What comes in and what goes out, must balance

Almost every company would like their employees to have some commercial awareness. That doesn't mean having a detailed knowledge of how accounts work, but it does mean knowing how profit and loss work, in the broadest terms.

For a company to make money it has to spend less money on operating than the amount of money it takes on sales, all of which sounds simple; however, spending less than you take is not quite as easy as it sounds.

The biggest cost for most companies is labour, the people who do the jobs that make the company work. To make money, you need to spend money on people working on the product, administration, sales, marketing, etc and that is in every industry; other job roles will be needed depending on the industry.

Whether you have a product that you sell directly to the customer or a product that you sell directly to a business, the price will matter, just think of all those retail shops that have sales going on. Many of them find they have to put on a discount before they get the customer to buy the product. This ‘buying sales' can lead to companies actually losing money! Business-to-business companies also find themselves squeezed for discounted products or services, all of which leads to an ever increasing need to be as efficient as possible.

Companies constantly have to check they are growing sales faster than they are growing costs, it's a fine balance as to grow sales it is likely more people, or better people will be needed. That creates more cost if sales lag behind costs then the company must consider if the investment up front can be afforded.

Commercial awareness is the ability to consider not only how the company works but the industry, market, and environment that the company works in so that the best decisions can be made and understood. Employees who can do this are sometimes referred to as having savvy or nouse and are generally more respected and valued that employees without commercial awareness.

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