Business Counsel A Forum for Ideas and Exchange

Positive Conflict in Business

2010-03-04T14:37:00Z

After two decades of consulting, I can identify common problems found in most companies. As expected, procedural inefficiencies, lack of internal quality or financial control and a host of others that most would suspect. However, one theme in particular I find fascinating. It has a profound negative effect and is rarely discussed—the strong desire to avoid conflict, sometimes at all cost.

The other day I had a discussion with a young business owner who was considering increasing inventory beyond financial wisdom just to avoid a discussion with the workers regarding a lack of quality. Last week I met with a client’s employee to discuss performance issues. It quickly became evident that the lack of honest communication regarding expectations was the crux of the problem. I have seem companies accept inferior efforts by vendors rather than confronting them and salespeople quickly lowering their price before even attempting to explain the value-add gained by the cost.

More often than not, it is within the small companies that these behaviors exist as the large companies are much better at holding their ground. Large companies have learned how to overcome the fear of conflict by passing responsibility onto a third party, “it is our policies” whereas small companies make each discussion and word “personal”.
Conflict can either be beneficial, spurring innovation and creativity or destructive, causing discord and acrimony. When used in its positive form, conflict can provide a catalyst for change. A popular term that illustrates the positive use conflict is “the devil’s advocate”. Such applications suggest a conflicting view is being presented in an attempt to provide a much-desired opposition. This process involves uncovering truths that if left undiscovered may have allowed an unsuccessful idea to be taken to fruition.

When conflict arises in a relationship the process of resolution can lead to an increased understanding and renewed commitment. In fact, it is not unusual to have relationship bonds strengthened by this sometimes-intense interaction. This can be experienced on both the individual and organizational level.

To those who are more open emotionally, conflict provides an opportunity for self-analysis and introspection. The well-known saying, “if you’re not part of the solution you may be part of the problem,” has great application.

Asking business advice—it really matters who we ask what

2010-02-10T17:01:00Z

When we seek advice from peers or colleagues we are usually consider the person’s expertise and ability to advise on the subject matter. For example, we would not ask the newly divorced about the wonderful aspects of marriage, the financially independent about the best place to purchase inexpensive items or the childless person about dealing with disciplinary problems. However, when small company owners seek business advice, I often see them forget this fundamental concept.

When we search for business advice, we want to make sure the person has the experiences and insight into our particular situation. A “one size fits all” strategy does not apply to business problems.

I am not suggesting that we only seek advice from those with direct application to our situation. To the contrary, we should seek the opinion from a variety of sources thereby gaining a well-rounded view. What I am suggesting is that we consider what questions we ask of whom.

If a successful discount retailer was to comment on marketing tactics for a high level Spa, unless this person was educated in marketing principles they are only equipped to prescribe from their own biography. Therefore, the advice may not be applicable. However, the discount retainer can be asked about developing discount programs for the Spa, thereby tapping into the person’s unique experiences.
With the recession on the minds of most business owners, there is an increased tendency to frantically search for advice. Frustrated and scared by economic conditions, they turn to friends, family and colleagues to whom they feel close and connected with, independent of that person’s business acumen. As a result, they make decisions based upon well-intended but often misdirected advice.

As nervous business owners seek more advice during these troubled times, applying the right advice to the right situation can make or break the company. Be sure to consider the source and strive to align the appropriate question with the advisors background, experience and expertise.

Are you engaging in the right type of prospecting activities?

2010-01-06T22:24:00Z

Success in prospecting is dependent upon the sales person's ability to (a) get in front of enough qualified prospects and (b) say the right words to develop interest, gain confidence and close the sale. Therefore, if the objective is to increase the number of sales it can be said that one of the following or a combination of may be true.

The salesperson is either: (1) Not getting in front of the right prospects (2) Not getting in front of enough of the right prospects or (3) Not saying the right thing when in front of the right prospects.
Other considerations can include: (4) the competitive position of the company in the marketplace (5) economic conditions that influence buying power.

If a sales person believes the problem is #2- not getting in front of enough of the right prospects it may be beneficial to review each of the prospecting activities and ask the following:

(1) Is the activity successful but changes could be made to increase productivity?
(2) Is the activity successful; however, a different approach might lead to better success?
(3) Is the activity unsuccessful to the point that it is questionable as to whether the salesperson should engage in this activity?

For each sales prospecting activity, (as identified above), answer the following question;

(1) Based on a percentage identify the amount of time involved in the activity
(2) Based on the ability to convert the prospect to a qualified lead, rate the “perceived” success ratio of the activity

The next step involves reviewing a list of successful sales closings to determine the origin of the lead. For example, if one of the activities listed is “cold calling”, review the list of closed sales to determine how many of the leads originated from the activity “cold calling”. In doing so you may find that the greatest amount of time is invested in the least profitable activity.

The purpose of the above activity is to identify the amount of time that is invested in relation to the amount of success, the ROI (return on investment) for the prospecting efforts.

Every minute invested in front of unqualified buyers or wasted doing inefficient tasks, is a minute lost towards achieving the next sale.

Moreover, every little improvement in sales skills (sales knowledge, language and closing abilities), marketing skills (research, lead generation and market penetration) and in time management (organization and efficiency) adds another minute towards achieving the next sale.
For information about a purchasing a sales activity evaluation email request to: contactus@BusinessSimplyPut.com

Reviewing your sales process to boost revenue

2010-01-05T06:46:00Z

It is the start of a New Year and what better time to look for ways to improve upon your current business practices. The economic conditions of 2009 were brutal and most companies experienced a loss to their top line revenue. With this in mind, it may be a good time to review your companies lead and sales generation process.

Often companies do not consciously consider the individual activities that comprise a process. This is especially true in sales organizations, where each person may operate independently. By performing an audit of the internal sales processes, through a series of questions, sales managers and company owners can determine if each salesperson is investing their time efficiently and where additional training may be beneficial.

The following outlines a series of questions regarding three processes: lead generation, lead management and prospect development. Although each company is unique, many of these questions can apply to most organizations.

Review the questions and customize a list to your organization. Ask each person involved in the selling process to submit their answers and then have a team building meeting where tribal knowledge can be shared, to the benefit of all involved. The more consistent and streamlined the sales process—the greater potential for success.

Lead Generation
(1) How are you generating your leads?
(2) What research do you use in the process?
(3) How do you solicit referrals?

Lead Management
(1) Describe a typical day and how you schedule your activities?
(2) How do you manage/calendar your day?
(3) Describe your process for organizing the leads once obtained.
(4) How do you manage the follow-up process?
(5) What processes do you follow to convert a lead to a prospect? (ex. number of calls/visits or the use of specific literature)
(6) What percentage of leads turn into prospects?

Prospect Development
(1) At what point in the sales cycles (amount of effort invested) do you determine if the prospect is qualified?
(2) What criteria do you use to identify a lead as a “qualified prospect”?
(3) Once identified as a qualified prospect, describe the activities involved to close the sale?
(4) How do you manage any additional information obtained during the interaction?
(5) How do you manage the communication process?
(6) What percentage of qualified prospects turn into clients?

It’s the bottom line not the top line that matters

2009-11-20T16:47:00Z

In response to the recession many small to mid-sized companies are discounting their prices to attract or maintain customers. Although this may make sense from a sales perspective, financially this could be the decision that destroys the company.

Many business owners follow this thought process: offer lower prices to get the customer in the door and the discount will be “made-up” on the ensuing sales. If you are reducing the profit margin to gain market share this can be an effective short-term strategy. However, if you are discounting below the company’s cost structure the financial loss on each transaction can lead a company to insolvency. Therefore, prior to deploying a discount strategy a true assessment of the cost structure must be considered.

Here is where companies miscalculate:

Large corporations follow similar strategies but they differ in their financial understanding of the cost structure, which considers ALL expenses involved in the production of the product or service. Less financially sophisticated companies, which are indicative of smaller companies, make the mistake of only considering the obvious cost, leaving out overhead items such as rent, marketing efforts, sales commissions, administration and insurance. Whereas the large companies are discounting the amount of profit, the smaller companies are unknowingly losing money on every transaction. Eventually this becomes evident in the cash flow, as the amount of cash slowly diminishes every month in spite of an up-tick in sales.

So what is a small company to do?

In response to the recession most companies have seen a decrease in sales. Many small companies simply do not have the cash reserves to cover the overhead during a prolonged sales decline. Additionally, the profit margins may have been slim prior to the recession and therefore they do not have much “wiggle” room to decrease prices. In the case of decreasing sales a company may be better off reducing the overhead expenses to respond to the new sales numbers thereby protecting the profit margins. A profitable company with revenues of 2 million is much better off than a company discounting prices in an attempt to maintain 5 million in top line revenue, while losing money every month.

Sink or Swim: When Small Companies Don’t Provide Enough Sales Training

2009-11-05T14:45:00Z

Those of us who began our sales careers in the 70’s and 80’s may remember the old adage where a potential new salesperson is put in a room with a telephone and a phone book and told they now have all they need to succeed in sales. If they did not intuitively pick up the phone book and began miraculously making appointments, it was then determined that they simply did not have what it takes. As ridiculous as that may sound, today in small companies this practice still remains. However, the subtleties of its enrollment makes it even more damaging since the bosses believe they are providing proper training.

A fast-tracked career is one of the benefits received when working for a small company. However, many times the exposure to new opportunities comes abruptly as employees are required to perform duties before receiving proper training. This happens throughout all departments but it is most problematic in the sales department.

In most departments a team of individuals work collectively together to achieve a common goal. In this the new recruit can learn from colleagues and/or follow established protocol: fill out the required forms, log the collected data and file the documentation. Sales is a different animal; the people have a unique temperament. They tend to prefer to work alone and covet tribal knowledge. The processes tend to be ill-defined and although results are based on effort, the outcome also involves chance and a bit of luck.

Most sales training in small companies is based on a perceived osmosis; place the person in an environment where they are exposed to sales dialogue, which may include a few key meetings and presto out pops a salesperson capable of achieving results. While this may be possible in a low dollar “gumball” sale where the ticket items are inexpensive and the sales person can bluff their way through, for sales transactions that involve a higher level of sophistication, specific industry language or persuasion based on experience this technique usually does not work. This is especially true of longer sales cycles involving a series of transactions where the salesperson performs research to locate leads, develops a communication strategy, uses past performance and case histories to convince the prospect of industry expertise and presents proposals that may not be as attractive as their big competitors and therefore must be sold on the unique capabilities of the firm. This type of sale requires the salesperson to develop cognitive thinking abilities, which are best learned in a linear training program in order to understand the processes and reasoning so they can use the tools to develop strategies unique to each situation.

In small companies, owners and/or key employees are often involved in the hiring and training processes, causing them to forego other important duties. Therefore the risk of a wrong hire or inefficient training can be disastrous to the bottom line. For this reason company owners need to choose which hiring and training method to employ, based upon the type of sales transaction and a honest assessment of their ability to invest in a training program.

If the company has the structure to provide formalized sales training (or the money to invest in outside consultants), the company can afford to hire inexperienced sales people. One advantage to this approach is the ability to train “fresh” employees to adapt to the company’s unique culture and processes.

If the owners and/or key employees have the “tribal knowledge” that must be passed on to the new employees yet lack the time to establish a structured sales training program, than the company is better off investing in a more experienced sales person that offers a faster ramp-up time given their knowledge and experience.

If the company chooses a “sink or swim” training structure, in order to locate those self-starters with inherent sales skills capable of succeeding in this type of environment, the company must be prepared for employee turnover. The process involves hiring several individuals, setting time limits and measureable goals and quickly firing those that do not reach the mark. Otherwise the company retains ineffective, unhappy employees and this is not beneficial to the company or the individual.

In a recession properly qualifying prospects can be the difference between survival and death

2009-10-28T02:28:00Z

The sales process, from prospecting to a signed and engaged client, differs per industry and company. Products and services that are more complex in nature tend to require a longer sales cycle that may include a RFQ/RFP (request for quote/proposal). If this process involves investing staff time without a client commitment or payment, companies must be extremely careful to make sure they properly qualify the prospect. This includes making sure the client has the desire and the financial ability to purchase what you intend to propose in addition to confirming that you are speaking to the right person, who can make the decision and learning who else (competitors) that person is speaking with.

This problem is further exasperated in the small and medium sized companies where often the business owners play a dual role as the key sales person. Owners anxious for the sale invest scarce resources into deals that lack proper qualifying. Leading by example, other salespeople quickly follow in these footsteps and before long the amount of time invested in lost or unprofitable deals slowly erodes margins and affects the financial health of the company. Left unguarded, this structure lacks the necessary quality control between sales and production and can diminish the company’s financial health.

With a down-sized staff every invested effort needs to be properly scrutinized to make sure it is time well spent. Staff time that is invested in unprofitable ventures erode already squeezed profit margins. Morale can be further dampened when employees already fearing their future see their efforts being improperly invested.

I have a client who refuses to properly qualify prospects even though they belief their actions are to the contrary. The clear disconnect is made self-evident when competitors suddenly appear, proposals are presented which are over budget and the “buyer” turns out to be the “influencer” with little power in the decision process. Meanwhile their competitors ask the right questions and using my clients proposals gain a better price and win the deal with less time investment.

This behavior in the good times reduced profit margins as they foolishly invested staff hours chasing unwarranted deals. In the recession it may just cost them their company.

The Most Recent Economic Forecast-- more of the same

2009-10-15T15:46:00Z

Today’s economic forecast held at the Vernon Chamber by Jack Kyser of the LAEDC once again contained more red ink and negative numbers than those I had attended previous to a year ago.

Retail is not expected to have any significant growth during the all-important holiday season, the real estate market, albeit showing slight improvement, is still suffering. Job loss continues without any significant uptick in the immediate future. Banks aren’t lending, businesses are closing and the consumer isn’t consuming.

Threats specific to LA are the aggressiveness of other states to lure companies with promises of lower taxes and better living standards for their employees and the Panama construction that will place competitive pressure on the LA and Long Beach Ports (thanks to past union decisions). Lastly, Sacramento continues to ignore the impact their decisions make on businesses.

On the positive side education and health care are two areas of the economy that continue to expand. Although it is a negative impact on the economy I do appreciate seeing personal savings increase, as I have long held the position that a nation of spenders does not provide future stability.

There it is—a wrap up in 4 short sentences, so where do we go from here? Well businesses on the edge may not be able to hold on long, those run efficiently will continue to grow later and new ideas and innovation will preserver. Some things never change.

Small Businesses-the next BIG thing

2009-10-06T17:44:00Z

According to a survey performed by Constant Contact, in conjunction with the American Chamber of Commerce Executives (ACCE), SCORE and the Association of Small Business Development Centers (ASBDC) , 70% of small businesses expect moderate to significant growth in 2009. Almost ¾ of the respondents cited marketing, sales and new business development as being their biggest challenge. (To review the survey click here).

According to the stats provided by the SBA, small firms (defined as those with less than 500 employees) represent 99.7% of all employer firms and have generated 64% of new jobs over the last 15 years. More interesting is the fact that 52% are home based.

In the past both large and small firms have sought the big well-established corporation as the coveted client. However, in today’s business environment that may not be an effective sales strategy. Given the ever-convincing empirical data suggesting the proliferation of small businesses as the future economic powerhouse, all sized companies may need to sell into this small landscape.

Albeit a good strategy, many businesses are at a loss, not knowing how to locate, attract and sell to the smaller sized company. It requires a diversified and targeted marketing strategy as it is no longer a simple act of locating a published phone number or driving by an established building. These prospects are opaque, interspersed in the business community and harder to locate. Moreover, given the reduced order size and increased need for handholding the cost of doing business with the smaller company may be in conflict with some firms fixed overhead. Even with these inherent difficulties many firms will find the need to adjust their business model accordingly, as the recession has abruptly changed the players in the game.

It may be time to reconsider your business model.

2009-09-17T15:03:00Z

In 1942 Joseph Schumpeter in his work entitled “Capitalism, Socialism and Democracy” coined the phrase “Creative Destruction” defined as a “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” Once again this concept is gaining popularity and being quoted by economist as they try to explain economic volatility. This resurrection is not due to a belief that innovation or creativity has increased but rather that the rate of destruction has accelerated. Historically, creative destruction involved marginal improvements occurring over many decades. Armed with a time advantage, businesses could adapt to the new methodologies. More importantly, the elapsed time frame allowed generational adaptation, whereas the originators of the obsolete technology where surpassed by the next generation of new inventors. It is a known fact that change occurs more freely when the innovator was not the originator of the first idea.

However, today changes are occur ring rapidly; sand castles built in the morning are being washed away by the afternoons’ tide. Such expediency requires the originator to recognize and respond to creative destruction prior to a comfortable mental release of the old methodologies. Especially hard hit are the small to medium businesses (SME’s) with the founders nearing retirement. At an awkward point in their business life they are learning that their company asset (and once perceived safe nest egg) is yesterday’s business model and losing value daily. Unfortunately many business owners do not recognize or more accurately refuse to accept this inherent threat until it is too late.

Finding Qualified Buyers

2009-09-01T15:09:00Z

A salesperson’s time is a very valuable resource, especially today when hunting for new business is a main priority. Therefore it is crucial to identify qualified buyers early on, before too much time is wasted.

I have identified two types of buyers, (price sensitive) the buyer who is looking for the lowest price but does have an understanding and respect for quality and (bottom feeders) the buyer who is simply searching for the lowest price and is willing to sacrifice quality and service to get it. If your value proposition does not involve a lowest price strategy then you will need to identify bottom feeders early in the sales cycle and quickly move on.

If a salesperson is working with the price sensitive buyer the salesperson must first provide education as to why the additional investment is important and (if available) provide financing options including quantity discounts, leasing options etc.

If they are working with a bottom feeder the salesperson must provide education and use sales skills to inform the buyer of the potential (negative) outcome of their decision-to see if they can convert them to a price sensitive buyer. If unsuccessful they must discontinue the selling process and invest time to locate better prospects.

Salesperson must use their sales skills, knowledge and expertise to “qualify” which type of buyer they are dealing with, which is accomplished through a series of questions. Moreover, the salesperson must aggressively manage their time to ensure they are investing in qualified prospects.

A Strategy-Driven Organization

2009-08-18T17:21:00Z

As the economy begins to recover, some companies will not be able to have a “return to business as usual” mentality. The recession has glaciated the business environment, forever changing the competitive landscape.Many industries remain transmuted by changing consumer behavior, loss of discretionary income, over capacity, and a myriad of other post-recession conditions.

In order to survive company leaders must begin thinking strategically. For some, this will include making drastic changes to their business model. For many family owned companies this may be the first time in decades they had to seriously consider repositioning their business, embracing words like reassess, reinvent and realign.

Business leaders unfamiliar with strategy development often confuse the creation of strategy with the tactical steps of marketing,resulting in a series of mismatched efforts lacking an overall plan. Before company owners invest in expensive marketing collateral they must first engage in strategic thinking to ensure their efforts and dollars spent are directed at the appropriate target. As you begin to reassess your company's business model begin with strategic thinking and them move onto the tactical marketing steps.

Strategy is about the overall vision and goal of the company
It involves positioning an organization for sustainable competitive advantage
A company's strategy includes decisions about which industries to participate in, what products and services to offer and how to allocate corporate resources
Financial capital, human capital and other available resources must be considered in relationship to market opportunities when developing the strategy
Strategy identifies who the company will compete against and how

Strategic Marketing

Requires an understanding of your industry, especially emerging trends
Requires an in-depth understanding of your target market, including the potential benefits customers seek from your product/service

Tactical Marketing

Tactical marketing is simply an execution of your strategic marketing plan
Tactical communicates the selling message though marketing vehicles
Determines where the marketing dollars will be spent; such as electronic media, direct mail, trades shows, PR/Media placement

Year End Forecast-Last Chance to Make a Difference

2009-08-12T14:20:00Z

The first part of the year has been difficult for most businesses. In response to these hard economic conditions company owners were forced to cut expenses and in many cases lay off staff. In the last few months there have been subtle signs that the economy is recovering and business is starting to pick up—may I repeat subtle. For companies with longer sales cycles it may be some time before they experience an increase in business.

Given the half-year mark, company owners need to accurately forecast the remaining months to determine their financial position at the end of the year. Credit lines and bank loans are reassessed based on year end financials. The income statement for the year prior will determine the availability of credit to run operations as the economy improves in 2010. For some companies, a positive net income (or only a small loss) will be a necessity to gain access to funding, which is used to purchase inventories or hire employees to take advantage of future opportunities.

As I review my clients financials. I am creating a year-end forecast by assessing submitted client proposals and the salespersons pipeline. I am actively speaking to each salesperson to get realistic numbers on what “they strongly believe” will close this year. I preface my discussion with the fact that financial decisions will be made from their anecdotal information. In this, I wish to discourage over optimism from a believe they are being judged for performance. And then, of course I am discounting their answers to stay on the conservative side.

From there I juxtapose the sales forecast with our current run rate (monthly overhead) and add it to the existing income statement to predict the year-ends income statement. This final number tells me whether it is time to cut more, aggressively ramp-up sales or a little bit of both.

We are over the half-way mark, for companies with a longer sales cycle this may be the last chance to adjust sales and/or expenses. Don’t sit idle and hope things will just work out. Instead gather the information, begin the discussions and break out the calculator. The numbers may not be pretty but as I tell my clients, I have never seen anything good, ever come out of ignoring reality and now that we know, we can at least do something about it.