Focus on sales is hurting bottom line

Britain's pubs, bars and inns may be increasing their sales figures, but this is being done at the expense of profits and could result in vast numbers of businesses going to the wall, according to the latest research by Plimsoll.

The analysts report that although current market growth is a respectable three per cent, this has slipped from five per cent a year ago, according to the snapshot of 849 companies studied by Plimsoll.

Despite the increase in sales, Plimsoll claims that 326 of the surveyed 849 companies (or 38 per cent) are currently selling at a loss; 440 companies (52 per cent) are making less profit than last year; 247 companies (29 per cent) are in more debt now than they were a year ago; and 418 companies - nearly half of all those involved in the study - are at a high risk of failure.

David Pattison, senior analyst on the project, said: "The reality is sales teams are very rarely privy to the full picture. All too often, they are unaware of the costs of overheads, the levels of debt and how their sales add up in profitability.

"In such stretched economic conditions, companies need to assess and understand who is a long term threat in the market and which companies are following an unsustainable strategy. This knowledge could be the difference between spotting a potential acquisition at a bargain price - and becoming one."

Pattison added: "The latest figures do seem to suggest that the focus has switched from profit to sales, as companies grab business almost at any cost. The old adage has never been more apt, 'sales for vanity - profit is sanity.'"