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.  

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