Salesmen and Entrepreneurs are optimistic by nature – for them the glass is always half full. After 25 years in business, I have come to realise that sometimes the glass is also half empty and it’s as well to recognise when it is.
The Difference – And Hear Me Out, Please
From time to time every golfer will find themselves behind a large tree which blocks their route to the hole. The optimistic golfer will reason that there is more space between the branches than the solid wood of the branches and so will be prepared to take their chances and play the ball through the branches. Pragmatic or pessimistic golfers will actually play the ball to a point where the tree no longer poses an obstacle and then play on to the green. The argument here is that the pessimist will have wasted a precious shot in being conservative while the optimist will have got a shot ahead, never thinking about the downside.
In all my optimistic golf, I have found that you have no more than a 1 in 5 chance of getting through the tree – and believe me I have evidence to show this. More often than not I will hit a branch yet all my statistical training will tell me that’s simply not possible – there is far more space than solid. I was being a Wishful Thinker.
However, if you stop to consider this for a moment it isn’t so strange. You see we have clubs which have sloped faces which give the ball its given trajectory and knowing the distance we stand from the tree, we could approximate the path of the ball. Given we are not perfect and allow for a margin of error, the ball will probably travel through a circle ahead which will include branch and tree. The uncertainty of the shot and the conditions now play their part and when you home it down the solid effect of the tree becomes more pronounced in that circle. By being more accurate you actually increase your chances of hitting wood rather than decreasing it should you not be as random as the tree itself.
Even when I have selected less sloped clubs to go under the branches I have contrived to get unexpected loft or misdirection and hit low branches or the trunk itself. The fact of the matter is that it is better to take the tree out of the equation entirely as in all probability even if you get through the branches you will most likely be in no better position than the pessimist anyway, unless you are Tiger Woods or Seve Ballesteros.
Even an optimist can see that. But a Wishful Thinker is absolutely driven by the single hope, against the evidence even if it is overwhelming, of getting through the tree.
Golf – A Metaphor for Business?
Well the observation has merit. All Entrepreneurs it is alleged have similar backgrounds and traits which cannot be learnt. It is curious then that my sister has a Training business in South Wales called Learn Kit Ltd which this year celebrated 20 years in business. My sister does not play golf and she will kill me for saying she is not your archetypal Entrepreneur yet through the best of times and the worst of times she has run a business which is now one of the most respected and accredited of its type in Great Britain – that’s some achievement. Particularly as her previous roles were in Public Service and no one in the family had a track record of Entrepreneurial spirit or any money.
In fact I cannot remember a time when she had not worried about the next pound of revenue she was to find or worry equally about the next penny of cost. She was never a traditional optimist but by understanding her customer base, focusing on delivering value, excellence and service while knowing her business model to the nth degree and having a fantastic staff all dedicated to the same values, she has a business which has never performed better than this year.
Why? Because while she may only thinly be described as an optimist, she has certainly never been a Wishful Thinker. And therein lies the rub.
The Entrepreneur and Salesperson's Blight
Wishful thinking is the scourge of all Entrepreneurs and salespeople. I recently met with a boutique pre-seed specialist VC whose company has ‘chased the deals’ for the last 4 years, often grabbing semblances of ideas many with no actual business plans. The most common area of failure was wishful thinking – either the Entrepreneur had assumed too many things about the market or customers, bet heavily on too few customers or horribly misjudged the pace and structure of the buying cycles.
Salesmen too have a terrible habit of over-calling their hand. Operating on gut instinct, experience and sheer blind hope they talk up their pipeline in glowing terms when a pragmatic approach would tell them there was at minimum a lot to be done or they might even be chasing lost causes.
Planning During a Recession
For these reasons, many businesses and particularly sales driven or Entrepreneurial –led companies will find it very hard to face a Recession for what it really is – a severe downturn in the number of opportunities to sell products and service. Dress it up, put on brave face or simply deny its existence at your peril because even if you think you are impregnable, businesses around you certainly are not – and that is the big issue.
Just as you may think you are a great driver that does not stop you having accidents as it is the idiots around you who you cannot always account for. But what you can do is think about as many possibly dangerous situations as you can and drive accordingly to avoid them, or choose to take a train in icy weather for example.
The same goes for business. Planning is crucial and reviewing plans equally so to help avoid the obvious dangers and to drive your business accordingly.
This Recession has been looming for some time and only the housing market in the UK has helped us resist it until now, but the absurd value of growth in housing will likely mean we have further to fall and for longer than most economies. So while we sit on the first wave of Recession and maybe feel ok, there is plenty to come. And the ripples caused by it will spread soon enough. As major companies like BT, Citigroup, Woolworths and MFI start cutting large chunks of workforce and cost, the effect of such slowdowns in spend will surely hit all areas of the market at some point.
So start thinking now, while you have money in the bank and sales. Leaving it too late will inevitably mean you have little course of action left other than severe and sharp downsizing – and you know what? That’s just unforgivable because you could have and should have planned to avoid it.
Just like that golfer and that tree. It may cost a short term loss in momentum, but you will take the risk of failure away by doing so. And you owe that to your staff to do so.
How to Start Planning
1) Review Your Entire Sales Pipeline
Your existing customer base is your lifeblood. Now is the time to know how they may be thinking and planning. What cuts are they going to be making? How can that affect you? Is there anything you can do to mitigate this – maybe by approaching the customer and extending a deal while taking a lower revenue short term? The risk is losing out entirely to a competitor based on cost.
New business – what deals have you in the pipeline? Are they going to be affected by the downturn? What is happening in those potential clients? Is there a plan to represent the deals innovatively to create a better cost case? Be very realistic – wishful thinking is the greatest danger. Look for warning signs early – think ahead.
Realign the sales effort if needed. If you realise you are going to lose 50% of your pipeline don’t just sit there. Look for other sales. Profile what you can sell easily and out the right resources behind it to get them. For instance, you may need a massive Telesales effort so put the force there. Marketing is less effective in a downturn so don’t plan major spend here.
2) Look For Warning Signs
One of the biggest problems with wishful thinking is denying the truth or evidence. If 30% of your customers’ base is in Finance Markets then you have a problem. If a further 15% is in Telecoms, you have major issues to face. In that example, 45% of the business is at direct risk to some extent. Don’t ignore it.
If your customer base obeys the 80-20 and you haven’t a great volume of customers, then you have a problem. If any one customer is more than 15% of your business, then it’s a warning sign. If a single customer constitutes more than 50% of your business, then you have a major area for concern and it’s as well to understand how that customer will be affected by the downturn – and hurry.
3) Salespeople Fib
I can’t put any better than that but salespeople have a tendency to at least be either economic with the truth, wishful thinkers and generally they will flower a story. To the rest of us it’s fibbing. In good times they can probably get away with it as often they will have more opportunities than threats. But in a downturn wishful thinking and fibbing are a massive danger. It is time to get pragmatic and ask tougher questions, probe answers, don’t take things at face value, cross check and go see for yourself.
Many Sales Managers and Directors are Optimists verging on the Wishful Thinkers themselves and so it is often harder to ask your own kind the tough questions as they tend to want to hear a good story and only the good news. So don’t be afraid to use third party managers, the CEO or even external people to do it. The truth is more important than ever in a recession.
4) Be Realistic
For some, even the bad news is not enough of a warning. Remember, in the face of often overwhelming evidence, Wishful Thinkers will plough on regardless. It takes a tough cookie to challenge this but you have to be realistic. More rides on this than egos – people’s livelihoods, jobs and securities.
5) Do It Early
The problem with leaving things late is that it limits you options. Citigroup’s denial of their flawed business model has caused the loss of 72,000 jobs. You can’t blame that on markets because only months before people were paying themselves fat bonuses – they just did not read the situation. Planning ahead can mean the difference between staying in and going out of business – it’s that scary. Plan before the bad times hit and not much will surprise you.
6) Don’t Be Afraid To Talk To Customers
Customers are your lifeblood and they are also part of your future. As you plan, tell them what you are doing and your rationale. Ask them how they see things, how they think that will affect you and what they want to see more or less of from you. Confront this early and do create a joint action plan – document it so that everyone is bought in. The danger is that the customer may forget you in all their knee-jerking and you may suffer in revenues, cost and even lose their business.
7) Join The Salesforce Into The Planning
Salespeople have a wonderful habit of blaming other people, competitors or markets. They have never been outsold. If you want a bad news session one the [proverbial hits the fan, you’ll get it. However, if at the start of early planning you ask them to be more realistic and come up with action plans to make up differences then they will respond more favourably. Salespeople like to see paths to the future, the air between the branches if you like. Sometimes you have to show them it but once there you will be amazed at how they can respond. Just don’t heap bad news on them – or else they will become part of the problem.
8) Adjust Targets & Compensation Plans
You have to lead by example here. It is no good hitting salespeople in the pocket if you are not prepared to have the same done to you. However, if sales are expected to go down, then so have costs. Again, make the position clear and do it early. Come up with innovative plans like gearing the commission higher for higher achievement but move the thresholds – don’t make things unrealistic as that’s no fun. Also think about deferring bonus or targets so that they will be paid in better times – it’s better than just taking a chunk of earnings away for all time.
9) Practice What You Preach
Whatever you do, make sure that the whole organisation is joined into the plans. There is a huge risk that you can ask staff or salespeople to take earnings holidays but don’t then organise an executive offsite in the Bahamas or a Chairman’s Club in Florida. I worked at one company when on the day we shut our Manchester office lay off many staff, the CEO took delivery of a shiny new red Bentley as a company car. He did not have the nerve to drive it anywhere for some months although it was forever known as the ‘Blood of Manchester’. CEO’s taking massive bonuses when cutting staff is plain disgusting frankly but it happens all the time.
10) Don’t Blame The Salespeople
There is also a massive and easy tendency to blame salespeople for bearing bad news. While they can deliver such news with dour aplomb when the market goes sour, without sensible direction on alternatives beforehand they are not to be blamed for the conditions caused by recession. Many managers go into high-blame mode, start losing their rag and even start firing people to make them feel better. But usually that’s because they haven’t anticipated the market, planned for it and so are equally to blame for the mess they are in. At this point, the company will already be on the slippery slope as replacing people takes time, money and management plus a lag for productivity while many will see open headcounts as savings. You can see the pattern develop early and so plan early.
‘Us and them’ management never got anybody anywhere. It’s usually around this time that a manager will notice that someone has taken a lot of sick leave, works flexi-hours, wears no tie, is asking for holiday – you know the sort of normal things that in tough times are construed as slacking. Usually at this point huge management gaffs are made in the eyes of the law so again, plan early, anticipate and communicate.
11) Mobilise Your Salesforce
Now is not the time to reduce effort. Take a long hard look at who is successful and how and why they are. If it is anything like reality, the majority of highly successful salespeople have similar habits – they work a little harder and smarter and they concentrate on repeating their successful formula wherever they can. They tend to lose fewer deals, sell at higher prices and generate more long term customers. If you have a Customer Relationship Management system (CRM) like Salesforce.com or Act!, then you can easily check what people are doing. You will quickly find the habits of successful people are clonable and you should endeavour to do so and typically they will make more calls, demos, visits etc while closing more sales. Share their habits for everyone to use them.
12) Constantly Review Progress
Once you have started planning, a recession has a habit of changing things. So while you may plot courses of action, you will find things change. You must continually look at your methods, value proposition and efforts and make changes as quickly as possible. The last thing you need to be doing is worrying about making cuts when the market is starting to recover but too many companies have very little flexibility.
13) Small Is Beautiful
One of the advantages of SMEs in recession is that while they can feel the body blows of major customer decisions harder, they can also effect change much faster. Large companies cannot change quickly and so when there are fewer opportunities to chase, small companies can chase them faster and harder. They will be hungrier for business, more adaptable to customer needs and more ready to make sacrifices to get business. This is a huge advantage and it all comes to the fore if the SME is realistic about opportunities, plans well and constantly reviews.
14) Think Small, Act Big
For many salespeople presented with the prospect of making sales in a downturn, there will be a period of inertia when they question whether the task is achievable. Even half-full optimists can find selling in a downturn tough. It is all about helping salespeople see the path to success. When presented with a tough sales target, the best thing to do is to work backwards. Think about the average deal size and how many deals are required to make the target. Then think about the normal hit rates of how many prospects are required to make a deal, then how many sales visits are needed to create a prospect deal and finally how many calls are usually needed to get a meeting. Suddenly the task does not look as daunting as usually less than 8 meetings and 100 calls per week can make significant targets. Whatever way you calculate it, your daily tasks are more than achievable in the main and that’s how optimists think. Just make the pessimists see it the same way. From small, repeatable actions, big targets can be achieved.
15) Reward Correct Behaviour and Success
While costs will be constrained, the one thing that must be delivered on is success against the revised plans. So make sure achievers are rewarded for their efforts. If you want people to make 50 calls a day, reward them in some way even if it is only recognition by a pat on the back. For real success, make sure you deliver on all the remuneration promises and don’t suddenly have a volte-face when someone blasts a target. Just plan it carefully as this is where many managers go wrong. They think of something in a knee jerk way and when it’s achieved they claim it was luck.
Don’t put anything out as a reward you are not prepared to honour and when you give, do it with a smile.
Conclusion
I have concentrated on sales planning here – the art of being realistic in the face of a downturn. Don’t confuse this with cost cutting although there may be a harsh realisation when the planning starts that a hole may appear in the revenue some months down the line. If that is the case, either plot a way around it as an astute golfer may do with a tree or make tough decisions early. By tackling it early, you may avoid cutting staff by merely stop replacing headcounts or cutting other budgets.
Sales planning is crucial to avoid Hitting The Wall as I call it. Denial is too easy in the face of a recession, wishful thinking even worse. By planning ahead and tackling the tough issues before they arise, you will not only preserve your company in a recession, you may even thrive and you will certainly be best placed for the upswing at the end.
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