A Quick Response

After Kim’s last blog, I had a few clients ask about businesses that are operated based on ‘homerun clients.’ These are businesses that will land clients that make up the bulk of their business.

Similar to the formula in Kim’s blog, I recommend these business look at their three-year run rate and find the average. Then look at their pipeline for the first quarter or two and compare it to the previous year’s pipeline. If their pipeline is full – great, they can take on a bigger growth target. If it’s empty, they know they’re going to fall short the first quarter so to set an unrealistic target will simply put them behind the 8-ball from the get-go.

I know it’s a lot more work but these formulas are critical to understanding your business and your industry over the long term. If you have more questions or comments, feel free to email or simply drop me a line! - Kevin

As we near the end of January, you’ve probably set your sales goals for 2012 but how do you know if you’ve set realistic targets? Realistic goal setting is an area where most clients fall down. The issue is that setting extravagant sales targets erodes their value as a business planning tool, for budgeting and forecasting.

Last year we grew by 25%, this year we’ll grow by 40%!
After a good year, it’s human nature that sales managers will want to increase the revenue target.  And why not? Onwards and upwards, right? Wrong.

The catch: Oftentimes a single source of referrals or a one-time client can lead to large amount of business in a single year. Basing your sales targets on a single client or stream is risky. What happens if your client goes out of business or changes direction? Meanwhile your company has spent based on that number…yikes. That’s why it’s important to know your businesses baseline and grow from there.

Here’s the fail-safe formula Kevin uses with Growth Path clients:

1. Review all your business over the last two to three years
2. Delete any one-off projects, business that are downsizing or have shifted gears from your baseline and take an average of what’s left
3. Look at where your business came from over the last two to three years
4. Delete any one-time referrals or sources that have disappeared from your baseline and take an average of what’s left
5. Take a look at how quickly your sector is growing (e.g. 8% nation-wide)
6. List new accounts or sectors you’re targeting and the growth in those areas
7. Take your average baseline (step 2 and 4) and increase it by the average growth in your industry and your client’s industries. Add business you’ve already booked. That should be your new sales target.

This formula eliminates the guess work and provides a reality check for what’s really happening in your business and your industry.

Why shoot for less?
Successful organizations need realistic goals that people believe they can achieve. While it’s true that some sales people respond well to a big audacious goal, many will look at an unrealistic goal as representative of management’s disconnection with reality, and start job hunting.

Making the business case
Most sales staff can’t imagine presenting lower sales target to their managers but there is a way…

It’s important to show management what business or sources of business have disappeared and what’s not replicable. The next step is to immediately show how you’re rebuilding the pipeline in those areas where you’ve indentified steady growth. It’s about working hard to fill pipeline and managing your manager’s expectations.

The important thing to remember is this strategy is great for management.

Consider this: When sales people have realistic targets, management is able to budget and spend properly for the year. So forget about inflated targets. It’s easier to plan based on what we know is going to happen vs. what we dream might happen. This honest approach to planning will keep both managers and staff happy over the long run and that’s key to strategic growth.

There’s one word that can make business owners shiver and rush out of a room, unlikely excuses falling off their tongues as they scale walls and cross oceans to get out unscathed. That word is CONSULTANT.

Consultants have bad rap and it’s no wonder. Many consultants will hijack hours of your time, only to deliver a wire-bound, clear covered POTS report and disappear.

POTS refers to ‘plan on top shelf’ because that’s where most organizations put them, pulling them out periodically when they’re needed as paperweights, draft insulators or booster chairs for small children. But it doesn’t have to be that way.

From Consultant to Coach

The idea of simply submitting a strategy to a client with no implementation or follow up is like throwing a ball over the fence and hoping somebody will catch it. It’s a short sighted way to operate for both you and your client.

Once the strategy is written, it’s time for consultants to turn into coaches and help their clients to:
• Arrange the resources
• Implement the plan
• Make it work over the long term

Your client’s strategy should include implementation to begin with, but your involvement goes beyond that. A true consultant should be invested in the success of the plan. And that investment can be expressed a few ways:
1. Performance pricing: Growth Path works with a number of clients on performance-based fees. The more they make, the more we make. Performance pricing not only reduces your client’s risk, it’s also the ultimate expression of confidence in your ability to help your client reach their objectives.
2. Ongoing reviews: One of the ways we add additional value to our clients is providing them with ongoing consultation for as long as they need it – long after the last invoice. A monthly or bi-monthly in-person review allows you to track progress and obstacles, and modify plans to realistic objectives. This leaves us managing the relationship rather than a transaction, bodes well for the life of the strategy, and increases the likelihood of repeat and referral business big time.
3. Complimentary training to various levels in the company and be on call to them whenever they have questions. Anything you can do to make it easier for your client to implement their strategy will be highly-appreciated by your client. The idea of ‘nesting’ within an organization (building relationships throughout the organization) will strengthen your overall relationship with your client and introduce you to additional business development opportunities.

Demonstrating your commitment to your clients’ success by performance pricing, ongoing status reviews and training may seem like a lot of time, but the chance of those clients eventually retaining you doubles. It takes just a few conversions for you to see the logic of being a better consultant. That’s the bottom line – better than the top shelf.

They are a relic of the past. There are still a few industries which prominently feature finders fees as a way to incentivize business referrals, but there has been a marked move away from these in the past decade.

The reason? it began with the corporate malfeasance early in the millennium at companies like Enron and Tyco (I was in Sr Management at Tyco when the CEO and CFO were indicted, and know the culture first hand). Out of these debacles came new standards of corporate governance, including the widely adopted Sarbanes Oxley – which by the way isn’t law in Canada, but is a de facto standard for corporate governance.

Governance guidelines like these were designed to eliminate kickbacks, and ensure supplier selection fairness. Interestingly these were more of a problem for public sector suppliers, but that irony went largely unnoticed. Kickbacks and finders fees had way too much in common to eliminate one, and not the other. The very thought of finders fees raised eyebrows in corporate accounting, and the concept soon was banished from most major organizations.

This has eventually trickled down to Small-Medium Enterprises, to the point where asking about finders fees is generally considered distasteful or insulting. There are a few industries where they still are common, interestingly including human resources and recruiting – folks you might think would be early adopters of new governance standards.

So what’s the alternative? The generally accepted one is mutual referrals. This is actually a great alternative, because as the bonds between referrers grow into a strategic alliance, accountability increases – which can help assure customer satisfaction on both sides. This is clearly aligned with the aims of referrals.

The hurdle is one of inequity. If you expect the value of referrals to be equally matched, you are destined to be disappointed. Instead, look at any of this business in either direction as “found” – work for which you did not have to do the business development. And rely on that increased accountability – it can end up being more lucrative to have reliable partners than reliable volumes of referrals. Because the goodwill that they generate is transferable to you, and builds your own credibility. And in these days of good governance, the subtraction of finders fees allows mutual referrals to become self governing.

Last blog I discussed disciplines which owner-managers who sell can use to improve their game. But there’s an interesting step to take which they cannot accomplish themselves – external accountability.

It’s a simple concept – but a tough one for the boss. Every two weeks, you report your business development progress to someone else. That someone needs to be prepared to kick your ass if you are falling behind in your commitments.

There will be extenuating circumstances – there always are, but would you accept them from a sales person reporting to you?

External review helps ensure that you’ve:

• Targeted and prioritized your efforts

• Recorded the results of any meetings

• Established a follow-up plan for potential prospects

• Executed any follow-up identified for this 2-week period

• Determined if you need any external assistance, information, etc to help close

You may notice that the first 3 of these relate directly to the sales disciplines which owner-managers typically lack. And follow-up has actually been broken into three pieces, planning, executing, and looking beyond what you can do alone.

The trust involved in an external business development review can make it difficult to assign. And with this trust comes authority – you have to be willing to be prodded, yelled at and motivated. And be responsive.

I’ve seen several business owners successfully use a spouse in this role – one who understands the business and wants more involvement. A third party also works well – this is a role I frequently take on. Project managers can also be an excellent choice, given their skillset.

An external business development review needs regular scheduling, and regular reporting to work best. This also enables tracking of prospects – and prospecting activity – over time, to help in targeting and prioritizing. And of course identifying where you, as a business owner-manager, need help in effective selling.