11 months ago I released my eBook, Successfully Growing In A Recovery. I announced the release of the book with a blog post titled, The Great Recovery. The post turned out to be somewhat controversial, as many readers and business executives expressed their belief that I was, at best, premature in my call.
I tried to remind these executives that, too often, we confuse “recovery” with “expansion.” Recoveries are very bumpy and are quite treacherous. As I share in the book, recoveries can be even more dangerous than recessions if not handled properly.
The main thought I shared was that great companies move before everything is clear. This is the great advantage of a recovery – while most people still see fear and confusion, a few companies will see through that fear and act.
Happily, there were many companies that downloaded the ebook and many of them recorded record-breaking years.
The point of this post is not to congratulate myself for my call. Rather, it’s to point out that the advanced mover advantage is still there, but probably won’t be here for much longer. For those of you that wanted to see more proof of recovery before moving, I’ve got some very good news for you.
The news about the economy is as good as it’s been in five years. Don’t get me wrong, there are still big challenges and barriers facing us; but the opportunities for small and mid-market businesses are plenty.
For those who want some data to back up this claim, here you go:
- David Wessel, economic columnist for The Wall Street Journal, says, “The data is encouraging. Unemployment claims are down to their lowest level in more than three years. Housing starts are up. The stock market is bouncing back. Europe’s last round of bond sales wasn’t a complete disaster.”
- There’s early, encouraging belief that even the housing market is poised for long-term recovery. Gregory Zuckerman, a columnist for The Wall Street Journal, shares, “big money is starting to wager on housing. Hedge funds have been buying housing-related investments, betting on a rebound.”
- 2011 finished with a three and a half year low in unemployment claims, and home sales agreements were up 7.3%. Both of these are clear signs of recovery.
- Just yesterday, The Institute for Trend Research (one of the best group of economists I’ve come across) share this observation, “The Purchasing Managers Index 1/12 rate of change rose in December, a positive sign for the economy. Since the October 2011 tentative low is holding, this indicator is providing further evidence that we will likely see growth in US Industrial Production in the latter half of 2012.”
Bear in mind, recoveries are not all rosy (of course, neither are expansions). As I said earlier, there are still many challenges and barriers that could hold back economic growth. Waiting for the “all clear sign,” however, is a guarantee strategy for failure.
Remember, the companies that gain the advantage and enjoy the rewards are the ones that move forward before the herd. It’s not too late to gain that advantage, but time is running out.
While I do not wish to diminish the issues that still must be dealt with, virtually all of my indicators and research indicate that we have clearly entered a recovery phase. This is backed by economic data and a tremendous amount of anecdotal data (including that this January has been the busiest in our history).
The winning businesses of tomorrow must understand the immortal words of hockey legend, Wayne Gretzky – You must skate to where to the puck is going to be, not to where the puck is now.
While true recoveries (and this is the first one we’ve experienced since 1982) represent tremendous opportunity, they also represent significant danger for businesses that are not prepared. Companies planning on growing must understand the advantages and dangers that recoveries represent. And I’m sharing those observations with anyone who wants them.
I’ve just published my first eBook (it’s short – I promise): Successfully Growing In A Recovery: How Recoveries Can Be More Dangerous Than Recessions & 20 Questions To Ensure Your Success. In this eBook, I share:
- The 5 reasons recoveries are dangerous for growth companies
- The 5 areas (I call them The 5 P’s) where a company must excel to succeed in a recovery
- 20 questions and actions (4 for each area) that you must address to ensure your success
The eBook is free. If you’d like a copy just click on Successfully Growing In A Recovery: How Recoveries Can Be More Dangerous Than Recessions & 20 Questions To Ensure Your Success.
PS: Even is you don’t believe that we’re in a recovery, the advice in this book will help you grow profitably as well.
After three of the toughest years in the lives of growth-oriented CEOs, the signs are finally pointing towards sustained growth opportunities. While most of the headlines are still very negative, the underlying fundamentals show new opportunities for companies ready to make the transition.
While our research clearly indicates that we are out of “The Great Recession” that has provided the narrative for the last three years, this recovery will not be anything like the “recoveries” of the last 20 years.
We’ve summarized the key ingredients for succeeding in a recovery to five points, or The 5 P’s to Ensure Success in a Recovery. Now is the time to give yourself a check-up in each area, and ensure that you are prepared to create a newer, bigger future.
The Five “P” Checklist:
- Profit Formula
If you want to learn more about The FIve P’s, here are three options:
- For a quick summary, check out the latest issue of The Demand Creator Newsletter.
- On November 9, 2010 at 2pm EST, we will be hosting a special webinar on The 5 P’s to Ensure Success in a Recovery. We’ll have more details about the webinar out early next week.
- If you can’t make the webinar, you can order our soon to be released report – The 5 P’s to Ensure Success in the Recovery.
Of course, you are always welcome to pick up the phone to ask one of our experts any question or send us an email.
Everyday, I hear salespeople complain and moan about how customers are so price sensitive. They tell how customers are less loyal than ever before or how companies’ sole buying goal is to commoditize sellers.
I always caution that these are symptoms of a much deeper problem. At the root of the problem is a complete breakdown of trust that buyers have with sellers – especially in the area of pricing.
A common sellers’ practice that drives me around the bend and contributes to this distrust is how sellers pad their pricing on opportunities that they perceive to be easy or already won. When sellers price their offerings from the perspective of “how much more can I get,” instead of pricing from the perspective of creating a true win/win – they are begging to be commoditized; after all that’s what the seller is doing to the buyer.
I understand that this practice is as old as the world of selling is, and I understand the motivation to “get what you can” when profit margins have the type of pressure that they do. But – and this is a big “but” – in today’s drought, there are no easy one’s. You may trigger a shop cycle when you didn’t need to.
I remember when I was young and first entering the world of sales. My mom cautioned me about some of the darker behaviors that occurred in that world. I asked her how would I know if something would be a mistake and she told me, “Doug, just pretend that whatever you do will show up on the cover of New York Times, if it would embarrass you – don’t do it.” I think the same advice applies to your pricing.
The definition of a great salesperson – or a Demand Creator – is someone who can sell when there is nothing to buy.
I don’t mean that you can sell ice to Eskimos, but that you can get conversations started before the customer/prospect has identified their need and begun the buying process. When you can do this, you gain two critical advantages:
- You are able to provoke awareness and create demand.
- Because there is nothing to buy, none of your competition will be there.
To be able to create demand like this, you must stop thinking of yourself (or acting) as a salesperson. Instead, you must truly become a businessperson who sells.
To begin the process of creating demand, and selling when there is nothing to buy, follow these four steps:
Step 1: Identify the problem you intend to solve. This should be a high probability/high value problem that impacts the types of customers you best serve.
Step 2: Answer the question – “Who gets fired if this problem isn’t solved?” The reality is, in today’s sales drought if the problem you want to provoke isn’t big enough for someone to potentially lose his or her job over, it’s not a big enough problem to create budget for.
Step 3: Determine if the person you have targeted has the authority to do something about it. There are two types of authority worth pursuing:
- The best is the authority to launch an initiative and allocate budgets to fix the problem.
- The second type is the authority to get you the attention of someone who can launch an initiative or allocate budget.
Step 4: If the answer to Step 3 is “no,” then you must go back to Step 1 and identify a bigger problem you can impact.
For the first time in my life, I’m actually concerned about the future competitiveness of America. It has nothing (at least directly) to do with the recession we are either in or just completing. It has everything to do with the USA going against type.
I just finished reading a research report discussing why and how banks are under extreme margin pressure. The report states:
“Conventional wisdom holds that a steep yield curve is good for banks — borrow short, lend long. With a Fed Funds rate of essentially zero and banks paying almost nothing for deposits as well, bank-funding costs are at all-time lows. Unfortunately, after a prolonged period of near-zero rates, bank assets (both loans and securities) are also re-pricing to all-time low levels. Banks also remain cautious about lending, choosing to park cash in safer, but lower yielding assets.”
As I read this report, it made me think of what the television networks are doing with reality programming. Because of their low cost, networks are almost guaranteed to make money – just not much.
These two points are symbolic of a series of actions that I’m seeing taking place in companies – both big and small. Every time a company makes the decision to focus on exploiting its current assets, rather than exploring how to deepen and expand those assets and the impact of those assets; it is behaving like the banks and television networks.
I’m concerned that many American companies are coming down on the wrong side of a critical, philosophical business question: “Are profits the result of having the right focus or are they the focus?.”
When banks stop lending, or television networks begin relying on cheap reality programming, they are making the decision that profits are the focus. When you’re focus is on profits, you start extracting value from your market and you stop taking real risks because they’re, well, risky.
When you focus on your customers and you answer the question – “what can we do to improve their lives like no one has done before,” and then you pursue that path with dogged determination; then you’re making the decision profits are the result of the right focus. When you make that decision, you see risk through a new prism, and while it does, in fact, represent risk it also provides great reward.
For more than 100 years, America has been the most profitable country in the world by focusing on taking the right risks and creating value better than any other nation. I sure hope we don’t lose that.
The Conference Board recently released its Measure of CEO Confidence. Taken between mid-May and mid-June, the reading of 62 was flat with the first quarter. The trend has still been positive over the last year (any score over 50 indicates more positive responses than negative). The good news is that nearly 3/4 of respondents expect profit increases over the next year, driven primarily by revenue growth – not cost cutting. As the chart above (from Argus Research) indicates, small business confidence is still very low. Facing tight credit and rising costs the National Federation of Independent Businesses (NFIB), June survey took a significant dip. The NFIB’s “Good Time to Expand” measure remains at near multi-year lows. Since the primary engine of job growth is small business, especially small businesses beginning to scale to become big businesses, the survey indicates that more tough times lie ahead. My experience mirrors the chart. I’m seeing quite a bifurcation in CEO outlooks. Some executive teams are really focusing on growth initiatives, basically saying the world is what it is and now is the time to “get on with it.” Other executives are still taking shelter “waiting for normalcy to return.” My concern is that much of the revenue growth I’m seeing is caused by an increase in capacity utilization (thus increasing the commodity value of various products or services). This increase is caused primarily by a decrease in capacity, not by better business management. It’s my feeling that businesses still need to get their demand generation engines running – and those that do will take business from those that are waiting. So, even though the economy isn’t growing at a “hot” pace, doesn’t mean that you can’t. How do you feel? Do you expect growth? Are you hiring? What are you plans?
I’ve always said that I’d rather be lucky than good. Of course, what I’d really like to be is both good and lucky.
The truth is that we all need a little bit (or more) of luck. The challenge with luck is that you can’t count on it and you can’t replicate it. The advantage of good is that it is replicate-able and much more predictable than luck. For most, if you’re good long enough, luck will eventually come in to play.
I share this thought, because as the economy continues to show signs of life, more and more businesses- and by extension, salespeople – are seeing an uptick in their business. While I’m excited and quite happy to hear increased reports of good news, I’m also concerned that an important question is not being asked – What is the cause of the success?
Are you successful because you are really creating value and you are becoming indispensable to your customer? Are you implementing sustainable go-to-market efforts that you can count on in the future? Or, are you experiencing success because you happen to be in the right place at the right time and you’re able to take advantage of some pent up demand?
When I speak to CEOs and salespeople around the country, I always caution them that just because the fish are jumping in their boats doesn’t mean they’re an angler. Don’t get me wrong, I’m all for luck and I do believe that we make our own luck.
The danger comes when we confuse luck with skill. Complacency sets in, and you begin to reinforce the wrong actions rather than continuing to develop the right ones.
Enjoy the luck when you get it, and please be sure to constantly focus on improving your skills for growth.
When I was a financial advisor with Merrill Lynch, I was working with a couple who worked for Nextel. It was following the tech bubble burst of 2000/2001 and we were discussing diversifying their holdings to provide for their future. Their net worth at the time was roughly $2 million, down from a peak of about $3.7 million as a result of the depressed stock. They agreed with every recommendation, but added, “We want to wait for the stock to recover before we do this. I just can’t bring myself to sell a stock for $30 that was worth $60 just a year ago (emphasis added by me).” I responded by saying that you could look at it as being worth ½ of what it was worth a year ago, or 30 times what it was worth two years ago. They didn’t listen, the rest was history, and last I heard their net worth was less than $100,000, and they planned to work for some time.
I was reminded of this story recently as I presented our program on Creating Demand to a group of CEO’s. The topic we were discussing focused on understanding your clients better than they understand themselves. One of the attendees said, “the only thing my customers think about right now is cutting costs – there is nothing else.”
I shared with them my thinking about the psychology of cost cutting and emphasized the need to recontextualize the conversation. Another attendee responded, “when your industry is down 25% and a competitor is willing to provide it at half the price you are, marketing can’t get you out of that mess.”
While I agree that marketing (at least how its’ defined by most executives) is not the answer to every question, I’ve now had time to think about the situation. My response today would be, “Maybe your company was never as big as you thought it was.”
Let me explain.
For at least the past 50 years, margins and financial performance, as measured by percentages, have been on the decline for businesses. When margins compress, the only way you can increase profits is to increase your volume at a greater rate that your margins are compressing.
So, for the last 50 years, businesses (as a whole) have been focused on increasing volume over margins – the center of what most people call commoditization. This resulted in businesses leveraging themselves to greater degrees to: a) increase the resources they had to chase volume, and b) increase perceived rates of return. The problem with this approach is that when relative demand decreases, profits are drained (what many analysts call a “profits recession” which the US has been in since about 1998); and when absolute demand decreases (as it has over the last 24 months), businesses are destroyed.
Fred Reichald talks about good profits and bad profits in the bestselling book The Ultimate Question. While I like Reichald’s definition, we have a slightly different definition:
- Good profits – those revenues and profits that earned because of the unique problems you solve for your target customers. I refer to this as your core business
- Bad profits – any revenue or profit earned from anything other than your core value proposition. I refer to this as your non-core business.
Bad profits are okay so long as you use them to reinforce your good profits and core business. Great companies to this religiously, average companies rationalize that they are being opportunistic.
As the economy appears to be reemerging from its doldrums, it is now more important than ever to remember what great companies do to make recoveries last. They refocus on their core and grow from there, even if that means they must be smaller than they were.
I’ve always remembered what one of my early sales coaches asked me, “If your life were a commercial, what would it look like?”
I’ve always kept that in the back of my head. I’m as big a believer in the power of positive thinking as there is out there. I’m all for positive attitudes, and I firmly believe that you cannot accomplish anything without confidence. But I also understand that success is hard work. I know that without the hard work, the positive thinking, optimism, and confidence is wasted.
I think that’s why I love Nike’s commercial talking about destiny.
Today is the first day of February. January 2010 is in the history books. Here’s my question – what have you done this year to advance and gain control of your destiny?
There’s been a lot of chatter in various circles about the economy – whether you’re watching the Sunday talk shows, listening to CNBC, or following Twitter. All one need do is watch the gyrations of the stock market to become clear that no one is certain what lies ahead.
The point of this post is not to add to the speculation. Quite the opposite, it’s to remind everyone seeking fast, profitable growth that FOCUSING ON THE ECONOMY AND WHETHER THE RECESSION IS OVER IS THE WRONG FOCUS.
I’m getting concerned. As I see more executives talk about the possibility of the end of the recession, it reminds me of the wartime movies when everyone would talk about the possibility that the war was ending. I’m sensing a false sense of hope that “things will return to normal.” That, soon, we’ll be back to the hyper-growth, fish jumping out of the water times we had before.
The last time I saw this was in 2001-2002 when I was a financial advisor. I remember sitting in a senior advisor’s office one day when the market rallied like 500 points (I do not remember the details). He commented (and I believed) that this meant the downturn was over – we could get back to things as normal. Of course, the “correction” wasn’t over, and as we went into 2003 we allowed the illusion of normalcy to further erode fundamentals.
I’m not pessimistic about a recovery – I just don’t care. Why don’t I care? Several reasons:
- I have no control over it.
- We’re a sneeze away from just about anything.
- No one has any idea what the future holds, and all this speculation can do is create more illusions
- Most importantly, it doesn’t matter. Whether the economy “recovers” or not has little impact on the decisions that I have to make as a small, mid-market business (SMB) executive.
I’m sure that the executives at Coca-Cola, GE, Amazon, etc., need to worry about GDP, consumer-spending rates, inventory levels, etc. I also understand that these issues will impact the results many SMBs experience, it just doesn’t have any meaningful relevance to the decisions executives need to make.
Look, there are only three scenarios that can occur:
- We enter what economists call a recovery – though I highly doubt it will really feel like one for a while,
- This is the recovery – welcome to “normal” everyone, or
- Another shoe drops and things get worse.
Now, ask yourself how are the critical, strategic decisions you need to make impacted by any of these scenarios? My bet is that the decisions you make are no different at all. I wrote about this at the early parts of the recession, and I think it’s important to reiterate it now.
Here are the dominant questions EVERY executive should be asking – and actively answering:
- Who are our core customers? What are our core markets?
- What are we doing to be/become indispensable to these people?
- Is our business model really sustainable? Please note that if you don’t have a clear, powerful answer to the question above then by definition your business model is not sustainable.
- What is our relentless growth execution plan?
- Can the people we have execute the answers above? (Ask the question again. This is probably the most difficult and important question, there are no points for self-deception.)
- What are we doing to immediately and permanently lower our cost structure, without it negatively impacting our ability to become indispensable and to execute our growth plan? If you can’t, again, your business model is not sustainable.
As an individual, there’s nothing more that I’d like than a strong recovery, a significant reduction in unemployment, and an increased sense of security for all of us. As a business executive, the more time I spend trying to figure out if the economy is “in recovery”, the less time I have to focus on the critical questions above – and the more likely my business fails to grow regardless of what the economy does.
What are the critical questions you would add to my list?
Last month, we held three very successful webinars focused on helping business grow – regardless of economic conditions. Making It Rain Even In A Drought focused on three key areas:
- What is “the drought” and why are we in it
- What causes rain
- Three steps to what we call “The Raindance,” that puts you in a position to create demand and make your competition irrelevant.
We got so much positive feedback, we decided to share it with the readers of this blog. Enjoy. Feel free to leave any questions or comments you have about the ideas in the comments section – I promise to respond to every question.
Part I – Focuses on The Drought & What Causes Rain
Part 2 – Focuses on the first critical principle to making it rain, instead of being forced to wait for the rain
Part 3 – Focuses on why most sales efforts fail to create economic value and how to monetize your sales efforts.
Thanks for watching. Please feel free to ask a question or leave your thoughts in the comment section.
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.
I pride myself on being an optimist. A long time ago I had a coach who told me that he could describe the current business environment at the time and forever in the future. “Opportunity mixed with difficulty,” he said. He added, “And what’s more – the greater the difficult, the greater the opportunity.”
I also pride myself on being a realist. And I have to admit that I’m getting a bit concerned about the buzz I’m hearing in business circles. While I certainly think the increased optimism and focus on growth on the part of business executives is much healthier than the “we’re all doing to die” feelings of a few months ago, I’m concerned that many may be deceiving themselves.
Today, in my twitter stream I’ve seen a number of headlines, such as:
- 6 Ways to Prepare for the Coming Upswing
- Dow, S&P Hit New ’09 High
- Pace of Job Losses Sets Stage for Quick Labor-Market Rebound
- When recessions end, stocks win
What concerns me is not the optimism, but the messages beneath the headlines. I’m worried that executives are viewing the “economic recovery” as a certainty and typical of previous recoveries. Now, just a few months ago, executives were convinced that we were never going to emerge from recession, today it appears as though the champagne has been put on ice.
As my opening paragraph indicates, I fully believe that the next 12 – 18 months represents TREMENDOUS opportunity – FOR THOSE BUSINESSES WHO MAKE THE CRITICAL, PAINFUL, AND NECESSARY CHANGES TO THEIR BUSINESSES.
• If you think for a second that the price concession your buyers have grabbed from you in the past 12 months are going to be given back without significant oppositions, you’re in for a rude awakening.
• If you think discretionary spending (both in corporate markets or consumer markets) is going to come back to previous levels, be prepared to be shocked.
• If you think your traditional, non-value creative sales approaches are going to work like they did in the past, be prepared to watch your margins disappear.
Here’s the point: Just because the environment feels less painful, don’t reduce the time you spend thinking about your business and its direction. Don’t slow down any actions you planned because, “things aren’t so bad.” While you should certainly be preparing to for a recovery, you should be asking yourself: how have you fundamentally changed your business approach and maybe, even, your business model. If you haven’t, there’s a good chance you won’t notice the recovery – whenever it does happen.
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?
Where: Anywhere you have an Internet connection
How Long: 55 minutes
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.