Back in the hay day of the booming economy people use to ask me how did that company grow so big. My response would be they either had great sales people or market conditions fueled the growth of the company through opportunity- Meaning work was flowing inbound with little outbound sales effort. Many of these companies expanded rapidly as work was plentiful, cash-flow was great and many owners build overhead structures to support the business as the business conditions warranted. Little did they know that small cracks in the foundation could lead to catastrophe and when the economy went bust, so did many of these companies? Plentiful work and great cash-low actually masked many operational problems.
Today; owners are directing their sales team to think differently, regardless of how the opportunity is generated. Today; sales’ team must make the right sale, not just any sale. Today; margins must be met; production stresses must be relieved by controlling your own work flow process and clients have to be stable enough to assure timely payment. While it’s always good to have more opportunity than you think you can handle, today, this process is being better managed by understanding the bad experiences of the past. The big question today is more often what’s going to turn into business and what isn’t?
When markets are scaling up is when a company is likely to face its biggest sales risks. Cash flow is likely to dry up as the company boosts production in advance of collecting payments for new sales yet to be delivered. For this reason emphasis on service mix is imperative. In the landscape industry the ideal mix for a multifaceted landscape company is derived from 70% maintenance related services and 30% other, typically, construction related activity. The company has to have the right workforce in place in order to deliver to its customers not only in a timely fashion, but exceeding their expectations on a consistent basis. Costly mistakes can occur when operational processes are not aligned and inconsistent service is delivered. Big-volume customers or large contracts might offer opportunity, but the client might negotiate for discounts that the company simply can’t afford to hand out.
Today; company’s needs to be more prepared today for surges in sales than ever before. This includes having the right mix of business, making the best use of resources the company has on hand and leveraging strategic partnerships with both vendors and clients.
Planning is imperative, execution of work is critical and reserve capital must be available to get through the ebbs and flows of cash flow requirements as the company waits to receive payments for services it’s rendered.
While cash forecasting is imperative, today; it’s simply not enough. You must be more accurate at forecasting what type of revenue you want to generate and when will it be generated. You must do a better job of predicting when and what risks are present. The communication flow between your sales and production departments are critical as they will depend on accurate sales forecasts to manage staffing requirements and payroll expenses. Any last-minute shifts from one type of sale to another can disrupt the service delivery model and result in lower profits.
Today; sales departments have to have the discipline to center its attention around the opportunities it’s going after. While most salespeople understand they’re not going to close everything they bid on, they still must be selective of the qualification process. What many sales people don’t get is the company may do better by walking away from some opportunities, even if they seem easier to close. Sales management is the conduit between internal resources and external opportunity. Your sales team can increase the company’s profits by knowing what the company is best able to produce and adjusting proposal pricing to account for risks and costs related to shifts in production, service mix and customer base.
In closing; when I talk to clients and colleagues today, I advise them that every decision they make must be weighed on the Risk/Reward scale as the outcome is imperative to both their short-term goals and long term success.
Looking for a good book on the subject, suggested reading;
- The Visionary Leader: How to inspire success from the top down.
- Susan Bagyura (Author), Michael E. Gerber (Foreword), Fiona Dempsey (Illustrator)