Guard Against a Potential Recession

I’m not an alarmist by nature so don’t take this as an ominous prediction, it’s not. I wanted to take a minute just to remind everyone of what may appear to be obvious. There is a lot of talk about a potential recession. The old adage is that a recession is when your neighbor loses his job and a depression is when you lose yours. Now I don’t expect either in the near future but prudence says that we should “expect the best but prepare for the worst” So let’s talk about preparing for the worst.

Have you started contingency planning for a slowdown in the economy? Do you understand what that might mean specifically for your company? If you were in the real estate or construction industry you already know. Start taking action to mitigate the potential damage.

Here are some ideas…

Look at your pricing policies to determine if there is a way of assuring future revenue from sales made now. There may be a way of accelerating the recognition of that revenue later if you need it. Remember if you have to discount a deal, always try to discount the one-time products or services over the recurring. If you sell professional service as part of your offering, try to discount those aspects that will only happen once as opposed to your overall billing rate. A discount to your billing rate may last forever.

Take a good look at your pipeline for prospects that might not have the ability to pay in a downturn. The decision concerning what to do is an individual issue. Protect yourself from incurring expenses that you may not be able to collect on down the road.

Don’t start projects that fall into the “nice to have” category both internally and externally. An updated document viewer my make your product more attractive in the long run, but if it isn’t going to pay for itself in the short run consider putting it off until you’re sure the economy is in your favor.

People are your most important asset. If you gain a reputation of jettisoning employees it will be hard to replace them with quality people later on. Make this your last alternative. If the downturn is short lived, the severance pay, plus new hire cost, will eat all your potential savings.

This is a really good time to have conversations with your best customers. Start putting together a contingency plan with them. It will pay overwhelming dividends down the road. It might be a time to accelerate projects while the money is available. It’s also the best time to put together a great business case on why your project should be a priority during the downturn. Proactive thinking beat reactive thinking any day.

Bottom line is; don’t let it happen to you. You have an opportunity to do something about it now. Don’t get so caught up in the day-to-day that you leave yourself exposed. If it doesn’t happen, you will have left yourself in a better position for what will happen.

Absolutely Accelerate Revenue Recognition

Every businessperson wants to grow their company. Growth can be defined in many ways; revenue, profit, market share, asset value, strong team that lets you take more time off, increased happiness and contentment. Not every businessperson wants more money. Interestingly enough, virtually everything that we do want is somehow tied to money. It’s because we live in a capitalistic society. Increased peace of mind comes from the ability to rise above the day-to-day issues of walking this earth. Much of that contentment can come from inner strength to face everyday challenges with less stress. I would say that we could in almost (key word almost) every case tie back the ability to use money to acquire tools that can help solve problems as an underlying attribute to contentment. Of course the other part is the ability to be content with less. Very few companies are content with less, so let’s talk about the other side….

If profit is a derivative of revenue and I need profit to invest in solutions then “If I could sell more today would I?” I think we would all say “yes”. Then if we want more revenue in our companies today, why don’t we just do it? It’s because it’s not that easy. Growing incremental new revenue is difficult at best, near impossible at worst. I know businesspeople who believe “If I haven’t done it yet, it’s because it can’t be done.” It’s not that they think they are overwhelmingly smart in general. It’s just that they believe that no one understands their particular business better then themselves. They don’t know what they don’t know (The ugly description is: unconscious incompetent).

Let me suggest an approach that should help virtually any businessperson find a way to generate not only more top line revenue, but bottom line profit. It is a systemic approach to looking at revenue. Systemic means “affecting the body as a whole”. There are several components that must work together. These components reside throughout your organization, not just sales and marketing. Here are some of them with a brief description of their impact on revenue:

Product Development: It all starts with deciding what is the best product or service to take to market? This doesn’t mean that you have to actually develop the product or service yourself, but someone must. You might just resell it for them. The key issue is “What business problem does it solve for my prospective customer?” Does the value of the solution cost more than the problem? It is a “must have” or a “like to have”? Does it dilute my earnings or enhance them? Is the market big enough to support the investment, initial and ongoing?

Accounting: Accounting? Yes one of the biggest overlooked elements in a good revenue engine. Are there KPI’s (Key Results Indicators) in place to tell you what products make money and which ones don’t or which clients make you money and which ones dilute your earnings? Do your credit and collections policies support or detract from your ability to attract quality prospects? Does your pricing methodology support your prospects ability to pay (capital outlay verses expense outlay, lump sum verse payments)? Do you have a discount policy and corresponding methodologies? Does the salaries, commission and incentive plans support the goals of the corporation (remember that this doesn’t just apply to sales)?

Marketing: On the surface this seems obvious, but there are deeper concerns. Every businessperson knows that marketing is important. Does your marketing department (person) work with accounting to determine the right product mix and customer profile? Does their lead generation programs target these products and prospects? Do they have metrics in place to measure the ROI on each program they run? Is information that is gathered through the marketing process feed back into accounting, product development and sales to improve their involvement? Is marketing not only targeting new products or new customers, it is trying to increase the average value of a sales by promoting ancillary or corollary products (product bundling)?

Sales: This is the assembly line of revenue and income. In a well oiled revenue engine; sales simply works through a process with predicable results; easier said than done. There needs to be a sales methodology that accelerates prospects through the pipeline. Each step in the process should be easier for the prospect. Every wasted effort needs to be removed. Think of it as an assembly line. You should be driving down the cost of manufacturing. Look at the risk associated with the potential gain. Don’t have such a laborious proposal approval process or credit approval process that it drives way business. This is especially true if you haven’t really experience a financial loss due to business polices. Get accounting involved to determine the true downside of speeding up the system. Be prudent, but not paranoid.

Support: I am going to define support as both post sales support and any production process required to deliver the product. It cost more money to get a new customer than it does to keep an existing one. We all know this, yet we act differently. Get feedback from your support function on the ideal customer. You can also get feedback on feature improvements and pricing or credit policies. Once you get this far in the relationship, use it. Constantly gather information on ways to improve the revenue generating process. These are people who have made a decision to do business with you. Make sure you know why.

Executive Management: Always a sticking point in my conversations. There are very good executives that understand revenue generation and are a major assets. I’m sure you are one of them. But I have worked with senior executive that have had a less than stellar opinion of sales and marketing people. When you don’t trust your revenue generation system, you have a problem. Use the system outline above. Understand that sales is not the sales department, it is the entire company. If sales are not where you want them look everywhere, don’t just beat up the sales group. If your career has been laced with having bad sales people call on you, learn to trust and delegate. Your personal bias may be costing your business.

Bottom line: Sell the products with the largest margins to the customer who will pay the most, through a sales methodology that will close the sale the fastest.