels.

Sales surges caused by predictable factors are easier to plan for than those with unpredictable causes. However, being aware of unpredictable factors that cause surges can allow you to prepare contingency plans for the event that these types of surges occur.

Managing Sales Surges

Proactive inventory management is a key to handling predictable sales surges such as holiday shopping, says SBA partner SCORE. Designating or hiring someone to manage inventory will help you coordinate your sales surge inventory strategy. To support your inventory manager, do market research to estimate which products are likely to see sales spikes, and track actual sales to refine your estimates. Adjust your marketing to promote items that are overstocked. Implement an order management system that notifies you automatically when stock is running low and that prescribes how to follow up when a customer wants something that has run out.

In order to handle sales and customer service issues that can arise during sales spikes, it’s also vital to prepare your sales and customer service teams. Inbound and outbound sales roles should be clarified so that sales representatives know what to do when customers express interest in a hot item. For customer service inquiries, adopting a cloud contact center will provide your service team with a centralized interface to handle inquiries from all departments, locations and service channels. All relevant staff should be aware of how the contact center works, including customer service and sales teams. Both sales and customer service representatives should also be trained in how to handle frequent surge-related issues such as requests for out-of-stock items, returns, exchanges and refunds.

Handling Unexpected Sales Surges

Wisconsin School of Business professor Jordan Tong has used big-data analytics to track random sales surges; he reports that they’re not quite as random as they seem. Based on his mathematical analysis, Tong recommends adopting a two-pronged strategy to prepare for sales surges.

First, firms should develop what Tong calls “reactive capacity,” which is the ability to ramp up production as needed. This requires researching your market as well as your supply chain.

Second, firms should maintain a level of “safety stock” that is available at all times. This will ensure that stock is on hand in an emergency.

Tong recommends analyzing your production and safety stock needs from a multi-factor perspective. Instead of just thinking of surges in terms of possible size, develop scenarios that take into account both how much sales volume you might have to prepare for as well as how long the surge might last. This will help you better estimate how much you might have to scale up at short notice and how long you’ll need to keep inventory levels above average.

Capitalizing on Sales Surges

To maximize your revenue from sales spikes, it’s important to prepare your team to capitalize on opportunities. Have a procedure in place when customers request an item that isn’t in stock so that your sales team is prepared to offer incentives for waiting until the item comes back in stock, such as discounts, or to recommend alternatives for immediate purchase. This will allow you to salvage sales you might otherwise lose.

Sales surges are also an excellent time to capitalize on upsells and cross-sells. Use your sales team and your CRM software to extend additional offers to customers shopping for hot items. Finally, be sure to capture customer contact information for follow-up marketing and repeat business.

Understanding the causes of sales surges helps you prepare for both expected and random surges, putting you in a stronger position to maximize your revenue. Through careful preparation and planning, you can avoid getting caught off-guard by sales surges and instead convert these valuable opportunities into profits.

Roy Rasmussen, coauthor of Publishing for Publicity, is a freelance writer who helps select clients write quality content to reach business and technology audiences. His clients have included Fortune 500 companies and bestselling authors. His most recent projects include books on cloud computing, small business management, sales, business coaching, social media marketing, and career planning.

Sales surge stock photo by iQoncept/Shutterstock