“My business isn’t growing fast enough and I don’t know why. Everything will go well for a while and then suddenly we’re not making any money again. What is happening?”
Owner-managers have often built their business up from the ground by doing everything themselves – the selling and the delivery. This is fine – and indeed necessary – in the early days, when the business can’t support extra members of staff to dedicate their time to these areas individually. But what happens when it grows? If your sales activity isn’t providing the revenue you need to grow your business, how do you know what is causing the problem? Is it your product or service offering? Are you expecting too much? Or are your sales people just no good?
The problem can often be that there isn’t enough definition between sales activity and delivery. Businesses need to develop processes whereby sales activity can be broken away from delivery activity, so that sales sell and delivery deliver. Otherwise, you find the business goes through peaks and troughs, as you can’t sell while you’re busy delivering, and when you’re busy selling you’re not delivering.
Businesses need to develop processes whereby sales activity can be broken away from delivery activity, so that sales sell and delivery deliver.
It’s also difficult not to end up starting delivery during the sales process, thereby setting unrealistic client expectations that cannot be met. Without a process that scopes a job and defines exactly each stage so you can hand it over from sales to the rest of the business to deliver, a business cannot grow: it just gets stuck.
Winning new business is critical for growth, but it doesn’t happen randomly. It happens because you make it happen by having good processes in place.
Where businesses are not bringing in much new business, they can often become highly dependent on a small number of clients or even one single customer. This is all well and good while that relationship is positive, but if that relationship sours and the customer decides to go elsewhere, the financial blow can be huge.
Quite often, a business starts out in life because of an opportunity for a relationship. As time goes on that customer relationship becomes bigger and bigger, and before you know it the business is over-dependent on it. The key is to see the early relationship as rocket fuel, there to get the business off the ground. Once it’s off the ground, it’s important to balance opportunity and risk.
The key is to see the early relationship as rocket fuel, there to get the business off the ground.
I worked with one business that had just one customer for 11 years. They didn’t realise it was a problem until that customer started making noises about their change in personnel and wanting to look at other firms. It was then the owner-manager realised he had effectively built another business’ R&D team at his own expense.
It is vitally important that businesses manage their sales activity effectively, ensuring that time and effort is spent on the correct customers – the ones generating the most gross profit.
It is easy to fall into the trap of allowing 80% of your business’s time to be sucked up by a customer that makes 80% of the noise but only generates 20% of your gross profit. It’s important to be aware of which are your best customers – not the ones that shout the loudest but the ones that contribute the most to your bottom line – and devote more time to servicing these customers. You have to be ruthless about it. Use timesheets, invoice proper hourly rates and track projects thoroughly to calculate what profit is really being made by that relationship.
If you employ second-rate sales people or a second-rate sales manager, you will more than likely get a second-rate result.
If a business has all the right processes in place and knows its customers, yet is still not growing, then it may be the people that are at fault. If you employ second-rate sales people or a second-rate sales manager, you will more than likely get a second-rate result. But fortunately, this is easy to rectify. Businesses need to have an objective document that states what each person in the sales team is here to do and breaks down their job into all the different elements – financial, organisational, relationship-building, key account management, demand creation. Most sales people have monthly targets to meet, gross profit margins to achieve, and a list of accounts to look after and grow. Setting SMART (specific, measurable, achievable, realistic, time-based) goals to measure individuals against those objectives will give a set of data at the end of which it will be very easy to see who can do it and who can’t. Get rid of the ones who can’t.
With thanks to Jerry Sandys