How are your margins? February 18, 2010
Posted by petemcd in Marketing, Sales, Strategy.add a comment
Thursday, February 11, 2010, 10:07am PST Puget Sound Business Journal (Seattle)
WSU survey: Half of Seattle businesses sell below cost
In an effort to stay in business, half of Seattle business executives said in a new survey that they’re selling their products below their costs. According to a survey by Washington State University and the Seattle Executives Association, in the last quarter, 70 percent of those surveyed said they believe their competitors were selling items below their costs to stay in business. The survey of 103 business executives indicated that their companies’ sales, inventory, financing and employment were all “stagnant to declining” but there was optimism because “more respondents were positive about key economic indicators than negative.”
“These conditions underscore the need for business to analyze profit in addition to costs to identify where their comparative advantages lie,” said Justin Taylor, economic impact analyst at WSU, in a statement.
Wow, that’s a very interesting blurb that appeared a week ago. From this article it sure appears that many businesses have little to no gross profit margin. I hope they have a lot of cash on hand because that’s what they’ll need if they hope to be around in a few months. It doesn’t take long for the cash to run out when the selling price is at or below cost.
What can you do about this? There are many actions you can take but I’ll just offer one for your consideration. Do a study of your current customer base using market segmentation. This will allow you to categorize your customer base by various demographics and psychographics, and thus analyze the estimated and actual selling margins. In addition, when doing the analysis, consider the background overhead costs that your organization incurs in selling, producing and delivering the product or service. Sometimes you can get fooled into thinking a particular customer is great, but behind the scenes they take a lot more work and cause internal hassle.
So, look for the customer types where you truly get the best ROI on your total efforts. Pick the top two types as you’ve defined them and develop a marketing plan to go after more of this business. If more of this business is not in your direct marketing area (location wise), consider how you can develop customers outside of your area and whether it still makes sense to go after that business.
By using a bulls-eye focused approach to a specific market segment, one that you now know has better margins for your business, you will be using your organizational strengths and expertise better and your margins should improve.
I’ve done this and seen revenues and margins improve significantly. Here’s an example (rounded #s):
- Business revenues: $15.0mil
- Overall GM% and $: 30% = $4.5mil
- Current Business Top Two Segments revenues: $8mil @ 35% = $2.8mil
- Current Business Other Segments revenues : $7mil @ 24% = 1.7mil
- 10% growth of Current Business Top Two, now targeted with your plan: $8.8mil @ 35% = $3.1mil
- Increase in GM$ = $300K
I don’t know any business owner who wouldn’t want at least $300K additional brought into the business. And, it could be much more. Your business may be able to grow the top two segments more than 10% because this is what you are really good at- it’s your sweet spot. Remember, you’ve got to take the time to do the analysis and build your plan. You cannot do this halfway.
Oh, one last thing- coming soon, maybe over this weekend, I’ll be posting an audio sound bite on my blog where you can hear a bit more about what I can do for businesses.
© 2010 Peter E. McDowell
Pete’s View
Interim/Contract or Permanent Executive Management Services
Sales Focused Business Strategies – Business Strategic Planning – Business Best Practices
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Selling the intangible February 11, 2010
Posted by petemcd in Sales.add a comment
All products are tangible- even the intangible products. Sooner or later everything has a tangible quality to it. Some products even have both intangible and tangible qualities that ultimately come back around as a tangible quality. Intangibles are incapable of being perceived by the sense of touch. Tangibles are discernable by touch, they are real or actual, rather than imaginary or visionary.
Here are two examples:
You’re selling accounting services which include tax advice and tax return preparation. Is the service an intangible? You can’t touch it, right? The tangible part comes in the actual reports and documents that reflect the service work (i.e., knowledge, expertise, credentials) being done. Well, we’ve all gotten documents that are so poorly written or formatted that they are complete gibberish. So, another tangible part is in how easy it is for someone to hold, read and understand the material because it is formatted so well. The tangible part also includes the invoice from the firm…if you’re not being billed and paying online.
You’re selling product quality and on time delivery (think kan-ban as a supplier or a specific due date and dock time). Product quality shows up as both something real to the touch, say a new PC that is put together perfectly and works flawlessly, and in the supplier’s quality improvement process that documents manufacturing processes that ensure adherence to exact specifications.
One way or another, every service that seems intangible will show up in a tangible way. You have to think about how this will be for the customer and the value they will get in the ‘tangibleness’ of it. It’s important, because when people physically handle something tangible they get connected to it. It moves the selling process beyond just talk and ideas that are floating in the prospects head to one where the prospect can actually see and touch what he or she is buying.
Think of it this way- the prospect may be saying or thinking, “sure, what you say is great, but how do I really know that all of these great services and expertise you provide is real?”
You show them and let them handle the proof.
© 2010 Peter E. McDowell
Five Points to Develop a Sales Business Culture January 18, 2010
Posted by petemcd in Culture, Leadership, Marketing, Sales.add a comment
Do you want to improve your business culture so that everyone on your team is sales oriented and customer focused? In today’s slow growth environment you have to do everything you can to generate sales revenue. You need your whole team to make this happen.
By now, most companies have taken the scalpel to their cost structure in order to survive the downturn that started in the fall of 2008. They weathered the storm and adjusted in 2009. Now, companies must turn their attention back to growth in a very tough domestic and global marketplace.
An organization that is not fully attuned to and committed to customer acquisition and retention will find themselves bogged down. Notice that I said organization. Marketing and sales pros aren’t the only ones who can affect your growth. Sure, they have the most responsibility to identify the specific customers and reel them in, but it takes a team effort.
Here are five things for you to think about in your business to ensure that you have the best opportunity to grow.
- Hire right- make sure you have a system that ensures an 80% chance of getting the right person for the right job on board and that the person will stick. Companies like Apple, IBM and Microsoft are famous for their processes to churn through candidates and get the best fit.
- Train- make sure that you continually train throughout your organization to upgrade skills and competencies. Those skills and competencies should always be in line with what the company’s customer base will get as a benefit- it’s all about the customer. General Electric is known for its intense focus on employee development.
- Communicate- make sure that everyone in the organization knows what the business is all about- the Mission, Values and Vision stuff (who you are, what is important and where you are going). At any time, everyone should be able to communicate this outside your walls and help to position the company in a positive light. Every team member should know the company’s revenue goals and other objectives for the business year. Alan Mulally, former Boeing Aircraft President and now President of Ford Motor Company, is a great example of someone who communicates the MVV and goals.
- Develop a sales management system so that you are certain that people are working on the right things. Doing this enables you to focus on the activities or behaviors that affect success. Companies like Cisco, Hewlett Packard and Oracle have highly developed and razor sharp sales management systems.
- Develop Marketing and Sales Strategies (plans) that are aligned and not in conflict. If you have separate marketing and sales functions within your business, make sure that there is open and regular communication and between them.
The work I’ve done in the past and that I currently do in the role of interim or contract or permanent senior executive is geared exactly to the points above. My experience tells me that by doing these five things you can grow, even in tough times.
© 2009 Peter E. McDowell
Pete’s View
Interim/Contract or Permanent Executive Management Services
Sales Focused Business Strategies – Business Strategic Planning – Business Best Practices
email me to request my e-newsletter!
Web @ http://www.performabusdev.com
Blog @ http://petemcd.wordpress.com/
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Guest lecture opportunity November 3, 2009
Posted by petemcd in Sales.add a comment
Cool news for me and a way for me to give back to others!
I’ll be guest lecturing at the University of Washington in the Michael G. Foster School of Business in the Winter Quarter. On January 14th, 2010 I’ll be a guest of John Castle in his year-long entrepreneurship course, Creating A Company. I’ve done this before with John’s classes and it’s always fun and invigorating. The students are great and eager to learn. I’ve discovered that practical sales training with tips and techniques is something the students do not get in business school and past feedback has been that it is highly valued. I’ll let you know in January how the experience goes.
© 2009 Peter E. McDowell
PERFORMA Business Development
Different View/ Better Results
email me to request getting my e-newsletter!
Web @ http://www.performabusdev.com
Blog @ http://petemcd.wordpress.com/
Connect with Pete on biznik, Contribution Networking Party, Eastside Entrepreneurs, Facebook, Linked In, Plaxo and Twitter.
Is Sales Training really important? October 30, 2009
Posted by petemcd in Personal Effectiveness, Sales.add a comment
Businesses typically spend 80% of their time & $ for sales training on product and industry training and 20%, or less, on developing sales competency or mastery. Basic industry and product knowledge can be picked up in relatively short time. Obviously, deeply knowing the ins and outs of an industry and your company’s products takes time. But, basic knowledge is often very sufficient to get out into the market place and sell. That’s why new and inexperienced sales people can achieve at least some level of success.
Sales mastery- being extremely good at having multiple sales conversations with an account and controlling the sales process- is much harder but produces far more beneficial results for the customer and provider/supplier. The ability to effectively build relationships and work toward a win-win solution by understanding the totality of a business and personal environment in order to solve problems takes continual learning and discipline. Without this total or global or holistic approach to the sales process it is very easy to sell a product or service for the wrong application at the wrong price (or value). Poor ‘salespersonship’ usually produces poor and costly solutions for both parties.
© 2009 Peter E. McDowell
PERFORMA Business Development
Different View/ Better Results
email me to request getting my e-newsletter!
Web @ http://www.performabusdev.com
Blog @ http://petemcd.wordpress.com/
Connect with Pete on biznik, Contribution Networking Party, Eastside Entrepreneurs, Facebook, Linked In, Plaxo and Twitter.
