Archive for April, 2011

Profit In Process

Thursday, April 28th, 2011

This week’s guest post is by Tibor Shanto – Principal of Renbor Sales Solutions Inc., - a recognized speaker, author of the award winning book Shift!: Harness The Trigger Events That Turn Prospects Into Customers, and sought after trainer.

Most sales people are taught that companies go under due to lack of sales. We all know that the reality is that companies fail due to a lack of profits.  But this disconnect is one reason sales people see discounting as an alternative to selling. Reps fail to realize that the 5% discount they give on a deal could be half, or more, of the margin in the sale (why worry, they still get  their commission).

One way to address this is to ensure that you have a detailed, clearly defined and suitable sales process.  This needs to include defined stages that align with the buying process, and clear workflows.

The sales process also needs to align with other processes in the company. While sales does drive orders,  if it is not synchronized with the rest of the organization, there is a real risk to productivity and profits. One example is the waste that results in working at cross purposes, typified by the often found disconnect between sales and marketing.  I recently saw the results of a survey that suggested that 75% of marketing managers do not know what the sales team’s quota is. 

Once the sales process is aligned with other processes in the organization, they can be harmonized and leveraged for further advantage. A good example can be found in environments where production and related resources are directly tied to orders.  Having a logical process that helps sales execute and at the same time delivers predictable and reliable forecasts to production is a definite competitive advantage. 

For example, one of our clients publishes a series of trade magazines. One challenge they face is maximizing revenue from each issue.  Specifically, the more ads sold the larger the issue, but this impacts editorial, layout and other areas of production.  Add to this the fact that the issue has to be locked down many days before publication.

There was a constant to-and-fro between sales and production with sales trying to get one last advertiser in to an issue after the deadline or ads that sales had guaranteed would come in evaporating. Both situations caused havoc for production.

We worked with both groups, analyzing how different ad sales unfolded, the time from start to finish of the process, critical points along the way (go/no-go points), confirmation points and elapsed times from those points to close. This allowed sales to quantify aspects of the sale and establish reasonable probabilities to close from specific events during the sales.

Armed with these facts, we sat down with the production team with two goals in mind. First, was to help them understand in an objective way how a typical sale unfolds,  including critical turning points. Second was to establish a rule and workflow with respect to objectively agreeing which opportunities were to be included by production, based on where they were in the process at a specific point in time prior to publication date.

This allowed production to better plan a given issue, and sales to be more confident in communicating and adhering to deadlines with advertisers.  While there are still instances where sales try to bring in one more ad, production has built in a bit of wiggle to their timelines.

This same approach can be implemented by aligning the sales process with other areas of the company.  It goes without saying, that the same efficiencies can be realised in other environments – JIT or otherwise.  The key is to have a sales process to begin with, one that suits the needs and the type of sale on which the entire organization needs to execute. 

This removes the emotion and subjectivity when it comes to sales predictability, forecasting and driving both revenue and other key objectives of the organization.

Tibor can be reached at info@SellBetter.ca, or + 1-416-822-7781. You can read his blog, The Pipeline and follow him on Twitter @Renbor.

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Should I Sell Or Succeed?

Tuesday, April 26th, 2011

Suspend your first reaction – i.e. has Jim finally lost his mind – just for a moment. This is a question we are asked more often than you would think. It may not be posed in those exact words, but it’s always the fundamental, real question.

Let me tell you why it’s asked and then give you our answer.

Frustration and Unexpected Curve Balls.

Business owners like to think they’re superheroes, capable of absorbing unending stress and working mind numbing hours day after day after day. But they’re not, they’re human beings and so – occasionally and less frequently than most – even they get frustrated, tired or worn out.

It often happens when a new initiative or project takes longer, runs significantly over cost, or generally creates more headaches than anyone imagined – even in their wildest dreams.

Another trigger is a completely unexpected event. A competitor dramatically drops prices, a long term supplier goes out of business or a partner walks in and says they’ve decided to retire.

It could be a tough, slow market because of a recession. Or the owner could have reached an age where he/she is ready focus on other aspects of life.

It could be a combination of the above.

But the result is the same – the business owners say the equivalent of “You know what, I don’t have the desire/motivation to do this again. It would be easier just to sell.”

That’s when we hear the question.

You Can’t Do One Without Having Done The Other.

Consultants (it is said) always answer a question with a question. In this case we ask something like:

• “Can you be sure that a company – in the middle of a major project or facing major price competition or about to lose a key player/founder/owner or some combination of the above – will continue to be successful?” and
• “Would you pay top dollar for a company in any of those situations?”

Buyers want to minimize risk when purchasing a company. So the likely answer to both questions would be “No”.

Sellers want to maximize the selling price so the business owners pretty quickly figure out the answer to the “Should I Sell Or Should I Succeed” question for themselves.

A fresh mind can often quickly see a solution to the types of challenges that cause business owners to consider selling in the first place. And this is one situation where we – and other consultants like us – add value.

The Bottom Line.

As a rule, you can’t sell unless/until you succeed.

But, as with many rules, there’s an exception to this one. Want to guess what it is?

Leading Business Plan Execution

Thursday, April 21st, 2011

Brian Brennan is a Chartered Accountant and an experienced leader in the business community. He is a Chair with TEC Canada where he works closely with numerous CEO’s to help them become great leaders in their organizations.

Imagine being at the top of an organization – calling the shots and being where the buck stops. What a thrill!

Leadership is exciting, invigorating and tremendously motivating for those who are in positions of authority and prominence in an organization.

Developing business strategies is a key function that leaders fulfill and executing them well is a tremendous responsibility. The long term success of your company depends on it.

The process of business planning is often conducted annually and is completed in one or two meetings of the senior management team. Too often this is as far as executives go with their well-considered plans. When the meetings are over it is back to the rigors of running the business.

Strategies need to be carefully thought out and passionately executed.

In their book, Execution – The Discipline of Getting Things Done, Larry Bossidy and Ram Charan present the leader’s role with business plan execution as this – “The leader has to be engaged personally and deeply in the business. Execution requires a comprehensive understanding of a business, its people and its environment….only the leader can make execution happen, through his or her deep personal involvement in the substance and even the details of execution.”

The vast majority of business planning fails at the execution phase. Some estimate that the failure rate is as high as 90%. That is astounding considering the quality of the people involved in strategic planning.

I think that Larry Bossidy and Ram Charan have it right. Successful business plan execution requires passionate leadership from the CEO and senior executive team working together. Solid teamwork is a caveat, something that cannot be ignored if business planning is to succeed.

Those who will be responsible for executing strategy will need to be intimately involved in its development. As a CEO or business owner it is your responsibility to direct the activity, stay close enough to understand it thoroughly and ensure that strategic initiatives are followed through.

Keeping your senior team focused and on track to achieve the results that you expect is critically important. Coaching and assisting your team where necessary is all part of the process.

Leadership is all about providing direction and assistance wherever and whenever it is needed – with passion and a deep sense of commitment.

For more information on Brian Brennan visit www.maxpotential.ca and www.tec-canada.com

How Strategy Evolves – A Great Example

Wednesday, April 20th, 2011

We consultants love to hold forth about how strategy and business models can, and should, evolve. But today I came across an article written by someone who has actually proved that it works.

Here’s how.

Worm Your Way Into Business – The Original Strategy.

Tom Szaky, a Canadian immigrant, started TerraCycle as an eco-friendly waste management company. His customers paid him to haul away their organic waste and, instead of dumping it in a landfill, feed it to worms.

In less than a year he realized that they couldn’t get customers to pay them enough to make a profit doing it.

Then they figured out that instead of making money only by providing a service they could also turn the output into a saleable product.

Evolution # 1 – Turn S#*t Into Gold.

TerraCycle took the worm waste and sold it as premium, organic Plant Food, packaged in recycled soda bottles. The product was sold by major retailers – e.g. Home Depot, Wal-Mart – and revenues grew to over $3 million in 4 years.

They sourced bottles via their web site and a program launched in schools. TerraCycle paid the shipping to get the bottles to their plant and made a 5 cent per bottle donation to a school or charity of the sender’s choice. The program was so successful that they were soon paying out hundreds of thousands of dollars. And that almost broke the bank.

So they tried to find sponsors to pay the shipping and donations in exchange for publicity. That idea didn’t work but it did lead to another opportunity.

Evolution # 2 – More Waste = A Broader Product Range.

Sponsors didn’t want to pay to haul away waste created by other companies – but they did pay TerraCycle to take away their own waste. The opportunity was to turn that waste into raw materials to be used to make consumer products e.g. backpacks made from used juice pouches.

Within a year the new products were sold by the major retailers who agreed they embodied the same values as the Plant Food – better, greener and cheaper.

But once again, success brought a problem. Over time TerraCycle had learned how to bottle worm waste profitably. But it didn’t know how to manufacture these new products, manage supply chains or compete against low cost, Chinese manufacturers.

In 2008, TerraCycle lost $4.5 million on sales of $6.6 million.

Evolution # 3 – Focus On Eliminating Waste.

Szaky, walking through a major retail store one day, noticed that Disney had products in a wide range of categories – from shower curtains to food products. He realized that one company could not be an expert in so many consumer product categories – and then a friend explained licensing.

TerraCycle evolved once more and now even their Plant Food is manufactured under licence. The company has grown to over $13.5 million in sales, is operating in 14 countries – and is profitable.

Szaky says that they will stick to their core business (eliminating waste). But he knows there will other challenges to deal with and that more evolution may be required.

Summary.

It’s easy to assume that a company has always done business using its current strategy/business model. But it frequently isn’t that way – e.g. Starbucks original strategy was for customers to stand, listen to classical music and be served by baristas with moustaches.

3 Surprising Strategies (Or Not)

Thursday, April 14th, 2011

At the end of March we emailed our quarterly survey to over 600 people in our database (see commentary on the November survey here).

We asked them 4 things.

To describe their strategy for this fiscal year; which actions they were taking to execute it; how they had gone about planning for the year; and what they did to evaluate progress at the end of the first quarter.

The first surprise – no one’s planning to retire.

Only about 5% of the respondents described their strategy as “planning for exit”.

There have been stories in the media for some time now about the number of companies which will change hands as baby boomers retire. Many articles talk about how far in advance business owners must begin to prepare, particularly if they intend to sell their company.

As a result we were surprised at the low number of owners planning for exit. (We’re even in the process of launching a new service to help owners get the highest price and the best terms possible when they sell.)

However, this may reflect other surveys, by e.g. the banks and CFIB, which found that only a relatively small percentage of baby boomer owners are actively preparing to bow out.

The second surprise – everyone’s staying home.

Just over 70% of companies said they were pursuing a growth/ expansion strategy. But entering new domestic or overseas markets ranked 8th in a list of 9 actions being taken to increase profits.

Once again we were surprised. This time by the relatively low number of respondents who said they would be entering new markets. The North American economies are not the ones which are expected to show the most growth in the next few years. This is a good time for Canadian companies to be expanding into export markets.

But the answers to this question could be influenced by the (small) size of some of the companies responding to our survey.

By the way most companies are using a combination of increased promotional activities, new strategic alliances and improved internal systems/processes. Many said they intended to increase their prices.

And the third surprise – someone’s not planning to follow through.

As you might expect, most large companies said they held a 1-2 day planning session with their management team/key individuals before the beginning of the financial year.

So did many smaller companies. But they appear not to have used the opportunity to develop action plans/budgets or specific targets for measuring performance.

Then we asked what techniques respondents used to assess their progress at the end of the first quarter. Many of the smaller companies which used planning at the start of the year now said that they used none of the quarterly follow up techniques.

There have been a number of research studies which have tried to determine why planning fails. One of reasons given for failure is the lack of follow through by management. It is easy to assume that the owners of smaller companies are likely to be more involved in day-to-day operations than owners who have management teams in place and so find it easier to overlook quarterly follow ups.

So, to sum up……..

There’s good news and bad news.

The bad news is that some of the companies in our database – even larger ones – appear to be overlooking a number of external and internal factors which are critical to success.

The good news is that it can all be fixed – if the owners are willing to try. We’re certainly willing to help.

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