When your business needs a bigger boat…

We’re gonna need a bigger boat…

In 2017, businesses still manage to suffer from the same problems they have been facing for decades; focusing their efforts on increasing sales while seemingly ignoring the procedures and operations in the process.  The fact that history’s mistakes continue to repeat themselves without many positive signs of improvement on the horizon leads one to believe that the core issue is a lack of capacity, meaning businesses will need to build bigger boats to accommodate all of their growing needs in a sufficient and sustainable manner.   

A business can be like a sinking ship with expenses, culture, and a whole bunch of other issues, weighing down revenue growth.  Yes, some businesses seem unstoppable, which is more likely a stroke of good luck that somehow enable those lucky businesses to excel in spite of that firm’s negligent inclination to ignore and still survive internal issues rather than addressing them.

However, adjustments to the structural size of a firm alone will not be the sole solution to all of a firm’s issues.  While a bigger boat (more resources) can make a project seem less challenging, it does not guarantee success.  Just like having the ability to generate sales is fantastic, believing you can sell your way out of a problem is not a long term solution.   Having an understanding of the internal operations and how the firm’s money is being spent is also a critically important factor, as well.

The business activities that work as a bail-out for the sinking ship generate profits, while operations keep the boat afloat it’s culture and marketing that move the ship along.  The reason I am trying culture into this is while marketing is, of course, a common core competency of every organization,  culture is also often disregarded as an expense that does not offer an immediate measurable impact on revenue performance.  If the cost to acquire a new customer (Customer Acquisition Cost(CAC) =(Total sales + marketing cost)/ # of new customers added per month) exceeded revenue, then the approach that may have the largest financial impact may have to do with culture, while the cost of a sale has a cost for marketing anytime there is a change that affects how employees operate there is a threat from outside influences. It is important to be agile and make changes that support the business and focus on repairing the leak instead of focusing on buying a bigger bucket.

Learning to do more with less is just as important as learning to do less with less.  Meaning, As a result, businesses possess the ability to drive revenue higher as a percent of cash flow from operations by focusing on process improvement over sales performance improvement.

There are actions to fix the whole instead of

When it comes to cutting costs, there are what is seen as the most common or traditional cost cutting measures with the quickest and most visible impact to the bottom line are employee layoffs, which are often referred to as reductions in staff and restructuring.  laying off employees; While business decisions involving terminations, demotions, and added responsibilities without compensation all provide organizations with the ability to quickly reduce costs and drive profits, this approach is often only viable in the short-term, as staff changes of this nature often result in hurt moral and can decrease the rate of productivity and can compromise quality control much farther than anticipated.  Reducing employee pay is always challenging and usually will drive the top talent and high performing people out first.  Reducing benefit programs can also cause the same impact on the staff as pay reduction.  In addition, changing customer service hours, or altering billing terms with little to no notice to the consumers may drive away profitable customers while producing an undesirable impact on the business’s reputation.  Less common, but often more sustainable, cost-cutting measures look to leverage relationships and local communities to support a business in transition which can help with performance, sales, and reputation.

Strategic alliances for marketing purposes can be leveraged more easily when there is a nonprofit or charitable affiliation.  Collaborating with local schools or social organizations for mentorship or internship programs can provide firms with the opportunity to reduce expenditures (Cost Cutting) with low-cost labor options, elevate customer retention and new client acquisition, and promoting a more positive brand image while cultivating stronger relationships in the community.  

Activities that possess a viable means for increasing the dynamics of a firm’s cash flow from operations include the following:

  • Budgeting constraints for outside sales teams that link expenses to performance. The better a sales member does the more access they have to company reimbursement for non-essential business expenses.
  • Performance-based expense-reimbursement standards create challenges to the firm’s culture and the espoused values. As a result, this approach would require the greatest amount of care and focus on change management implementation to ensure optimal successful results are achieved.  

I have personally witnessed the execution of all of these various strategies increase business performance in different industries at different times.

There are many other types of activities to improve operations, as well as improving access to a highly valued workforce that work as repairing a leak to move the boat better. Feel free to comment with any other uncommon ideas that you have seen work.  

The phrase every executive should avoid

Marketing is everything you think it is and everything you don’t think it is…

While that is stirring around in your big beautiful melon.  

Obviously, all normal advertising is marketing, training for how company representatives interact with customers is marketing, text, and images on everything from white paper to web pages and business cards is marketing.

For the past 17 yrs, I have seen businesses that over-leveraged themselves to increase marketing expenditures and firms that limit the amount of business cards they give out to keep marketing expense down and everything in between.  Here’s is what I have come to understand. There are three “things” that drive businesses to be successful timing, magnitude, and luck. Timing can be early to market, late to market on right on target. Magnitude not having enough widgets, having too many widgets, or right on target. Luck is the wild card, good luck can make a business succeed regardless of timing & magnitude. Bad luck can crush a business despite all the best efforts, and it(luck) can not be considered at all in any planning. The importance of marketing is directly tied to timing and magnitude. I am not going to lay out the different approaches to campaigns, calendaring, or strategy implementation.  I really just want to share a mindset that should be avoided at all cost by any executive, business owner or division head and that is anyone who utters this are a variation of this phrase;

“We don’t really do marketing here”.

“We don’t really do marketing” is probably one of my most favorite things to hear an executive say.  I have the hardest time not laughing in their face and the more profound they look while spewing the statement the harder it is to maintain composure. Obviously, if that statement made then marketing is being discussed in some manner, and the person making the statement has misunderstood the idea of marketing and how to drive sales. While outbound and inbound advertising is absolutely part of marketing so is the content that is used on websites, business cards, even customer service training is part of marketing. There are Key performance indicators and metrics that impact sales that are also linked to forecasting growth.

Here is a short list of less common practice activities that are part of marketing.

  • Return on Marketing Investment (ROI) = (Sales Growth – Marketing Cost) x 100 / Marketing Investment
  • Customer Acquisition Cost (CAC) (Total sales +marketing cost)/ added customer per month
  • Marketing % of Customer Acquisition Cost (M%-CAC)
  • Success Metrics
  • Channel conflicts
  • Newsletters
  • Landing page
  • Search ads
  • Forms
  • Blogs
  • Social networks
  • Banner ads
  • Vlogs
  • Customer service
  • Logos

Far too often businesses will become so focused on the bottom line that opportunities are missed because “we don’t do marketing”.  In actuality the statement is more likely to be “we don’t understand marketing” or “we don’t do marketing well” there are lots of different recipes to make a nutritious meal but you have to be willing to spend money on the ingredients or know how to cook. Not every business needs a celebrity endorsement or SEO strategy, but they should know who much they are spending on their marketing activity for the simple fact that if you can measure it you can plan for it making timing & magnitude an essential aspect of marketing and business strategy.

Next time you are in a meeting or shooting the breeze, just remember the phrase to avoid. “We don’t do marketing”…