Growth in Difficult Times: Top Mistakes a Company Can Make
As the global economy continues to tighten, most businesses appreciate they won’t get different results by doing things the same way. But much of the science for growing in a recessionary market is counterintuitive, and managers whose hands were on the rudder in previous downturns are no longer in the workplace. Few of today’s executives therefore have ever faced this kind of storm in their career.
It’s a situation primed for old mistakes to be made all over again.
Former executives of Fortune companies and start-ups, who captained the ship through the ’70s stock market crash to the ’90s dot-com bubble, reveals some useful home truths. They report a range of signs that it’s time to rethink how your company sells:
• Tenders appear to be an exercise to justify decisions that are already made, and not a serious opportunity to win the business.
• Key customers slash budgets or rationalize their number of suppliers.
• Deals you thought were “hot to trot” go “off the boil.”
• Your pipeline bloats with opportunities stuck in a holding pattern, with the seller not achieving any forward progress for several months.
• Decisions become more complex, involving more people and taking longer to get across the line.
• Price and risk mitigation become main topics for discussion in the negotiation phase.
• Sales are for amounts far less than forecast.
• Salespeople spend time on low-yield activities like prospecting because the quality and quantity of leads from Marketing is too low or dries up.
• Your forecast is murky when you look out further than six months.
• You win deals, but can’t repeat success across the sales force.
• You lose deals and don't know why, or when it became irrecoverable.
• Good salespeople bail out into management roles in other departments or leave the company altogether.
When organizations are dealt with these challenges, their typical gag reflex is to spend more on advertising, cut back on salespeople, cut back on training coaching, cut back on pricing and tell salespeople to “work harder and smarter.”
What happens next? A downward spiral commences.
Managers focus on activity metrics and demand more calls, more leads, more proposals. Salespeople chase anything that moves, filling their funnel with unqualified, low potential deals to meet the activity targets. Forecasts fill with fiction. Managers start weighting the forecast report, which sends the message they don't trust their team. Salespeople invite managers to help close their big deals, knowing that if the manager can’t win, the salesperson is off the hook. Customers invite managers to attend the final pitch, knowing they can approve larger discounts. Coaching stops as managers don the cape of “SuperRep.” Nonstandard promises made in the heat of battle are off-menu for what the delivery team actually does, establishing a gap between the customer’s expectations and what they then experience.
Plus, repeat business drops, as promises are not met, and margin erosion begins. Managers focus on even more activity metrics, more calls, more leads, and more proposals, and the downward spiral gets deeper and deeper...
If any of these danger signs look familiar, you’re in good company. Most executives who turned their companies around in former recessions first fell into the same traps because they represent a natural response in times of uncertainty. People go to risk and get tactical.
But these same executives report the secret to pulling out of the nosedive is to act contrary to the natural impulse, keep your head, and take a contrarian path. Those that did so achieved stability and even growth while their competitors fell by the wayside. They cite the five most dangerous mistakes a company can make as:
1. Ignoring the problem
Fear and panic can cause indecision. When they do, business leaders can fail to evaluate options rigorously, and so make inappropriate decisions to maintain the status quo. Poor choices—or safe choices made too late—cause a company to go backwards. When the warning signs appear, take swift action.
2. Increasing advertising
For fast moving consumer goods, brand advertising can sway preference and so take market share away from competitors in the short term. But in complex B2B sales, advertising does not lift short-term revenue because institutional buying decisions require a protracted period of assessment that outlasts most advertising campaigns. So don't advertise and expect an impact on B2B sales this year. However, consulting firm PIMS Associates1 reports how companies that advertise more end up growing faster over the long term than firms that drop off the customer’s radar, seemingly swallowed by the downturn.
3. Cutting the price
Buyers in a tight market will naturally gravitate to low prices. But this simply reduces your margins, which must be paid for by cutbacks to operating expense elsewhere. It leads to short-term gain but long-term pain; the loss of sustainability. Conversely in the B2B space, higher prices positioned as necessary to reduce the customer’s risk, actually plays better to executive perception than “getting a cheap deal.” Sometimes putting your price up is the best way to grow your market.
4. Freezing sales expenses
Putting a hold on sales costs such as travel, entertainment and training are typical areas targeted by nervous CFOs. But a study reports only 27% of companies that indulged in intensive cost cutting were growing as a result of their pains.
5. Pushing more calls
Pressuring salespeople into making more intrusions on the same number of prospects actually reduces sales. Neil Rackham (author of “SPIN Selling” and “Rethinking the Sales Force”) concludes: “The least successful people are the ones making the most calls. Increasing the call rate results in fewer orders, not more.”
To avoid reinventing the wheel, learning from executives who weathered past recessions is a sound approach to reducing risk. In your own organization, your alumni or your online social network there may reside active or emeritus officers with deep experience to share. Talk to them. Pick their brains.
But one thing is certain when an ailing economy mimics a black hole—piecemeal remedies fail to achieve escape velocity. Cutting back on cost, though logical, is the opposite of what has pulled businesses through recessions in the past. Increased investment in the sales process, governed by greater discipline, is a more reliable approach for achieving sustainable revenue growth, even in difficult times.
Nicholas Read is president of consulting firm SalesLabs (www.saleslabs.com) and co-author of “Selling to the C-Suite.”