Wednesday, March 18, 2009

Rules of Skiing and Business

Growing up in northern Maine there was a running joke that the annual climate was 7 months of winter, 1 month of mud, 2 months of bugs, July and August. When you have a long winter you learn how to enjoy the outdoors or you go crazy. While I enjoyed lots of winter activities, including a bit of ice fishing every now and then, my passion was skiing. I started when I was 4 and still get flush with excitement and anticipation on the first chairlift ride of the day looking down at the freshly groomed trails.

During my years in college, I found that my friends shared my passion and we spent many days on the slopes of Sugarloaf deepening our bonds of friendship and exploring the rules of physics. We competed on every run for bragging rights on who was better, faster, or whatever. Many of us were engineering students and as we skipped classes where we might learn about the laws of thermodynamics, we made up the 5 Rules of Skiing. As I day dream about meeting up with many of them in a couple of days for a weekend of skiing, I find myself reciting these 5 rules and I think they have an interesting correlation to successful businesses.

So, here are our 5 Rules of Skiing with some ideas on how they apply to business.


As I mentioned, there was a bit of competitiveness in our collective group of downhill skiing Mainiacs and we tended to push the limits on speed and we took chances (calculated risks) to push the limits. We often raced down the slopes without stopping from top to bottom. Speed was favored over a slow pace, and there were many opportunities for one-ups-man-ship as we took chances on jumps, moguls, speed runs, etc. I think we did abide by the ski in control rules because in thousands of person-days on the slopes, I don't remember anyone ever having their ticket taken away by the ski patrol.

Getting from point A to point B as quickly as possible is critical in business, especially in today's economic climate. Speed of product development, speed of response to market needs, and changing quickly when your current model does not work are all critical components of winning strategies.

Many companies are risk averse, and this quality is even more prevalent during times of turmoil in the markets. Taking chances on new products, new technologies, new packaging of products and solutions, and new markets are all areas of opportunity for a business today. Chances can be irresponsible if not well planned or fully thought out, but they are critical to success. Well calculated risks that mitigate the downside and optimize the upside potential for a company, open new doors and position the company to take advantage of new opportunities. The Roman poet Virgil had a different spin on Rule #1 in his quote, "Fortune favors the Bold."


Standing at the top of a challenging run, my buddies would assess the line they were going to ski and launch themselves down the hill. Some fared better than others, some were more graceful, some skied on the edge of control and barely made it down the slope without falling. Some took tremendous, spectacular falls -- diggers or yard sales in skier nomenclature. At the end of the run, the brunt of the jokes were not focused on those that attempted the toughest line down the mountain, but rather those that skied very conservatively just to make it down the run. The badge of honor was always given to those of lesser skills that attempted things that were above their ability, crashed tremendously, and vowed to attempt to conquer the snow beasts on the next run.

This is absolutely true in business. Most people never will achieve their full potential, and therefore their business won't either, because they never push the limits. It is hard to know where the edges are located if you never try things that push your skills and capabilities beyond the edge of your comfort zone. Sales professionals often have a fear of rejection and this will inhibit their efforts because they don't want to hear "no" from a prospect which they equate to failure. Business leaders also fall into this trap, safe routes often win over pushing the edge and trying new approaches -- great innovators are not afraid to fail and when they do fall down they learn much more about how to overcome the challenge on the next attempt than they ever would have learned from not trying.


Many times when you watch a great skier challenge the mountain and win, you have the assumption that they operate without fear. While this may be true for some elite skiers, the fact of the matter is that most extreme sports stars are not devoid of fear but rather they have found a way to channel their fear into an increased awareness of their surroundings and athletic achievement. Screaming down a hill at 70 miles per hour in a downhill ski race is not a natural act. However, when you are scared it opens up your awareness of your surrounding and you see the small bumps and ruts that might catch your ski and make you fall. You start making decisions which control your fear, and apply your skills and talents to overcome the challenges which ultimately controls the situation and reduces the fear.

Entrepreneurs experience fear every day, it is part of the game and often part of the thrill they seek from their business life. It might be the fear of competition, of making payroll, of commercializing a technology before the competition, of winning the next new client deal. Operating in a constant state of fear can be debilitating to most professionals because it is not a longer term sustainable way to live or do business. However, truly successful businesses and their leaders confront fear, learn to control their emotions, and overcome it. Andy Grove wrote about the virtues of being paranoid and how this leads to survival, and while paranoia and fear are not exactly the same there are some parallels that you can take from the increased awareness when your senses are challenged by fear.


A couple of my college friends were former freestyle skiing champions. They had great comfort being airborne, and great control of their bodies while flying through the air. As a former ski racer, I always envied their ability to be seemingly out of control and destined to take a big fall, only to launch themselves into the air in the middle of a mogul field, control their body in the air, and then land to continue conquering the slopes. Thus was born, Rule #4. The idea was that if you knew you were going to fall if you continued in your current state, why not launch yourself into the air, use the time to recover or adjust, and then take your chances upon landing. You may fall upon landing, but the time in the air might also give you the ability to adjust, land successfully, and keep going.

Business activities can benefit from this same concept, although I would not suggest jumping off conference room tables or over cubes to test this theory. In many businesses a project team might get a bit out of control and can see that they will fail in their efforts in the near future. Rather than simply continuing on the path that they know will lead to failure, the project team might benefit from "airing it out" and use the time to adjust the project and potentially get it back on track. It may fail upon landing, but if it was going to fail any way it is much better to do something rather than accept the fall without trying an adjustment that might lead to success.


There are some immutable laws of physics, and gravity is one of them. In skiing, I have seen great feats and acts which have defied gravity for some period of time. However, at the end of the day gravity always wins out. Knowing that what goes up will come down is especially important if you are the object that is going airborne. Whether racing down a slope and unexpectedly finding yourself flying through the air, or planned flight from jumping off a cliff, you know that it is a matter of time before gravity will bring you back to earth. Preparation and planning is the key to make your reconnection with the snow successful.

In business, there are some immutable laws as well. Probably the most important is that CASH IS KING. Businesses cannot operate without cash, access to cash, the promise of cash, or some other way to create cash to fund operations. There are other business "laws" that can be overcome -- larger competitors can be outsold, less talented teams can beat more talented teams, feature rich products can be beaten by products with fewer features, etc. -- but in the long term the averages will work in favor of the stronger position.

Things that go airborne will come back to earth, and businesses without cash will fail.

If you are a skier, employ the 5 Rules of Skiing the next time you are on the slopes -- I guarantee it will create a more rewarding (and exhausting) day on the mountain. If you are not a skier, these 5 Rules can be employed in business or many other sports -- Go Fast & Take Chances, or Carpe Diem.
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Thursday, March 5, 2009

Selling In A Buyers Market

Last week I attended an event sponsored by NETSEA, an area organization for technology sales & marketing executives, where the topic of the night was selling in the current down economy. After some materials were presented by Doug Banks, editor of Mass High Tech, on the economic metrics today versus the Internet bubble burst of 2001-2003 the conversation turned to selling strategy and tactics.

There was a panel who spoke to the virtues of selling value, understanding your customer, repositioning against competition, focusing on ideal clients, etc. etc. Next many of the audience members started to chime in on their selling and marketing tactics in this type of economy. While all of the points and advice were relevant and are great foundational practices, they all seemed a bit too much like motherhood and apple pie recommendations for me. Finally, I had to offer my own counterpoint to this discussion…

“The problem is that you are all focused on selling when you should be focused on how people BUY your products and services,” is I think what blurted out of my mouth. All of the previous suggestions were focused on how to sell something and this missed the point that economic down markets are extreme buyer’s markets. We have an excess of inventory, excess capacity, and too few people that are buying most products & services. This tilts the balance of power at the negotiating table to the favor of the buyer, not the seller.

How often do you take a step back from your sales process – identify, set meeting, do a needs analysis so you can find out what you can sell, demo your product, qualify the decision maker, submit a proposal, and get the deal signed – to think about what is going on in the buyer’s mind, within their department, or within their company? If you are not putting yourself in the buyer’s shoes, then you will not be very successful in a down market.

Buyers have plenty of competition for their attention. Unless you have some type of extremely unique product or service, most buyers will have several options from which to choose. All they need is two choices to make your life difficult, and if they have 3 or more choices then their position of strength is even more emboldened. Having multiple sellers competing for a buyer’s attention is not a new phenomena, this happens all the time in a competitive market. However, in a down market this phenomenon takes on new meaning because the sellers that understand and manage the BUYING PROCESS will beat their competitors that only manage the selling process.

The buying process is nothing new as it always exists as the yin to the selling process’s yang. Additionally, the best selling organizations and individuals are always thinking about and working to understand the buying process. However, often the buying process is often confused as simply the process that the prospect is going through which mirrors the steps in the selling process. While the seller is demonstrating software or capabilities, the buyer is evaluating functionality and determining the fit – but is that all they are doing? As part of the proposal process, the seller will find out who will be part of the review and decision process – but is it just identification of people and check box criteria, or are there other considerations in the evaluation (buying) process?

We are now in an extreme buyer’s market. Buyers will dictate terms of deals, timing for purchasing decisions, and generally have the upper hand in negotiations. Assuming that we can all agree that sellers should universally focus on the value of their products & services, and the return on investment for a client, here are four other areas that savvy sellers will focus upon as they work to understand and manage the buying process during this downturn.

1) ALTERNATIVES - DO NOTHING OR USE INTERNAL RESOURCES. During times of economic growth most of the alternatives that a buyer evaluates are other providers of products & services – i.e. competitors. However, when the economy is in a downturn all companies look to manage expenses and cut costs so they can match reduced revenue with a reduction in overhead and capital expenditures. This means buyers will ask certain questions as they consider alternatives; a) can I do nothing without a negative impact – if yes, they won’t buy, or b) can I use internal resources to achieve the same result by building the product, delivering the service, or doing some type of work around – if yes, they won’t buy.

During the selling / buying process, to be successful you need to fully understand all of the alternatives that the prospect is evaluating and, most importantly, how feasible or realistic is it that the prospect might be able to use internal resources to solve the same problem as your product or service.

2) FIT WITH CULTURE, PROCESSES, AND PEOPLE. Every company in the world owns software or technology products that they do not use, but are probably still paying for via licensing or some other financing vehicle. Every company! In a downturn, prospects will place much greater scrutiny on the fit of a product or service in their organization. They want to make sure they will use, and get value, from what they purchase with their limited resources (budgets). They cannot afford to buy products or services they will not use. Fit does not just mean functionality. Subtle variables for fit are always scrutinized but become less subtle when resources are in short supply. These include the solution’s fit with a) organizational processes, b) the people that will be using the product or service, and c) company culture.

During the selling / buying process, it is critical that you fully understand how your products & services will be used, by who, in what organizational processes, and how your offering matches with the culture of the buyer’s company.

3) SACRIFICE OF RESOURCES - TIME, MONEY, AND ATTENTION. One of the long held adages in sales is that you can get things three ways – fast, good, or cheap, you just need to pick 2 of the 3. Good and fast is not cheap, and fast and cheap is not usually good. Just as quality plays into the products & services that you are trying to sell, the buyer is also evaluating what type of sacrifices they will have to make if they purchase something from you. The most obvious sacrifice is that they will expend some money and budget on your offering that is no longer available for other uses. Sacrifice might be related to the time it will take to use or implement your solution. Will a purchasing decision require them to use other human resources or political chits to get your solution implemented?

Money and budget are the obvious questions that one might ask in the selling / buying process, but you should also understand the individual, departmental, and organizational sacrifices of resources (people, time & money) that need to be made to implement your solution.

4) RISK ASSOCIATED WITH THE PURCHASE / DON'T PURCHASE DECISION. As a buyer evaluates the purchase of your product or service, risk comes in two forms – the risks of doing something and the risks of doing nothing. Additionally, the measure of these two forms of risk can be tabulated by capitalizing upon, or missing, an opportunity for more revenue, less profit, or some other positive business outcome. As much as you may believe that your product & service is good for the buyer, you have to understand the risks that are associated with making the buying decision. Individual risk is different than organization risk, and that must also be considered. Something that is low risk for the organization might pose significant individual risk for the buyer – for example, the buyer might lose their job for a poor decision even if there was no significant impact on the company.

Ask the buyer to help you understand the risks for themselves, their department, and their company that are associated with the purchase of your solution.

While these concepts are good advice in strong economic times, they are critical during downturns. The more you know about alternatives, fit, sacrifice, and risk from the perspective of your prospects and potential buyers, the more successful you can be in securing a buying decision. Using some of these concepts will also differentiate you from other sellers.

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Wednesday, February 25, 2009

Challenger Brands In A Down Economy

With all the talk in Washington DC about how small businesses are the drivers of the economy, I thought I might share some ideas on the opportunities and obstacles that challenger brands face in a down economy. For those that have never heard the term “challenger” brand, think of David versus Goliath. Since challenger brands can be everything from food products to consumer electronics to any thing, let me set the context that this article will focus on B2B challenger brands.

The great thing about challenger brands is that there is freshness and an innovative air that comes with a company who brings new products, services, or solutions to the market. Most companies want to stay ahead of their competition and know about new ideas or approaches that will give them an advantage. This will keep prospects interested in a challenger brand who offers a compelling reason for a discussion, meeting, pilot project, or trial product use.

However, there are also obstacles for challenger brands who take on established brands and market leaders. Companies will assign safety, stability, and comfort to market leading brands. When so many dynamics are impacting a company and their business, the established brand comes with an implied guarantee that the market leadership comes for a reason – the products are good and you will get value in your investment.

Let’s outline some of the opportunities and advantages of a challenger brands in a down economy.


New Idea or Novel Approach. Almost by definition, a challenger brand brings something new to the market. There is sizzle and buzz that surrounds a new product or service, and for new ways to deliver old products and services. The opportunity here is for a company to leverage this newness to get the product in front of prospective customers.

Flexibility and Turn Around Speed. Time is money, and windows of opportunity in a down economy open and close much faster than at other times. Challenger brands and small businesses tend to be void of the bureaucracy that encumbers market leaders – think speed boat versus aircraft carrier. Challenger brands have an advantage from their flexibility and speed which manifests itself in responsiveness and making the prospect feel their business is of high value to the challenger brand.

Niche Focus & Expertise. Challenger brands tend to be very targeted at a well defined niche market where the smaller business holds an advantage. Somewhere there is a Sun Tzu quote which paraphrased states that you should fight battles that you know you can win. Challenger brands cannot compete with market leaders on availability of financial resources or number of people. The challenger advantage, therefore, comes from highly specialized knowledge and expertise. Focusing on a niche and leveraging deep expertise creates opportunities for challenger brands.

Lower Cost & Higher Value. While no one wants to compete solely on cost, challenger brands are often delivered by small companies that have less overhead than large organizations. Less overhead allows a challenger brand to provide high value through potentially lower prices while maintaining healthy profit margins.

Sounds like there are some nice advantages and opportunities for a challenger brand to win against market leaders, but there are also obstacles which need to be overcome to be successful.


Viability & Sustainability. Many people were sold solutions by innovative companies during the Internet boom of 1999, only to be burned when the company went out of business in 2000. Whether the question will be asked in a meeting or not, if you are a small business with a challenger brand, the prospect will be (should be) wondering about whether you will go out of business after they have made a purchase from you. Challenger brands need to have a good, believable, and truthful answer on the question of viability since in down markets companies are even more cognizant of risk management.

Delayed Payments & Cash Flow. There are plenty of business advisors that have written extensively about preserving cash in a down market. Cash IS king. Large company clients are great for committing to big purchases of a challenger brand, but purchase orders and invoices are not cash. Treat accounts receivable like the most important department in your company and get everyone involved – from the CEO to the account managers. If you have blue chip clients and can factor your invoices, set up that relationship well in advance of needing to use it. Even your best clients may start to delay payments and unless you hold some type of leverage they usually hold more of the power to delay, than you have to collect, the payment. This has nothing to do with how much the client likes the provider, or values their product; this is about them managing their own cash flow.

Lack of Breadth. While being a niche provider offers many benefits, there are many companies who are looking for one-stop-shopping, or one-throat-to-choke as the saying goes. Challenger brands will not typically have the breadth of products and services that a market leader can bring to the prospective client. This gives the market leader an advantage in packaging an overall solution rather than a niche product or service. In a down economy, large companies tend to cut deeply and lay off employees quickly as the economy slows – this leads to the same amount of work for fewer people to complete it. This may make a single vendor relationship attractive and can work against a challenger brand since it is easier for the client to manage one relationship instead of many.

I believe that challenger brands delivered by small innovative companies have an advantage in a down economy. They can be nimble, the solutions can be customized, and deep expertise around a niche plays to their advantage. At the macro level, market leaders are often measuring their success based on overall market share. Challenger brands gauge their success on new clients, deal revenue, and growth rates. They can win (steal) clients from market leaders without worrying about whether the market is increasing or contracting. Challenger brands just know they are getting more than they did before, and this leads to growth and opportunity even in a down economy.

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Wednesday, December 17, 2008

Planning for Success in 2009

I have to admit that I’m a glass-is-half-full optimist. In fact, I have been accused of looking at a half-full-glass situation and arguing that it was closer to a three-quarter-full glass situation. So, it is with that back drop as a dues paying member of Optimists Anonymous that I have been troubled so much with all of the economic trouble that has been in the news recently. It is not that I have my head in the ground and can’t see that there are major issues with the US economy and the global economy, but my view is to focus more on the opportunity than the problem. Unfortunately, it has been tough to focus on anything but the problems with the news coverage, but I also know that with problems come opportunity.

As businesses look at their 2009 planning process, the major question is where the opportunity will come from with respect to revenue growth, profits, sustainability, and survivability. This is not the time for anyone to put blinders on but rather the time to take an objective assessment of your market, the products and services you offer, and competitive alternatives available to your prospects. Then use all of this information to align your resources (people, products, processes, and investments) to make certain that you deliver value to your clients.

If you were losing market share during 2008 because your products and services were inferior or were overtaken by new innovations or product offerings, then 2009 will be a very miserable year for you. Businesses will need to operate, but they will scrutinize purchases with a different lens – do I need this product / service to operate, and if I buy this product / service will it help me make / save money? Taking out of the equation the quality and selection of your products and services, the real question becomes whether or not you have an effective marketing, sales and support model. Looking at all of the ways your business interacts with the customer, especially with respect to Sales Effectiveness will impact your success in 2009.

For this reason, you should take an objective assessment of your Sales Effectiveness using these stages and components.

Business Strategy: The first thing to review is the business plan and strategy for the company. Often when working with managers of component parts of a business, they fail to take into account the overall business strategy and how it might impact their individual department or area of the business. Perhaps you are in a position to impact, or change, the business strategy otherwise you should simply worry about understanding the strategy so you can set up your 2009 plan in the context of the overall business strategy. Some of the questions you should be asking include;

• What are the big picture objectives for the business?
• Are there new vertical markets, products, or initiatives that will be rolled out in the next 12-24 months?
• What types of operational or structural changes are being made, and do these impact my area?
• How might my department better support the overall business strategy for 2009?

Analyze 2008 Results & Project 2009/2010 Desired Results: After you have an understanding of the overall business strategy and how it will provide a framework for getting to the destination, the next step is to define the destination – where are you going? This really involves two pieces of a puzzle; first, where did you come from or the results from 2008, and next, where are you going or the desired results for 2009 and perhaps into 2010. Your results from 2008 are critical to understand how and why you achieved the results last year, and this understanding will guide you to craft a plan to achieve the desired results for 2009. Some of the analysis you should perform on your 2008 results include;

• What were the results on an annual, quarterly, monthly, weekly, or daily basis? For the time periods that are relevant to your business get an understanding of how the results varied over time. Pay particular attention to any seasonal factors in how people buy.
• What were the results on a regional or territorial basis? Understand how different geographic factors and competitors impact the results. Also, get a sense of which managers and individuals are your best performers.
• What were the results by vertical market or industry? Determine if certain types of companies purchased more of your products.
• What are the results by account? If there is an 80/20 rule at play in your business then determine the 20% clients that are your best (measured by volume of purchases) customers.
• What are the results by product / service line? Get an understanding of which products and services are purchased most often by your clients.
• What is the average purchase or deal size? Depending on how purchases are made, you might want to look at annual purchases versus initial purchase, and it might be more relevant to look at median size if you have some significant deals that throw off the average.
• What are the average close rates and length of your sales cycle? In addition to simply looking at the end results, you probably also want to review the results based on conversion percentages – marketing campaign pieces to leads, lead to qualified prospect, qualified prospect to proposal, etc.

All of these questions should also be evaluated against each other in matrix form. For example, if you can analyze the difference in results for products by region, or territorial performance based by time period, or conversion rates by manager, or any of the other combinations of different variables then you have a much better handle on the meaning of the results.

Once you know where you have come from (2008 results), you can develop a road map to your destination (2009 desired results). Simply assigning a budget or quota number to a manager or individual will not help them understand how to get there. Most sales executives and sales reps drink their own cool-aid and they will not take a critical look how past results will impact future performance and then you are dealing with a mentality of wishful thinking or the belief that simply working harder will yield better results.

Alignment of Sales Structure with Strategy & Desired Results: It is critical to align the structure of your front line teams with the business strategy and desired results. If you don’t do this, it is somewhat like suggesting that you need a “military” to fight a war but not thinking through what type of war needs to be waged and understanding the differences that an air force, ground force, or naval force would bring to implementing the strategy. You will most likely need a combination of specialties when it comes to the marketing and sale of your product, but the percentage combination of these specialties is the real question.

• Use the metrics of the number of leads that are needed to yield a certain number of qualified prospects and closed deals to determine the structure and volume of your marketing efforts.
• Use the metrics on the number of leads that need to be managed to determine the number of inside sales resources.
• Use the metrics of the average size deal, length of sales cycle, and overall 2009 desired results to determine how many outside sales resources are needed to handle the volume of active opportunities.
• Determine if you can have inside sales resources carry certain opportunities all the way through closure and eliminate certain types of opportunities from the need of an outside sales resource or account manager.
• What role do partners, value added resellers (VARs), and your other distribution channels play in the sale of your product? Depending on this role, who needs to manage them?
• Do certain types of clients warrant different sales & buying processes, and if so, what type of resources do they need to manage the process?

Marketing, Sales & Support Processes: In almost every company, there are separate departments for these functions. However, almost every client is looking for some consistency in how they are treated during the evaluation, purchasing, and customer service phases of their experience. This consistency boils down into a couple of core issues;

• Expectation setting. Does the promise of features, functionality and benefits from marketing align with how the product / service are explained by the sales team? Does the selling process align with a prospect’s evaluation and buying process? Does the customer service from the company deliver the support that was promised during the sales process?
• Smooth hand offs. Is the left hand talking to the right hand, or does the client have to explain what they want to every representative of the company that contacts them? Do the sales people know what the prospect wants based on how they expressed interest (marketing activity) in the product? Does the customer service team know how the client plans to use the product and any specific idiosyncrasies with their needs?

During the planning for your 2009 results, you need to determine if you have the right processes in place to support the client. If there is not proper expectation setting and a smooth hand off process between departments then you run risk of generating interest that you can’t fulfill, selling products that you can’t support, and working really hard for mediocre results.

Details Lie In Execution: Strategy, analysis, alignment, and processes are nothing without proper execution. In fact, we have worked with companies that have all of these elements well defined but still have trouble meeting their desired results. As they say, the “devil is in the details” and in the case of getting results in business these details are most often how a plan is executed not the plan itself. Many more plans fail due to poor execution than the quality of the plan.

Plans, strategies, and processes are executed by PEOPLE.

• Do your people have the right proper aptitude and personality to do their jobs? If you can’t get all of the insight you need by direct interaction, then look into one of the many personality assessment tests available to you. As one of my colleagues insightfully told me, “they won’t guarantee an employee is successful, but the results will tell you which people are likely to fail due to a mismatch between the requirements of the position and their abilities and desires.”
• Do your people have the right skills and experience? There are some skills and experience that you need to hire to get a base line level of performance, but there are others that you can train. Make sure you know the difference, and create hiring criteria that insures getting new employees that can do the work. Next, create training programs to improve or enhance the skills that accelerate high level performance.
• Do your people know what to do? In every company, there are high level performers that will figure it out on their own and achieve great results. Unfortunately, there is a large group of people in the middle of the bell curve that need more direction even if they have the right aptitude, personality, skills, and experience. Create clear job descriptions, and document your processes and best practices so people know what to do when confronted with a situation. Effective training also plays a big role in differentiating between success and failure.

Robust economic times often mask inferior companies and products who benefit from a “rising tide lifts all ships” phenomenon in business. Rest assured that 2009 will not be one of those economic times. There will be big winners and big losers, and the winners will be the companies that plan for success and then execute their plans.

If you would like to learn more about how an external objective assessment might answer some of these questions, please contact us directly.

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Monday, December 8, 2008

Making Valuable Use of Holiday Downtime

With Thanksgiving in our rear view mirror, and the calendar changed to December, all sales people and sales managers face the impending holiday season with excitement and trepidation. Excitement comes from closing out a strong year, and the joys of the holiday season with friends and family. Trepidation comes from the fear of not making those last sales to secure an above-quota performance, and time constraints that arise from the challenges of being productive during shortened work weeks.

As a native New Englander and life long hockey fan, I’ve always had a special appreciation for the “hockey stick effect” associated with sales performance. This paradigm relates to the fact that a spike of activity and closing of deals will happen (like a hockey stick blade) at the end of a sales quota period. This is pronounced at the end of months and quarters throughout the year, but the impact is the greatest for the intersection of December, Q4, and ending the fiscal year. With top performers striving to maximize commission accelerators and bonuses for a blow out year, middle-of-the-bell-curve performers working to close those last couple of deals to make quota, and low-end performers trying to close a significant deal that could save their job in an under-quota year, everyone on a sales team is working to make valuable use of the limited productive work days of December.

The dust will settle from this last push to secure deals, and from my experience there are always about 5-6 days in December – the couple of days before Christmas and a couple days between Christmas & New Years Day – that end up being lost days. The most productive thing to do might be to take the time off so you can enjoy the fruits of your of labor and recharge your batteries to prepare for the quota reset that will happen on January 1. However, depending on the amount of vacation time you have, or how liberal your management is about taking days off without charging them to personal days, you might be “stuck” going to work and going through the motions.

I have always enjoyed this time of year, and there are a few activities that I would complete during this downtime to prepare for success in the coming year. Without the noise of client requests, internal meetings, pipeline reviews, and the need to travel, I found this time a way for me to focus on some areas of my business that often go overlooked throughout the year. Here are some ways for you to make valuable use of these 5-6 days.

Assess Your Past Year’s Performance: Take a look at your performance for the past year, and break it down like a football coach might break down a game. This means looking past just your top line performance measured in revenue volume and moving deeper into the details. Looking objectively at your performance is a great way to understand what you did well versus what you thought you did well. Some variables that I use:

• Revenue versus number of deals – average and median deal size
• New clients versus existing clients
• Length of sales cycle
• Sources of deals – marketing programs, clients that refer, network referrals, etc.
• Product / service mix – what did people buy
• Industry mix for clients

I will admit that as a technical guy by training, I probably look at this analysis with a bit more intellectual curiosity than most. However, if you don’t know what drove your success or failure during the previous year it will be hard to duplicate the success, or understand what set up your failure.

Ideally, you would like a matrix view of this data so you could draw some conclusions from your analysis. How much of my business came from existing clients versus new clients? Did the sales cycle differ for new versus existing clients (assume what you might but the data could tell a different story)? Did I identify any prospects at networking events that turned into clients? Who were my best 5 clients based on revenue? Did I spend enough time with them? Are they good prospects for other products / services that we are launching next year?

Many SFA / CRM applications make the gathering of the numbers very easy, but the real value comes from setting aside 4-8 hours of undistracted time to develop meaning from the numbers.

Refine Your Client Stories: Over the past 12 months, you have started new business relationships with clients who bought into your value for their business. Now is a great time to evaluate and document all of the things that these new clients found valuable about working with you.

• What were the alternatives?
• Who were the competitors?
• Who had to be involved to approve the purchase – business & financial?
• What departments are impacted positively by the new solution?
• What went well during implementation and what can be improved?
• What internal business, external market, or other factors motivated the client to make a buying decision?

If you don’t know the true answer to these questions, then use this time to try and gather the information from your client. They might be going through similar introspective evaluations of the past year during this time and you can get some quality, un-rushed time on the phone.

Once you have gathered the facts and insights, you can document and highlight the key benefits the client received by using your product, and what other factors came into play during their evaluation. This information can then be woven into your meetings and presentations for the coming year.

On the negative side of the coin, you might also spend some time to evaluate the reasons that some of your clients stopped using your products, or chose an alternative solution over the past 12 months. This information can also be helpful to create account management plans.

Competitive Analysis: Nothing shakes the status quo like a disruptive new product or service. However, in most industries the incremental changes are the ones that can sneak up on you because they are right in front of your eyes and you fail to pay close attention until you are losing deals to a new competitor.

Take a day to dive deep into the web sites and public information of your primary competitors, and your partners. Competitors take two primary forms; first those that offer a product or service that is similar to yours, and second those that compete for the same budgetary resources. The first group are obvious and most usually the primary focus, however, as companies evaluate the level of their budgets and investments for the coming year it is also likely that ancillary products and services to yours could be competing for the same limited budgets.

• What new products / services are being planned for the coming year?
• Who were their big new clients from last year – any of your clients?
• What new partnerships did they announce?
• What are they telling the analysts about their business projections for the coming year?
• Are the new companies planning to enter your territory for the first time?

This is one of the productive activities that you can undertake with your entire sales team. Perhaps you start the day by framing out the information that you want to collect, and then assign 1-2 companies to each of the members of the team. Give everyone a couple of hours to conduct the research and document their findings during the morning, and then gather as a team for a working lunch where everyone presents their findings and you collectively discuss ways to overcome the competitive threats.

Develop Next Year’s Plan: This is probably the most obvious task that you should complete during this downtime. I did, however, hold it out until the fourth item for a reason – specifically, I think understanding your past performance, how your clients bought last year, and what competitive threats are on the horizon, are all critical to develop a strong foundational plan. Too often I see sales managers and sales people developing an annual plan that is founded on very weak assumptions, or unrealistic expectations.

A good plan should include:

• Overall annual objectives
• Quarterly and monthly breakdown of objectives
• Details against all your important metrics – revenue, number of deals, source of deals, number of new clients, etc.
• Details against pipeline and forecasting metrics – size of pipeline, close rates, and new deal flow
• Activity metrics to deliver the result metrics – number of meetings, demos, proposals, etc.
• A game plan for how you will apply yourself and your resources to make plan

Your plan should be based on what you want to achieve, not just on what your company expects from you (quota). Very few successful sales professionals that I know base their expectations solely on their annual quota. The top producers have income and performance objectives that typically supersede the baseline performance metrics set by their managers.

Clean Your Desk: Although this might seem like pure busy work, there is something rejuvenating about cleaning your work area. Over the final months of the year as you worked to shepherd deals through the process, I am sure that many administrative duties took less priority than the activities needed to keep your business deals on track.

Take a day to clean your desk, organize your files, and throw away the things that you don’t need.

• How many of your client folders have 6 versions of the proposal with various notes, negotiations, and concessions in the margins? Clean up the folders and file them away.
• Do you have a stack of industry magazine on the floor by your desk because you haven’t had a chance to read them but think there might be an article of interest or relevance? Become the great destroyer of magazines, thumb through them and rip out the articles that you think might be of interest to you. Throw the magazine carcasses away and put the articles in a folder. Read them on your next flight or just file them, either way the stack of magazines is gone until next year at this time.
• File or toss the trade show brochures, folders, company reports, and all of the other things that you’ve accumulated during the last 12 months. If you need room to file them, throw away your files of product brochures that are 2+ years old.

I could go on and on, but you know there are ways to clean up your work area and make it less distracting, and more productive. Clear the decks so you are not distracted come January.

All of these activities can have a material impact on your success for the coming year, and are great ways to allocate a few hours of your attention while things are “quiet”. If you use some of your downtime through the holiday season to do these activities then you can hit the ground running in January, focused, productive, and insuring a fast start to the New Year.
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Tuesday, July 29, 2008

Understand The Politics

Presidential campaigning is in full gear, the Congress is about to consider a spending bill with an $11 billion price tag, and I recently watched the movie Charlie Wilson’s War. All of this had me thinking about politics, the political process, and ultimately getting things done in a political environment. It also made me think about how little most sales professionals know about the politics that surround a deal.

Savvy sales professionals know that having the best product with strong references will not always win them the day if they are not also tapped into the internal politics at their prospect’s company. So, here are a few things that sales professionals might learn from politics and the political process to win more business.

Find The Power Base. In a political campaign, you will always find candidates tapping into key influencers who control a power base. By getting these influencers on board with an endorsement, the candidate also garners support from the people who have an association or beliefs that are in line with the influencer. Every company has influencers that control a power base, and there are multiple bases of power and influencers in every company – find the power bases relevant to your products and services at your prospects and gain their support. Power is not only derived from positions of authority, and often the key influencers in a company are not the senior managers but rather department managers or younger leaders who are up and coming in the company.

Reach Across The Aisle. Most legislative bodies are split between political parties in a way that one side cannot pass legislation without some support from the other party. In fact, it is very common for the minority party to grind the legislative process to a halt if they feel the majority party is steam rolling legislation through the process. Productive legislators reach across the aisle to develop common working objectives. This is a valid technique in a company as well because you will need prospects to reach across departments to achieve results. Almost every complex product or service requires that multiple departments work in concert to make buying decisions or implement a solution. How many times has a business leader made a purchasing decision for computer hardware or software only to find that the IT department would not cooperate to implement the solution? If the business leader had reached across the aisle to their counterpart in the IT department prior to making the purchase, cooperation and resources might have been more forthcoming.

Create Advocates. External influences – lobbyists, media outlets, bloggers, constituents, financial supporters, political action committees, interest groups, etc. – all have a voice in politics. You may argue that some of these are good influences and some are bad, but it would be hard to argue that they do not exist. Your prospective clients are also subject to external influencers and you should work to create advocates for you and your products in this group of influencers. Rather than lobbyists, your influencers might be analysts, industry thought leaders, happy clients (or unhappy clients), journalists, competitors, partners and alliance managers, etc. Neutralize the negative influencers and foster the positive advocates that interact with your key decision makers. Advocates are viewed as credible third party opinion leaders even when they are champions for your product and services.

Understand The Limits Of Power. In any well designed political system, there are limits on the power held by any individual or branch of government. The system is designed to require certain processes to be followed to make decisions, pass legislation, or make laws. No matter how powerful they might be, it would be impossible for a single legislator to change the Constitution by themselves – most people can understand this limitation of power exists. What might be more subtle are the limits of power based upon a political situation or individual circumstances. It may be impossible for a legislator to push a certain piece of legislation because of the way it will impact other legislation, legislators, their constituents, or their party’s overall agenda. Before you ask a business leader to push through a purchasing decision for your product or service, it would be good for you to know whether they have the authority AND political power to get the decision through the system. While they may have both the decision making power and the budget to make the purchase, they may have other critical initiatives which could get derailed if they go forward with your proposal. Understanding what people can and cannot do, before you ask them, will have a strong impact on your results.

Count Your Votes. Before any major legislation is brought to a vote on the floors of Congress, the sponsors know the results. They have counted the votes and know they have enough supporters to pass the legislation. How many times do you ask for a decision to be made for a purchase of your products or services without fully knowing how the decision makers will vote? Often sales professionals rely too heavily on the person with whom they have the best relationship, even if there are others that have equal authority, position, and power in the decision process. When you have multiple people involved in the decision process, you will also have multiple agendas, interests, and priorities – understand how they will vote on your proposal before you ask for a final decision.

Politics in an intriguing spectator sport to me. The manner in which people try to “sell” others on their ideas, agendas, and objectives has many similar qualities as to how professional sales people work to influence the opinions and decisions of potential buyers. Strong will and idealism will yield a certain level of results in both politics and sales, but great politicians and great sales professionals manage the process by acquiring and wielding power and influence in a manner that respects the subtleties of the system. Understanding the political situation within your prospects and clients will lead to an ability to manage the environment and ultimately greater success.
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Saturday, June 28, 2008

Recession Proofing Your Business

Last week, I had the privilege of being asked to participate on a panel discussion matching the title of this article. Sponsored by Entrepreneurs’ Organization (EO for short –, the panel featured three of us who were aligned with the areas of sales & business strategy, finance & operations, and personal wealth management.

The audience was filled with members of EO in Boston, and all are business owners who had various types of businesses including those that sold products or services, with some focused on consumer and others had B2B offerings. Without making this advice sound too much like motherhood and apple pie, I thought capturing some of the topics we covered would be helpful to others.

In general, entrepreneurs are far more risk tolerant than the typical business person. They have followed their dream and have “skin” in the game which usually involves personal guarantees on loans, second mortgages on homes, and an income that is entirely dependant on their personal ability to succeed.

I realize that the news media is pumping the gloom and doom of these economically challenging times. However, it is my strong opinion that small businesses can grow substantially during a business climate which is challenging for larger businesses. Additionally, entrepreneurs are almost always creating a niche business offering that meets a market need that is not being serviced by other available products and services. One of my first points during the panel discussion was that an economic downturn should not inhibit an entrepreneur’s ability to grow their business.

Here are some of the panel’s points about recession proofing a business:

Define your ideal client. This is my first piece of advice to every business that I work with, but it is very often overlooked by business owners that are “too busy” running their business to take an introspective look at the best clients for them to serve. There are a number of different measures to use, but here are a few that I think are important when you review a client relationship; the clients are profitable, offer repeat or follow-on business opportunities, value your work and are not obsessed with price, are easy to work with and respect your employees, will advocate and act as a reference for you with prospects, and they offer some name brand recognition when listed on your client list.

Allocate 90% of your time and resources servicing ideal clients. One of the best ways to drive your business into the ground is to spend too much time, money, and effort on low return activities. During an economic downturn, one of the biggest hurdles is getting over the market's gloom and doom attitude. By definition, your ideal clients are also the ones that get the most out of your services, and prospects that match your ideal client profile are the ones that are most likely to become new clients. Focus your time on serving and growing client relationships with customers that will place the most value in your offerings.

Get rid of the things that don’t work. Evaluate your products, processes, and people, and get rid of the things that are not working for your business. It is often hard to eliminate people or product lines during the good times, but when you have to look at your business with a critical eye, it might become easier. If nothing else, the people on your team will understand cutting out things that are not working during periods when the market is said to be in a downturn.

Improve your customer service. Expectations from clients will increase during times of economic uncertainty. Ironically, many of your competitors will start treating their customers poorly, or they will start taking them for granted. Either way, you can grow your market share by taking clients from your competitors through improvements in customer service. The added bonus is that better customer service will also increase the barriers to exit and you will lose fewer customers to your competitors.

Manage and lead your employees. If you have any employees under the age of 30, they have never worked through an economic down turn. During their work life, the US has had economic prosperity and the lowest unemployment rate in history, so they may not understand how to manage tightening resources. If you have employees in their 50s, they have lived through a number of slow periods, but now they are probably senior managers and earning a much higher salary so they have a different set of worries. As a senior executive, you need to manage the company as well as provide the leadership needed to motivate the team and set a winning direction.

Cash is king. Selling product or delivering services is one thing, but collecting on your accounts receivables is another. Big companies will often slow down their payment schedule during down cycles. You should make your AR department (or person) one of the most important functions in your company. Get all of your sales people and client-facing employees to understand and focus on helping to collect the money owed to you by your clients. If you can improve your days to collection by 5-7 days it will make an enormous impact on your cash flow.

Dig your well before you are thirsty – get a line of credit. If you get to the point where you need a loan or line of credit to finance your operating costs, I can guarantee you that looking for financing too late. Take your financials to a bank and get a line of credit before you need it. The credit market is tightening with the amount of write offs in the banking industry. However, banks are in business to lend money so you can always get loans or a line of credit. All bankers are not created equal, find one that understands your business and is truly interested in a working relationship. Banks make money by lending money; you just need to give them the comfort that you and your business can generate the cash to pay them back.

Don’t forget to pay yourself. When resources become limited, one of the common cash management techniques is to pay your employees and expenses but deferring your salary. Make sure that your compensation expectations are in line with the revenue and expenses of running your business, but don’t stop paying yourself. My guess is that most entrepreneurs did not start a business with the intention of creating a non-profit. You owe it to your family to be compensated for the hours you invest in building your business.

Many of these points might seem logical or simple, and that is because they are. However, don’t confuse simple with easy. Often the biggest management changes are the simple things that are extremely hard to implement. Good business sense does not go away when you’re growing a business in good times or bad times, but there is often more latitude to absorb mistakes in good times. Executing on your business plan becomes increasingly more difficult when you are leading a company in tight economic periods, but these simple guidelines can help.

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Friday, June 27, 2008

Pipeline Velocity - The Thrill of Speed

As my career has progressed and moved through roles as a sales guy, sales manager, sales executive, and business owner, I have spent countless hours reviewing pipeline reports. Whether it was in the old days of putting everything into a hand-written pipeline sheet, through the introduction of spreadsheets, or ultimately with some of the powerful reporting and analytical tools in today’s CRM systems, it all boils down to the numbers.

The question is what numbers are most important and telling when it comes to analyzing an individual, team, or company pipeline. Size and diversity matter. However, let me make the case for a metric that I feel too often is not reviewed with the proper level of importance…
Pipeline Velocity!

How often do you review the speed at which an opportunity is moving through your pipeline and advancing from one stage of the sales process to the next? I don’t think that most sales and sales management professionals appreciate the importance of deal velocity. Safe driving advocates advance the saying “speed kills”, but I would count that in sales it is a lack of deal velocity that kills.

When you review an individual, regional, or organizational sales pipeline, it is common to be lulled into a comfort zone when you have a large overall volume of potential revenue in your pipeline or a large number of deals that make up the pipeline. Both of these metrics are important, a strong pipeline needs to be substantial in dollar volume and diversified in the number of deals that make up the pipeline. However, this is also a great way to lose sight of the dynamics which are impacting your business, or individual sales reps.

Any one that has spent any time selling or managing has either used or heard the common excuses when a deal gets “stuck” in the pipeline. They range from decision makers going on vacation to budget reviews to personnel changes. All of these can be valid reasons that a buyer will delay making a decision. My goal in this article is not to analyze whether there are valid reasons for a deal’s velocity to slow down, but rather get you to think about why it is important to watch velocity and deal aging as an important metric.

Here are some of the things that pipeline velocity can tell you when a deal is moving fast through the pipeline.

  • The prospect has a problem that is significant and they believe that your product / solution can solve the problem.
  • The prospect sees a market opportunity and your product / solution will let them capture that opportunity before their competition.
  • Senior management of the prospect’s company is involved with the process so you are getting go, no-go, and advance decisions quickly.
  • Budget has been allocated to solve the problem so the prospect’s evaluation team and decision makers are funded to make the purchase.
  • Departments or groups within the prospect’s organization are aligned around solving the problem for which your solution is being evaluated.
Conversely, some of the warning signs that you should be fearful of if a deal slows down as it moves through the pipeline.

  • Your contact at the prospect’s company does not have the authority, political clout, or budget to move the purchase or agreement further in the process.
  • Some thing has changed about their need.
  • A competitor, or alternative, has entered the picture – this could be another company like yours, or it could be an internal group that believes they can offer the solution.
  • You are dealing with the wrong person – this can come in the form of a non-decision maker, or perhaps there is just another person that is more powerful than your contact.

Delay issues are not inherently deal breakers. In fact, they could lead to an expansion in the size of the deal. I’ve had situations where I was proposing a departmental solution that suddenly showed a compelling value proposition for a larger implementation, and the prospect slowed the deal down to turn a point solution into an enterprise solution. Even though they are not inherently bad news, when a deal loses speed and velocity, you need to take action. Good, bad, or otherwise, something is happening with the proposed solution.

For my last business we used as our sales force automation (SFA) system, and after developing some reports and analytics we found some astonishing information about the importance of pipeline velocity. Our proposals for consulting services had three times greater chance of closing if we won the deal in the first 90 days versus opportunities that had sales cycles longer than 180 days. Upon further analysis, we found that the ideal sales cycle was about 45 days and there was no deterioration in average deal size (debunking the theory that smaller deals take less time to close) and there was no statistical difference between repeat clients versus new name clients (debunking the theory that existing clients would buy new engagements with a faster sales cycle).

The moral of this story is to pay attention to your pipeline velocity. If you have deals that are stuck in a certain sales stage, that is a red flag and you need to find out why. If you have deals that have been in the pipeline for a long period of time, take a hard look at the dynamics impacting the selling situation because you probably have some issues that the sales person has not identified, or is not acknowledging.

When I started my last business, we had subleased office space with Fast Company magazine. It was a cool place to be as the magazine took off and changed the way business publications were designed, written, and read. Often times, posters were made of the magazine covers and we “liberated” one to hang in our office. The cover was stylized text of a Hunter S. Thompson quote and read, “Faster, Faster, until the thrill of speed overcomes the fear of death.”

Make sure your pipeline is energized with the thrill of speed via deal velocity; the alternative is much less attractive.

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Tuesday, March 18, 2008

Alignment Drives Sustainable Growth

In my view of the business world, there are two types of growth; Opportunistic Growth and Sustainable Growth. Most executive teams are striving for sustainable growth, but they accept opportunistic growth.

Opportunistic growth is just what the name suggests, growth that is born from opportunities. Often a company will find themselves with a new piece of business resulting from a strong sales effort, a client that “shows” up (the time honored “bluebird”), or just being in the right place at the right time. There is nothing wrong with using opportunistic growth to support short-term objectives.

Longer-term growth, however, requires a company to focus on sustainable growth. Stated a couple of different ways, sustainable growth is repeatable, systematic, and aligned with the goals of the company. Sustainable growth is also born from internal and external alignment of the company’s departments, employees, and market offerings.

The difference between opportunistic and sustainable growth for a company is the difference between being a flash-in-the-pan versus having long-term viability.

As the executive or manager in a growing company, alignment is your critical success factor. First, there is the alignment between the market needs and your product offering. Next, there is the alignment of your internal departments and functions.

External alignment between what the market needs and what you offer is critical for obvious reasons. Many of us have seen the failures of the “Field of Dreams” marketing plan – build it and they will come? Generally, this approach never works. Companies that create innovative new products have determined a market need for a certain solution, even if their offering is a novel way to meet that need. The innovation comes from their creative ability to meet the needs in a way that no one else had previously thought was possible, not from creating something and then hoping the market would buy it.

Internal alignment needs to cover the full length of your organization. Product development and engineering need to create an offering that meets the market needs. Marketing needs to position and promote the offering in a way that generates interest. Sales and business development need to qualify and close transactions turning prospects into clients. Services, delivery and customer support need to help the client implement, install, and start using the product or service. Finance and accounting need to create an invoice that matches the services rendered and collect payment.

Sounds pretty easy, right? Unfortunately, in many companies, especially those that are growing fast, the interaction between the various departments is out of alignment. Product development and engineering create features that are requested by a single client, are easy to develop, or that appeal to the technical curiosity of the development team. Marketing operates in a vacuum and doesn’t interact with the clients to fully understand what benefits they receive from using the product or service. The sales team does what they are supposed to do which is close a deal, even if it is supported by empty promises or exaggerating the capabilities of the product and service. Services and delivery groups then work to fit a square peg into round hole to get the client up and running. Ultimately, the client gets an invoice for products they didn’t buy and services that weren’t rendered. Can anyone else see a championship match of the Blame Game starting at the next management meeting?

Alignment starts at the executive level. Every organization needs a strong leadership team who can set the vision and the destination for the journey. Years ago, I was responsible for developing new business relationships with Fortune 500 corporations for a young, fast growing technology company. After hearing a number of different members of the management team describe our company differently, I posed the following question at a senior management meeting – “How would you describe our company in 30 seconds?” I was looking for the classic elevator pitch, but what I received were 8 different responses. Turning to the CEO, I said, “That should scare the crap out of you.” To which the CEO responded, “I think that shows our flexibility and breadth of problem solving capabilities.”

Actually, I think that shows a management team that is out of alignment. Creating alignment is not an easy task, primarily because every manager in your organization will see the world through their own lens. Engineering will see the technical elements of the product, but perhaps miss the salable features and benefits. Marketing might see the things that work well in advertising, PR, and promotional campaigns but not the expense of creating those features or the complexities of trying to implement the system.

I don’t have all the answers about how to create internal alignment, but it starts with a vision and is glued together with common goals, mutual understanding, empathy, communication, and collaboration. Alignment invokes the concept of movement into a line and movement means changing a position – sometimes physically, but often intellectually or emotionally.

What I do know is that the failure to achieve sustainable growth is often the outcome of not being aligned. If you feel like your business is out of alignment, then you might need to take the company to the shop for some diagnostics and a tune up. Start by initiating a dialog with 10 of your clients, not just your best clients but a range of large revenue, small revenue, long term, new, big, small, and whatever other metric that your company might use to segment your market. The most critical component of creating alignment is to understand what your clients need, want, or desire from your type of products and services.

Armed with this data and anecdotal feedback, have your management team review how their departments can improve what they do to meet the client’s needs, wants, and desires. Also, have them review their intersection points with other departments in the company and determine how to improve their interaction. Get marketing to analyze the way they communicate with engineering on new product features, and have them also review how they interact with sales to assist in the generation of new prospects. You cannot create alignment if the intersection points between departments are broken.

Sometimes, the issue with alignment is not the departments but the individual managers themselves. Many a great team has failed because the star player would not play well with others. Creating a great team requires great talent, but it also requires working well together. You cannot create alignment if one of your star players doesn’t play well with others.

In conclusion, there are many moving parts that need to be managed to create alignment, and the parts can be defined – market, clients, company, departments, functions, and individuals. Focusing on the intersection between these different parts will create alignment and set up the opportunity for sustainable growth.

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Tuesday, March 4, 2008

Managing Growth – Defining “Keeper” Clients

Anyone that has spent time fishing has experienced at least one day when the fish are really biting. No sooner is your line and bait in the water before a fish grabs hold and you are reeling it into the boat. During this period of fish feeding frenzy, it seems as though the fish are literally jumping into the boat.

Whether your fishing good fortune is a result of a large number of hungry fish, the right lures and bait, or just being in the right place at the right time, there exist some parallels when it comes to running a high growth business.

In these fishing situations, the avid fisherman is adept at practicing “catch & release,” whereby they let go of some fish after they catch them so as to stay within the limits set by the local wildlife authority or game wardens. For the managers of high-growth businesses, however, how do you make the decision about which projects to take on, or which clients to keep? Which ones should be thrown back? The answer to this question is related, in some ways, to the tried and tested Pareto Principle – more commonly known as the 80/20 rule. If 80% of your revenue, profits, value, etc. come from 20% of your clients, then how do you determine your best clients?

While having more clients than you can handle might not seem like a bad problem to have, knowing the right ones to hold onto is vital to your business’s success. Back to our analogy, managing rapid growth can easily be equated to “fishing during a fish feeding frenzy.” The metrics for the “keepers” may vary by company, but for those wanting to manage growth successfully, a well-defined set of criteria are needed to determine which clients to keep. Many companies are often afraid to let go of the least viable clients, and instead, they try to handle all of the clients that come in the door. This often results in spreading resources so thin that they provide sub-par services, with less than stellar outcomes. Doing a poor job, or providing mediocre services, not only affects the client experience, but negatively affects the morale and success of your business, as well.

It is essential for a business’s success to have clearly defined guidelines to identify the “keepers” when presented with more clients than you can handle. Here are a few to get you started:

1. PROFITABLE CLIENTS. Rule #1 is to keep those clients who generate new opportunities and profitable business relationships for your company. It always amazes me when companies make the choice to lose money servicing certain clients. Why? The list of justifications and skewed reasons of why “we, as a company, should be in the stupid business” could go on forever. One of my favorites is when sales reps tell me that if “we don’t do the project (and lose money) then our competitors will get the deal”…do you think that we could ship all of our unprofitable clients to our competitors? The answer is simple: Yes, I do. I would much rather have my competitors investing their time - and losing money - servicing these unprofitable clients. Another favorite is that if “we don’t do the small unprofitable project then we will never get the big projects from the client.” This, too, is a misnomer. If you continue to work with your clients on small, unprofitable projects, isn’t it fair to assume that the client will continue to hire you for projects that they think are your specialty, as opposed to realizing your full capabilities and expertise for their big, important projects?

2. CLIENTS WITH REPEAT BUSINESS OPPORTUNITIES. When given the opportunity between a client who will hire you for one project versus a client that might have multiple projects or an ongoing need for your services, pick the client with repeat business potential. While a bit self-serving for you as the provider of services, it is also very good for the client. Establishing longer term working relationships creates efficiencies for the client, as you will have a better understanding of their business, priorities, internal processes and politics. Not having to educate a new provider of services to all of these idiosyncrasies and preferences saves the client time, money, resources, and energy. Larger companies are often the source of multiple projects, but don’t lose sight of smaller organizations that may not have the breadth or depth of internal capabilities. You may well be positioned to assist these smaller companies that place significant value on having an outsourced relationship with someone with your specialty expertise.

3. TRUSTED ADVOCATES. During the course of a working relationship, your client will go through various stages. Stage 1 is a happy client – they like what you’ve done with them and for them, and they feel like they’ve received good value for their investment in your services. Stage 2 is a reference client – they like what you’ve done and are willing to act as a reference for other prospective clients if you ask them. Stage 3 is an advocating client – this is when the client will actively promote you, your company, and your services to their colleagues. Personal testimonials speak volumes and enhance your credibility. Working with clients who have developed a deep level of trust in you and the advice you provide them is a gift. Getting those rare clients to actively advocate for you, without being prompted to do so, is truly a prized gift. You probably have exerted all efforts to get to this stage of a working relationship with your trusted advocates, so you deserve the active goodwill that comes from the relationship. But remember; never take that type of client for granted.

4. “GOOD” CLIENTS. Different companies will define “good” clients based on varying measurements and criteria. Perhaps the client is fun, nice, reasonable, flexible, or in some other way, just a pleasure to be around. Perhaps they value your advice and make you feel like an important part of their team, rather than just viewing you as a vendor. Maybe they acknowledge appreciation for the work of junior members of your team and treat them with the same respect they treat the managers of the project or relationship. It is important to never lose sight of the detrimental impact that a bad client will have on morale and your ability to provide exceptional service and results when your people don’t like working with them. Similarly, don’t underestimate the effort that a motivated and respected team will put forth to make sure the client is successful – I’ve seen people on my team move mountains to insure that their favorite clients were happy.

Preparing for, and planning on, success often defines the likelihood of achieving success. Conversely, lack of preparation and planning will also negatively impact the likelihood of achieving success. It is an absolute certainty that fishing in the wrong location, at the wrong time and with the wrong bait, will not result in catching many fish. When you are in a position to select your “keeper” clients, you should employ a formalized set of well thought out criteria to make your selection.

If you looked at your client base and found profitable business relationships with companies that needed your services on an ongoing basis, plus they were nice to work with and advocated on your behalf – that would be a pretty good foundation for a successful business. Ironically, if more companies spent time determining the criteria for their ideal, or keeper, client profile, there is a greater likelihood they would have more of them.

Keeper clients often bring out the best in you, your staff and your services; ultimately, leading to more clients that fit your ideal client profile. Managing this growth requires that you make some decisions, and many of these same decisions can have a significant impact on creating growth in the first place. And, before you know it, the fish will be jumping into your boat, allowing you to further refine and define your keeper clients for long-term success.

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Wednesday, February 20, 2008

What is the Hull Speed of Your Business?

In my free time, and sometimes when I probably should be working, I do a bunch of sailboat racing. Sailing is a multi-variable sport and to be good at it you constantly need to be processing information about sail trim, crew work, boat speed, race strategy, reading the wind, current, waves, tactics against your fellow competitors, and generally trying to guess what Mother Nature is going to do. It is enough to make your head spin, but there are also periods of time when you are on the open ocean for creative thinking.

For the past 10 years, I was an entrepreneurial executive and founder of a venture backed professional services company. Growth and expansion were the operative words used by our management team, and the mandate from our investors. How can we grow, scale, and expand the company? This question was on our minds at all times. Faster was better and slowing down was not an option. This was on my mind during a particularly windy day when I was out racing my sailboat, and I started thinking about company growth as it relates to the hull speed of a boat.

Hull speed
, or displacement speed as it is sometimes called by professional sailboat designers, is the top speed at which a sailboat, powered by the wind, can travel through the water. The weight of a boat displaces an equal weight of water, and when the boat moves through the water it needs to move that water around the hull of the boat – faster speeds require moving a greater volume of water around the hull of the boat, and that is what creates the wake. This also creates friction and forces against the hull. Every boat hull has a certain shape which allows it to move a certain amount of water around the hull, and there is a point where the boat reaches a speed at which it can’t go any faster – this is the hull speed.

Interestingly, when a sailboat starts approaching its hull speed it starts to become very unstable and you feel there is a very good chance that you will crash. The boat can be pushed past its hull speed for a period of time, but go too fast for too long and it is almost inevitable that something dramatic will happen – usually not good drama.

This made me think – What is the Hull Speed of a Business? How fast can a company grow before things start to break? Can you change the shape and form of the business to allow for rapid growth?

Professional services firms are particularly susceptible to the limits on growth because they generally operate in a one-to-one performance environment. Meaning that someone has to perform the service each and every time the client engages you. This is different from a product company or some service companies which operate in a one-to-many performance environment. Even if there is a manufacturing process needed to make a product, it can be completed with efficiencies in volume or through an automated process so that each individual product is not custom built.

If you want to grow and expand your company, you need to make sure the structure of the business (your hull) is shaped in a way that supports the growth rate (your speed). The structure of the business is made up of a number of components that all need to be properly configured to achieve your desired pace of growth without breaking. Here are a few things to evaluate before you embark on a growth phase:

PEOPLE Do you have enough people to complete the work? Developing the processes to recruit and hire the human resources you will need to do the work is critical if you want to grow. There are different models – full time employees, contract and freelance resources, or subcontract companies – that will help you develop a viable plan to support different rates of growth. However, if you don’t have the people you can’t do the work.

TALENT Do you have the right people to complete the work? Having enough individuals to do the work does not guarantee that they have the proper skills, experience, or aptitude to complete the tasks. Often, it is easier to find the talent to fill junior roles on the team but you may not be able to find the proper project managers or client executives to guide and manage the engagement. Training is an option, but this takes time and there is no guarantee that a person that goes through training will achieve competence in the subject. Developing bench strength, people that currently have one level of role but that can step up to take on greater roles, will help you insure that you have a farm team ready to send team members up to the next level.

INFRASTRUCTURE Do you have the proper hardware, software, systems, and office space? You might have talented, properly trained people to do the work, but if they don’t have a place to work and the tools to do their tasks then it will be hard for them to meet deadlines.

PROCESSES Does your company have documented and standardized processes that a project team can follow? Every company operates in “fire drill” mode every once in a while, but I learned a valuable lesson about having processes from a situation that was brought on by an impending client deadline. With the alarms going off, and after my motivational speech to the team about the importance of working hard (and smart) to put out this client inflicted “fire”, one of the folks on my team looked at me and said, “…when the alarm goes off at the fire house, all of the firemen know the process to follow to put the fire out -- we don’t…” Don’t expect your team to be in a position to answer the fire alarm if you don’t have standard, documented processes, or if they don’t know them.

MONEY Do you have the capital resources to support your growth? People with the proper talent, a place to work and the tools to do the job, along with the training and organizational processes all take monetary investments to put in place. However, even if you have the money to invest in all of those things, you will also need the financial resources to fund your cash flow. The soft under belly of growing professional services firms is that you often need to pay your people to do the work prior to collecting payment from your clients. Unless you get significant payments from your client at the beginning of the project, you will need to fund the accounts receivable on projects with working capital or a line of credit. Create a solid financing plan if you want rapid growth.

To illustrate how these variables and components factor in to the growth of a company, let me offer an example. In most growing companies, one factor that plays a critical role in supporting growth is reducing the amount of time from hiring a new employee to having that employee able to productively contribute to the business. The shorter the time is from date of hire to self-sufficiency, the better it is for the business. For sales people, the metric might be date of hire to date of first closed deal.

The term that human resource professionals use to define this new hire orientation, training, and acclimation process is “onboarding.” All of the variables and components above play into a company’s operational processes and can contribute to an effective and efficient onboarding experience. Unfortunately, I see too many companies that figure that they will hire experienced and intelligent people and these new employees will be able to “figure it out.” Why would you invest all of the time, human resources, and money to find, recruit, interview, and hire a talented new person to join your team and then hope that they can figure it out?

Without going into detailed descriptions of all of the operational processes that need to be in place to create an effective onboarding process, you need to understand that there is a cause and effect relationship that interconnects all of these issues. Most important is to develop best practices and institutionalize individual experience so that your new team members learn from the best, not just from the current employee who happens to be available for their training and orientation. There are many great case studies about companies that have excelled in the onboarding process, learn from them and customize your system. Realize that there is significant return on your investment if you shorted the time to productivity, and there are also significant negative implications if you do not have operational processes in place to support your growth objective.

What is the Hull Speed of Your Business? How fast can you grow?

Before you embark on a phase of growth, make sure you have shaped the business in a way that can handle the speed you want to travel. If you push the company past your hull speed, you will know it because the company will start to shake, clients will become unhappy with their work product, and it won’t be the plastic or wood of a boat’s hull that will start to break it will be your people.

Understand the hull speed of your business before you start to grow too fast. The good thing is that unlike the hull shape of a boat, you can change the structure of your organization while you are “under way” (the sailing term for moving). If you need to change the structure of your organization to support faster growth, do it before things start to become unstable because by then it might be too late to prevent crashing.

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Monday, February 18, 2008

The EKG of Prospecting -- Inflection Points

For many professional services firms, there is a misunderstanding of how they should prospect for new business. A key component to this misunderstanding stems from the belief that prospective clients have an ongoing need, and therefore interest, in their services. Unfortunately, this is not true. Prospective clients experience some type of event which creates an inflection point, and this inflection point triggers a period of interest by the prospect in the services of a professional services firm.

I like to think of this as the EKG of prospecting, and it would probably be helpful if we even had the sound effects from some TV program where the patient (prospect) was wired into a machine that would emit an audible sound when the heart beat occurred (when the prospect had an interest in your services). The visual effect would be helpful as well...flat line, flat line, heart beat, spike in interest, flat line, flat line, heart beat, spike in interest...

If you are in the business of selling professional services, or "promoting" professional services since many of us still don't want to admit that we "sell" our strategic and consultative advisory services, then you need to understand that some inflection point happens to create a spike in interest.

For example, most of us do not sit around thinking about evaluating accounting services 12 months of the year. However, preparing our annual tax return in the February to April time frame every year is an inflection point -- that spike of potential interest that accountants could seize to add clients to their business. Another inflection point happens on April 16 for every person who was dissatisfied with their current accountant and the tax filing process. If we had a bad experience, we are prime prospects for an accountant that promises something different.

The point is simple, most people are not in constant need, or at least not in constant evaluation, of professional services. Some inflection point happens and then the interest in the service spikes, and once a suitable provider of the services is found, the interest goes back to -- you guessed it, a flat line.

So, how do you use this to your advantage if you are a professional services provider looking for new clients? Here are a few easy steps to follow to capitalize on the inflection points for your business.

1. Define the inflection points. What happened within the market, within the company, or to an individual decision maker that created interest in your services? The best way to find the inflection points for your business is to analyze why your current clients were open to evaluating your services. Go talk to them. Understand what happened to make them open to either looking at your type of services for the first time, or for them to contemplate a change from their existing service provider.

2. Identify what else happens at the same time. Very few things happen in a vacuum, whether in life or in business. The events which cause an inflection point for your business will, in all likelihood, also cause inflection points for other businesses as well. The more you understand what other types of businesses might be impacted, the better you can define potential partners or "early warning systems." Often there are a series of events that happen in a serial manner, one event creates the next and so on. If you can determine what service or product company is impacted by the inflection point just before yours, you have the makings of a great partnership. They can help you by being a lead source and you can help them by being a trusted referral to extend their relationship with a client.

3. Develop an automated alert system. Creating partners in the life cycle of inflection points will be helpful, but there are probably many other ways to create an automated alert system. There are old school ways to peruse business publications for notifications and public filings or listings, but the information age has shuttled in so many new ways to automate this process. Google alerts is a great way to create business rules that will automatically search press releases, news stories, and information sources for companies or criteria that you specify. Another great way is to create a web email account where you subscribe to industry newsletters and then run searches against your own email for company names or criteria. Finally there are subscription services for almost any type of information from court cases (for lawyers) to new business filings (for accountants), and pretty much everything in between.

4. Create your basic communication and positioning package. Now that you know someone that probably needs your services has reached an inflection point -- meaning that their antenna is up and ready to receive your message -- you need to make sure you know what you're going to say. I think the best way to do this is via corporate story telling and case studies. Create a set of collateral and materials that tell your story -- I know what you're feeling now, and here are the things that you will need to overcome between now and reaching a complete fix of your situation. Help you prospect understand how you will add value by showing them the benefits that others have received from using your services. You can generate interest and credibility with the potential new client by providing information via regular mail, email, phone calls, or by otherwise capturing them at their height of interest in your services.

5. Act fast. Leveraging inflection points is not a task that you can put off until next month, next week, or even tomorrow. The spike of interest lasts for a period of time -- different for every different type of consulting services -- but it does not last forever, or even for that long. The evaluation period may last for a while, but most prospects will not evaluate an endless list of professional service providers. They will make a decision quickly to select a new provider because there is not much differentiation between different providers. It is all about first impressions, your professionalism, and sometimes just being first to engage them. Acting fast will not guarantee you a new client, but acting slow will insure you are not part of the game.

Leveraging inflection points is not a hard thing to do, but it is a hard thing to systematize and to do consistently. Most professional services firms look for new business when they are slow, or when they need business and new clients. Unfortunately, when they decide they need new business the firm initiates a process where they communicate with prospective clients on their flat line, not during a spike in interest.

Think about, and define, the inflection points for your business. If you can capture the moment of time when your prospects will have a spike in interest in your services (the heart beat blip on the screen) then you can create a very efficient prospecting plan for your professional services practice.

Spend the time to create the plan, and the system, because this will create a very time efficient system for prospecting for new clients of your consulting and advisory services.
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