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Hiring The First Salesperson
Monday, I discussed two grave mistakes made when small and mid-market companies hire sales and marketing people. If The Wall Street Journal is to be believed, more small businesses are planning to hire in the next six months than those that aren’t; and the sales and marketing is the focus for 50% of those firms.
Given the size of firms that were surveyed (under $5 million) I’m certain that many of these firms will attempting to do the single, toughest thing in business – hiring the first salesperson. As I shared Monday, hiring any salesperson is difficult, but hiring the first salesperson in a company borders on the impossible.
Going from an entrepreneur/leader led sales effort to a salesperson led effort is a HUGE shift for any company, and it is ALWAYS underestimated. I often advise clients hiring a first salesperson that they may need to expect to go through 3 hires to get it right.
The reason hiring a first salesperson is so difficult is actually quite simple. Solving the problem is a bit more complicated.
When you hire a salesperson, the sales process paradoxically fails to create value. When led by a principle or services provider (a la accounting, law, engineering, etc.) the “seller” is constantly creating value. They’re not “selling” in the traditional sense. They’re probing, solving problems, enlightening the customer about what is possible. Sure, they violate 90% of the rules of selling, but they create value.
When a salesperson is hired, they stop creating value and instead communicate value. The process becomes a series of “we-do’s.”
The problem is that even when the salesperson is saying the exact same things that the non-salesperson was saying – they’re not saying the same thing. The non-salesperson was constantly diagnosing and designing, while the salesperson is constantly telling. The non-salesperson (accidentally or on-purpose) was problem focused, the salesperson is solutions focused.
Now you can’t blame the salesperson most of the time, because the only training the salesperson gets from a company is about the solution. They’re told stories, talk to successful customers and study all of the wonderful things the company does. Little to know time is spent on understanding the customers problems better than the customer understand their own problems. There’s no diagnostic sales training teaching and supporting the salesperson’s ability to dig deeper with the customer.
A successful salesperson brings a critical capability and focus to a company. They don’t have the expertise of the founder, the leaders or the subject matter experts. So they need a process that ensures they create value throughout the entire sales process. They must be trained to understand – diagnose – the critical few problems that your company solves. They must be supported by a marketing effort that supports that message and provokes the customer.
Merely hiring a salesperson and sending them into the field is not a recipe for growth. Hiring a salesperson is a defining moment for any company – and it must be treated as such.
If you are hiring salespeople in the near future, you can download Avoiding The 10 Critical Hiring Mistakes When Hiring Salespeople.
Goodbye Flip & A Thought on Focus
Today, Cisco announced that it was closing down it’s FLIP camera unit. Cisco bought the company in 2009 for $540 million dollars. Less than two years later, FLIP is no more.
I still remember when I saw my first FLIP video camera. I was so impressed that I bought one that day, and then bought one for each of my employees for the holidays. When I started using my FLIP people couldn’t help but talk about it. It did the nearly impossible – it was cool and practical.
Then Cisco bought them, in the pursuit of “diversifying” its revenue streams, with consumer oriented products. No wonder that analysts often refer to diversification strategies as deworsification ones.
The acquisition was doomed from the start, as it violates the cardinal rule of focus. You can delight one type of customer, but you can’t delight them all. Cisco was a great company when they focused on their core business.
Then they made a critical mistake that tempts companies of all shapes, sizes and industries. They began to believe they could make anything successful and began focus on what was good for them, rather than focusing on value creation.
I can’t promise that FLIP would have remained successful had they remained independent (and maintained their focus), but I sure would have liked to see them try.
Product vs. Service Sale: A Crucial Distinction
For as long as I’ve been in sales, guru’s have always focused on the differences between selling products and selling services. The approach, skills and talents required to successfully sell products are quite different from those needed to successfully sell services.
A major trend I’ve noticed over the last 5 – 10 years is that the distinction between “products businesses” and “services businesses” has become increasingly blurred; as product oriented companies have added services, and services companies have “productized” their offerings.
While the distinctions between companies has grown more nuanced, it’s impact in the selling process hasn’t. It’s critical that you decide if you are selling a product or a service. This simple statement of need can best illustrate the difference between a product and service sale:
Which word do you focus on – “it” or “now?”
If you focus on “it” over “now” you are making a product sale. You’ll focus your sales process, marketing and positioning on the product being offered. You’ll gear your sales efforts to late stage buy-cycle opportunities. Because your focus is on the product, you’ll deal with commoditization on a regular basis (you may even be the chief commoditizer), and as a result your margins will be tighter; hence, you’ll focus more on volume.
If you focus on “now” over “it”, you are making a services sale. You’ll focus your sales process, marketing, and positioning on the consequences of not getting it now. You’ll spend more time educating your customer base on the barriers to “now” and the impact that “now” has on their organization. Your efforts will focus on radical differentiation, and while your volume may be lower (everyone that needs “it” doesn’t need it “now”), you’re margins will be much higher.
A perfect example of the two can be seen between the two most profitable companies in the technology space:
- Microsoft focuses on “it,”
- Apple focuses on “now.” (Realizing that “now” is a metaphor.)
The Big Mistake
Everyday I see companies, especially small and mid-market ones, make a critical mistake. They try to focus on both “it” and “now.” At the risk of over-simplifying the issue, let me be clear:
You must focus on either “it” or “now;” you cannot focus on both.
For those that have been reading this blog for a while, you realize that the product sale focuses on “left-side value,” while the service sale needs to focus on “right-side value.” When you try to focus on both you fall in the middle, and there is no room in the middle.
The middle is Death Valley. You face the on-going margin pressure like a products company with the increased complexity and costs associated with services businesses.
When you’ve chosen which sale you will focus on, your job is to ensure that everything you do – the questions you ask, the ads you run, the social media strategy you implement, etc. – is completely aligned behind the decision.
I am not saying that the product or the service sale is either good or bad. My point here is that they are different. If you want to accelerate your profitable growth in the future you need to chose one – and only one.
The Key to Differentiating
“That’s not how we do it in our industry.”- “I’m not sure I’m comfortable doing that, I’ve never done that before.”
- “I’ve been working with my customer for several years, and I’ve never asked those types of questions.”
- “Salespeople aren’t expected to do that in our industry.”
- “We’ve never done that before. How will I know it will work?”
These are just some of the most common statements that I hear every day from people who claim that they want to differentiate their companies from their competitors.
Let me remind everyone that differentiation is an ends – it’s not a means. The critical component to differentiating yourself in the market is doing something different that matters.
90% of the time the activity that matters and makes you different will, initially, make you and the people in your company uncomfortable. Think about it, if it were comfortable to do, it’s highly likely many others would be doing it.
Please do not misunderstand my point. Merely being different is not enough to differentiate. So, just because no one has ever done it before doesn’t mean that you should do it – but it’s a great starting point.
Freedom & Capability
I first learned of this concept from Dan Sullivan and The Strategic Coach. They taught it as a way for entrepreneurs to look at their business, and I’ve since applied it to how salespeople can position their products and services.
I have a question for you – does your product or service represent either:
- A freedom for your customer, and/or
- A capability for them?
Stop and answer these questions:
- What are my customers currently doing that my product or service frees them from doing? What impact would that have on my customer’s business/life?
- What does my product or service enable my customer to do that they are not capable of doing now? What impact would that have my customer?
The value of your offerings is limited to your ability to clearly answer these questions. When you clearly understand these answers, you can guide the conversation to clearly articulate just what you’re worth.
The Most Important Thing to Know in Sales
Anyone who has heard me speak knows that I believe business acumen is the most important capability for a successful selling. One of my goals in writing this blog is to support the development of business acumen in the sales process.
I started reading the book Seizing the White Space: Business Model Innovation for Growth and Renewal. I found the title interesting because I often advise executives to “seek the white space.”
Mark Johnson provides one of the simplest and powerful descriptions of what a business model is, how to understand it, and how to affect it. Looking briefly at the four elements from the four box business model, they are:
Customer Value Proposition (CVP) – An offering that helps customers more effectively, reliably, conveniently, or affordably solve an important problem (or satisfy a job-to-be-done) at a given price.
Profit Formula – The economic blueprint that defines how the company will create value for itself and its shareholders. It specifies the assets and fixed cost structure, as well as the margins and velocity required to cover them.
Key Resources – The unique people, technology, products, facilities, equipment, funding, and brand required to deliver the value proposition to customers.
Key Processes – The means by which a company delivers on the customer value proposition in a sustainable, repeatable, scalable, and manageable way.
Understanding your customer/prospect’s business model is critical – I repeat CRITICAL – to becoming indispensable. If you don’t understand, you cannot make The Shift to selling results, and you’ll find your company, your offerings, and your sales efforts increasingly marginalized.
When you do understand their business model, you can begin to answer important questions like:
- Which boxes do we impact?
- How do we impact them?
- How will our customers business model improve as a result of our impact?
- What is that worth?
With those answers in place, your customers will be far more interested in talking with you and far more open to sharing their needs with you.
Getting What You’re Worth
It occurred to me yesterday that I’ve been writing a lot about the dangers of letting price competition damage your positioning and your margins, but I haven’t written much about the mechanics of protecting, and even raising your prices in markets like the one we’re in. So, today I’m going to share with you a specific example of how to enhance your margins.
First, you need to understand that you there are only two sales conversations you can be in:
- The What’s It Cost Conversation or
- The What’s It Worth Conversation
If you’re not sure which conversation you’re having, then you’re having The What’s It Cost Conversation. In my experience, 95% of sales conversations are in the “what’s it cost” category.
When your sales process is focused on your solution, it is difficult to impossible to escape “what’s it cost.” The reason for this is:
- The focus quickly goes to product/service features, attributes, and benefits; which naturally connect to costs.
- This focus naturally sets you up to be compared to other “solutions.”
- Further, because the focus is solutions oriented instead of diagnostically oriented, you must deal with a misunderstood or not fully understood problem. This often makes the comparison unfair and further commoditizes you.
- When this happens, you fall into the deadly specs/price trap. Think about what you want when you’re searching for solutions. We all want the solution that is good enough at the lowest price possible
It is far more effective, and profitable, to get into the “what’s it worth” conversation. To do this, you must change the focus of your efforts from a solutions focus to digging deeper on problems. As you begin to probe the problem and dig deeper, you can begin to monetize the value of your solution. In essence, I’m asking you to begin pricing the problem – not the solution.
Let me share a real life example to illustrate my point. At Imagine, we solve sales problems. We could easily be compared to a variety of training “solutions,” but a) what we do isn’t really training, and b) that would badly commoditize us.
Instead, we help our prospects and clients first understand their problem and understand the cost of the problem. In our business, like many of yours, we face a challenge that the difference between our approach and our competitors is not huge. We’re all saying many of the same things. These little differences, however, are huge when in comes to the results companies can enjoy.
So, to gain the price advantage that our results create, we must enable our clients to uncover just what the value difference is. That’s precisely what “pricing problems” and monetizing value does. Here’s how we do it:
Baseline Scenario
Let’s say that your sales team produces the following:
- They average 40 proposals
- They average a 40% close rate
- So they’re closing 16 new opportunities on average
- The average sale was $30,000
- Average gross margin of 22%
This means that each salesperson is producing (on average) $480,000 in sales and $105,000 in gross profit.
The Little Difference
Let’s say that as a result of working with us you improve your results by just 5%. Now keep in mind, that a 5% difference is virtually imperceptible. But, this virtually imperceptible difference can lead to extraordinarily valuable results this 5% difference means:
- Instead of 40 proposals you average 42
- Instead of a a 40% close rate, you average 42%
- Instead of average $30,000 per sale, you average $31,500
- Your margins would go from 22% to 26%
- Total sales would be $555,000, up from $480,000
- Most powerfully, your gross profit you go from $105,000 to more than $142,000 – a 35% difference.
Now, if you maintained this performance improvement, you’d grow faster. So instead of growing at say 10% per year you’d grow 12.5% per year. That difference over a 10 year period of time would result in an increased gross profit of just under $1 million.
I ask you, what would that be worth?
With the problem fully understood and, more importantly, the cost of the problem clear, the proper context has been created to enable you to effectively discuss the appropriate solution (yours) and to have the solution properly valued.
My be is that your business and your approach create such value for your customers/clients. However, if you don’t build out your business case to enable customers to understand the value of your difference, it can’t be valued and your profits will suffer as a result.
When Free Isn’t Sustainable
There’s an interesting post on my friend Gini Dietrich’s blog, SPIN Sucks. I found it and one of the comments both interesting and insightful. It actually created a bit of a visceral response from me (you can read my comment here).
Writing about The New York Times’ plans to start charging for its digital subscriptions through Kindle (which it already does and plans on raising), and the iPad (which, apparently, it’s going to start to do); guest blogger, Nick Harrison, and a commenter put forth an idea that is commonly accepted, and inherently wrong.
The idea is that you cannot charge for information on the web. Mr. Harrison, says, “My first reaction at the time was, if you are already losing subscriptions and advertising dollars, is actually charging for content the best strategy?” My answer – Yes!
The commenter added: “This is an example of a company not understanding that they have to change with the times. The Internet has made nearly everything free, and people aren’t willing to go back from that.” Outside of the fact that this isn’t true (The Wall Street Journal has been charging for content online since it started providing it), it doesn’t address the ability of a company to create a new experience worth charging for.
The reason I share this is because these thoughts are symptomatic of what is silently killing really good businesses – the idea that you cannot charge for what others are doing for free, or for less than you.
One of the first business lessons I learned (ironically from running a lemonade stand for a couple of days) was that if you charge less than it costs you to produce your products and services, you cannot make it up in volume. If raising your prices means selling less volume, than so be it, because if you’re not making money – WHO CARES?!
The fundamental job of marketing is to create enough value so that people would be willing to pay more for something. If all The New York Times does is charge for the same information and experience that other newspapers are giving away for free, then the author is right – it’s a bad strategy.
However, if you’ve had the opportunity to sample The New York Times’ iPad application (which I have) it will take you less than a second to realize that this is not the same experience as others. Would I pay for it? Yes I would.
Would everybody who reads The New York Times online pay for it? Of course not, but who cares! Would everybody pay for a phone that costs $600? Hell no, but Apple made more than $1.5 billion doing it!
As I’ve been writing a lot lately, the newspaper or the information in the newspaper is the commodity. The Internet has placed the value of that commodity (what I call the left side value) at zero. The Intelligence or Enterprise Value (what I call the right side value), however, is unlimited.
The New York Times was one of the first partners to jump in with Apple to develop meaningful applications for the new iPad, so much so that they were one of the few content providers highlighted in Steve Jobs’ announcement of the device. I give The Times a tremendous amount of credit for their willingness to innovate and experiment. I give them even more credit for asking people to pay for it.
Agree or disagree with The New York Times editorial slant, you cannot deny that they provide superior content and their new app provides a superior experience. My only fear is that they won’t have the guts to stick with the plan. Sure, maybe they’ll be smaller as a result, but I’d rather be smaller and profitable than larger and broke!
What’s the lesson for fast growth businesses? Stop focusing on The Left Side (commodity) Value of your business and start building The Right Side Value. If you don’t reinvent your business, some upstart in a garage will.
What do you think of The New York Times Strategy?
Beyond Price
Earlier this week, I wrote that the price you charge for your products and services is the signal that says more about you than anything you can do. I also shared the formula for determining what someone is willing to buy something for. Today, I’d like to go deeper into part of the formula, so that you can get paid more for what you do – even in difficult markets.
So for those of you who haven’t seen this formula, here it is:
Commodity Value + Intelligence/Enterprise Value = Price
Now, take a moment and think about the factors or contributors that your prospects and customers should use to establish the commodity value (or fundamental value) and the intelligence/enterprise value (the factors that you or your company bring to the table). Feel free to download the sheet below to use for this.
In my experience there are only five factors that drive the commodity value:
- Distribution costs
- Need (both the amount and the timing)
- Supply or Access
- Quality
- What someone else is willing to sell it for
When I was at Merrill Lynch I used to keep a sign above my door that said, “Don’t confuse brains for a bull market.” And don’t get me wrong, I’d much rather be a bad salesperson in a favorable market (i.e. lots of demand, tight supply, and not a lot of competition) than a great salesperson in a bad market (i.e. light demand, lots of supply, and intense competition). But here’s the thing:
We have no control over the left side (commodity) contributors of value!
In my post Monday, I referred to Todd Sattersten’s ebook on pricing. He discusses the choice companies have in setting their price and one of the interesting insights he provides is the difference in price and profit cell phone handset makers Nokia, Blackberry (RIM), and Apple experience.
Why does RIM get 4 times what Nokia gets for their cell phones? Why does Apple get 50% more for the iPhone than RIM gets for the Blackberry?
I can tell you this, the difference lies almost completely on the right side (the Intelligence/Enterprise Value) of the equation. It doesn’t cost Apple 50% more to make an iPhone than it costs to make a Blackberry. And because of that, almost all of the price difference goes right to the bottom line.
Go back and look at the right side contributors for you. What makes you a better choice for your prospects and customers? Why specifically should someone buy from you? Now, answer this question:
What are those contributors worth?
Are they worth 1%? 5%? 15%? 50%? More?
Whatever it’s worth, remember that every dollar you earn from the right side of the equation is highly leveraged for you (it also works against you if you make price concessions).
Your job is to focus all of your go-to-market efforts on supporting the “what’s it worth (right side of the equation)” conversation instead of the “what’s it cost (left side of the equation)” conversation.
Brand Destruction
Verizon Wireless and AT&T are in an ad war right now. First, Verizon came out with their “There’s a map for that” ad promoting their cell coverage while insulting AT&T’s. Then AT&T sued Verizon and lost. After that, AT&T fought back by hiring actor Luke Wilson to sling mud about Verizon’s network – and back and forth they go.
At the end of all this, the net result will be that both AT&T and Verizon will have spent hundreds of millions of dollars and the negatives towards each company will be heightened, causing consumers to like each company less. My bet is little to no market share will actually shift as a result of this.
The easy reaction to this is to sigh and mutter, “What a waste!” While this would certainly be a very reasonable response, there is an instructive lesson and huge warning sign for growth oriented companies.
When companies fail to consistently create value – and by extension create demand, competitive pressures become increasingly intense. The challenge that both AT&T and Verizon Wireless have is that neither of them does anything particularly special. While Apple, Google, Palm and other handset makers continue to innovate and search for new ways to delight customers, AT&T and Verizon Wireless are left fighting over who’s 3G network is better. I wrote about this six years ago: “We are better” value propositions don’t work.
The Warning Sign
This entire ad war reminds me of political campaign and negative campaigning. When you play the competitive game I call Demand Fulfillment, you are increasingly vulnerable to competitive attacks and mudslinging. The solutions focus of demand fulfillment makes compelling differentiation virtually impossible. Features and benefits become commodities. Developing new applications become increasingly expensive and risky. Because margins are tight, companies desperately search for quick hit tactics that can “have an impact.”
What’s the quickest, easiest tactic? Insult the competition. Sure, we all know that we’re not supposed to say bad things about the competition (that’s what I was taught in sales training), but politicians proved years ago that scaring buyers voters about their opponent had far more immediate impact than building themselves up. Of course, if the company being insulted is vulnerable to competition, they must fight back, and before you know it millions (or for small businesses – thousands) of dollars are wasted on inane messages, rather than on developing deeper understanding and connections with core customers.
The Lesson
Companies that create demand are increasingly immune from competitive pressures. Their maniacal focus on their customers – and solving their customers problems – give them a competitive-free like status. So long as they continue to build deeper relationships with their customers and desired markets, attacks from competitors have no impact.
The lesson for every company, even especially those companies in difficult markets, is to stop playing the traditional game. If you do, the AT&T – Verizon Wireless war is your future.
Start creating demand. Determine the results your customers want, help them understand the problems they don’t understand that are preventing them from getting those results, and sell a new solution. Don’t tell me people won’t pay more or do different things in this market, because I know that will. It’s your choice!
So, what are you going to do differently to create demand?
Build Marketing Assets, Don’t Spend Resources
I live by a philosophy that guides virtually every marketing decision I make – it’s okay to utilize assets, but spend resources only when it’s absolutely necessary. To understand why this philosophy is so important, we must first understand the difference between building what I refer to as “marketing assets” versus “spending marketing resources.”
Traditional marketing efforts are virtually all built on spending marketing resources. It is for this reason that the marketing budget exists solely on the income statement (or, more appropriately the expense statement) and doesn’t exist on the balance sheet.
The reality is that more than 95% of the time when a business owner, executive, or salesperson uses the word marketing they really mean advertising and/or promotion. Built upon the campaign mindset, traditional efforts focus on creating results through the sheer force of effort.
Tactics like cold calling, direct mail, print advertising, etc. all fall under this category. But, so do efforts like “going viral,” to increase “brand awareness;” and many other “new” marketing efforts. All of these tactics search to create an “event” that causes a message to break through the noise and gain the attention of a desired audience. The problem is that there is no foundation, relationship, or value creation to support the event or campaign. So, the only way to maintain their effect is to keep doing them.
Worse, because the rate of noise is increasing exponentially, what you did yesterday is not enough for tomorrow and you need to do more to raise the volume. To add insult to injury, as you get bigger, the only way for these tactics to support your growth is to scale them up with you. There’s simply no leverage or long-term benefit when spending marketing resources.
Marketing assets, on the other hand, build in value, impact and effect over time. While they don’t (always) have as an immediate impact as traditional efforts, the results you gain from them last. Because they last, as you do more, the value of doing them increases as well. They benefit from the network effect.
The biggest advantage that building marketing assets that once built, because they are assets and not campaigns, they take progressively less (never zero) effort to maintain them. As you maintain them, they continue to drive better results. This makes them highly leveragable (as virtually any strong asset is), and becomes a moat, or competitive advantage, if you will, that protects you and makes your competition increasingly irrelevant.
What are examples of marketing assets. As Seth Godin has made famous, probably the highest value-marketing asset is the permission of defined group of people. Tactics such as blogging, creating conversations on platforms like Twitter, and content marketing are prime examples. But, please (PLEASE) don’t ever confuse the tactic as being an asset. It’s the tactic driven to support a specific purpose, regularly monitored and constantly refined. The difference between these two approaches is best illustrated by this chart, created by Paul Hebert, at I2I.
So, why not just drop all of your traditional marketing tactics and focus exclusively on new ones? Obviously, the challenge with this is that if you’ve built a reliance on campaign driven advertising and promotion and you stop that cold, the inflow of business potentially stops as well. Your objective should be to develop a plan so that over the course of the next 18 to 24 months you realign at least 90% of your traditional efforts to new, asset based efforts. My experience says that it will take about six months to build a baseline of content, and you should consider this time an investment. At about six months, you’ll want to begin reducing your investments (time, money and energy) from traditional tactics and put them towards a new strategy. Keep in mind that the biggest investment barrier in new strategies isn’t money as much as it is time. You need – must – put in the time, or you will fail to build an asset.
One final note for all the traditional marketing cynics out there who may be saying that achieving “front-of-mind” status through traditional marketing tactics is in fact, an asset. You may even be rationalizing that the investments in traditional tactics create awareness and “build the brand.” I’ll concede that if you are McDonald’s, Coca-Cola, Proctor & Gamble, Wal-Mart, etc. this may (emphasis on may) be true. But, these companies spend billions (with a “b”) on advertising. As a small and mid-market business (SMB), you do not have the resources to “build the brand” that way. Besides, the smart “big guys” like Proctor and Gamble are already implementing the approach that I recommend – so why should you wait?
When Is It Time to Sell Your Company
I was speaking with a group of CEOs in Detroit today. The speaker before me had been discussing the typical business cycle: envision – growth – mature – decline – envision – etc. As I was talking about the keys to creating demand, I commented that I don’t believe that the traditional business cycle is a requirement. I believe that it can, in fact, be broken. I shared that my business cycle looked more like this: envision – growth – mature/envision – growth – mature/envision – growth – etc.
I asked the group, “while companies typically wait for decline before they take the envisioning and new growth phases seriously, why couldn’t they envision the next, potentially disruptive, growth cycle while they were in the growth or mature stages of the traditional cycle?” I shared how companies like Intel do exactly this – they strive to make their offerings irrelevant while their current offerings are highly profitable, not afterward.
One CEO challenged me, asking if there doesn’t come a time where a business can’t envision and trigger a new growth cycle before the decline. He asked if there weren’t many cases where a business needs to go through the decline stage and the cutting and retrenchment that goes with it, while it creates new markets and new offerings allowing it to potentially grow again.
I responded that a) growth by no means is a guarantee or an entitlement to business. Certainly times come where the fundamental purpose of a business is no longer relevant and growth fades and disappears – trees don’t grow to the sky and neither do businesses. I added that b) if a business stays maniacally focused on who its customers are and continues to build a deeper and deeper understanding of their customers, they can reinvent themselves before the decline happens.
I believe that this answer is on-target 95% of the time. As I’ve had more time to think about the question, I realize that there is a third part to the answer. If a business is in the growth and early mature phase, and is unable to envision the next growth and maturity phase, then it is time to sell the business.
This is true for two reasons. First, it is at this point that the business is at it’s highest valuation and is the most attractive to buyers. Of course, the buyers are not necessarily wise here, but that’s not the seller’s problem. Second, the seller (or the investors) would be far better off taking money from a sale and reinvesting it in another company or set of offerings that are in the envision or growth stages.
There are only three reasons that a business doesn’t follow this advice:
- Hubris
- Ignorance
- The misguided belief that a business can create the next growth business while “milking” the decline cycle.
The reason you can’t do both is because the declining business eats your resources when the new growth business most needs it, and the declining business diverts attention and focus when the new business most needs your attention.
Even though the declining business is declining, it will still represent more revenue – and even profits – than the growing business. This makes it the master. So while you’re balancing the needs of the declining business with the needs of the new business – two types of competitors take you out. The upstart, who has no declining business to worry about; or your other established competitors (or worse yet the one who is consolidating the industry) who’s dedicated to the cash cow. Just take a look at Merrill Lynch (before being bought by Bank of America), Time Warner, or Dell to see how this game plays out.
The time to focus on the “next big thing” is while you are experiencing success, not when you are struggling. Please don’t misunderstand this point. If the next big thing is not directly aimed at your current core market, then it’s a distraction and you should follow the third part of my answer – sell. If you master the first unbreakable rule for creating demand, which requires a maniacal focus on knowing and understanding your core market better than your core market understands itself, you can initiate new growth cycles while you’re in the current one.
The Drought
On our recent webinar Making It Rain Even In A Drought, I focused on some of the key actions companies need to take to grow in any market conditions – even down markets. It’s a process we call The Raindance. The first is to understand the market conditions you are in. The are three underlying conditions (a Perfect Storm if you will) that are creating the margin and growth pressures businesses are now facing – I call this The Drought. I thought I’d share an excerpt of the program with you.
By the way, we do still have spots available for September’s 2 Making It Rain webinars. Click here for details.
From Advertising to Influence
As more and more data supports the diminishing return of traditional advertising, businesses (especially small and mid-size B2B businesses) are left wondering what to do. I’ve written many times this year about the importance of a content development strategy, and how do utilize content to support the sales process.
I’m in the middle of conducting a full review of how one of our clients is approaching this issue (a process we call The Packaging Audit). The vast majority of their promotional efforts are focused on traditional advertising in the form of direct mail, trade magazines and trade shows. The fundamental problem with this approach is that it creates no equity value whatsoever. In order to continue getting results (and diminishing ones at that) one must continue to do at least what they did before.
We agreed that we wanted to cut by at least 50% their expenditure on their legacy approach, and begin building promotional efforts that built equity value (meaning they increase in the value and impact without increasing effort or costs). Additionally, we agreed that any new budget items would have to clearly support The New Marketing Funnel. While they’ve certainly cut (especially on tradeshows), their concern was how would they continue to drive results if they cut across the board – even though they were not convinced there was any real ROI on these activities (a very common SME issue).
The value of a content strategy is that it focuses on creating value – rather than interupting the customer. If one takes the same approach to their advertising – looking to go beyond advertising and promotion to real influence – then the results can be equally compelling. Making this transformation, however, means that you must completely rethink all (and I mean ALL) of your advertising and corporate colatoral. This includes (but is not limited to) your website, your ads, your brochures, your product data sheets, your sales tools, etc. Here are the five key points to making this transformation:
Do your own audit – take a look at every piece of sales, advertising or promotional communication and ask yourself if you are applying these five points.
Making It Rain Even In A Drought
UPDATE: in less than 24 hours we’ve “sold out” the Making It Rain Even In A Drought webinar. Because of how much it has resonated, we are adding more dates – see below for details.
The last three weeks have brought a tide change in the economic outlook. CEOs are looking at growth initiatives more than they have in two years. Despite the increase in optimism, there are still several challenges your selling team faces:
- Discretionary budgets remain virtually non-existent at most companies.
- Record layoffs have fundamentally changed the playing field at your buyer’s organizations.
- The purchasing function has seized more control than ever in buying organizations – leading to even more acute commoditization.
So, the question you must be able to answer is:
How are we going to make it rain – regardless of the weather?
On August 27, 2009 I will be hosting a special webinar to answer this very question. As a reader of this blog, I invite you and your guest to attend this webinar free of charge. Here are the details:
When: Thursday, August 27, 2009-SOLD OUT Tuesday, September 15, 2009 & Tuesday, September 29,2009, 2PM (EDT)
Where: Anywhere you have an Internet connection
How Long: 55 minutes
Registration Information: Click Here for September 15, 2009 or Click Here for September 29,2009
I am going to be keeping the number of participants on this call to less than 25 to ensure that it is interactive – allowing you to ask questions and maximize the application of the ideas I am going to discuss – rather than making it the typical “talking head” presentation. While your questions will clearly impact what is covered on this call, I can promise we will address the issues:
- The 3 Critical Actions You Must Take to Drive Growth In High-Margin Areas
- How to create your own “Business Oasis”
- How to shorten the sales cycle – in any industry
- Monetizing the sales process by creating Cash Flow Farms
- The single most important focus to ensure you business thrives in any market condition
Why I am doing this for free, you may be asking? Is this just a sales pitch in disguise? The reason:
With increased talk and focus on the possibility of recovery, we realized that many businesses are positioning themselves to make the very same mistakes they made that got them into this mess. We want to start a new conversation and provide small and mid-sized businesses a newer, clearer direction that leads to more profitable business growth.
With only 25 slots available make sure you register now! Click here for September 15, 2009 or click here for September 29,2009 to ensure you’re Making It Rain – no matter what.
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Resources
Doug's Washington Business Journal Columns- Intelligent Growth Articles
Third Wave Selling Blog
Products to Grow
