MB+M Inner Circle Newsletter
May 2011

(Time to read this entire newsletter: 24 mins)

In this issue:

• The Times, They Are A Changin’ - Are You?
  
  
• The Three Stages of a Downturn
  
  
• Your 2011 Don't List

The Times, They Are A Changin’ - Are You?

(Time to read this article: 4 mins)

It’s funny, Nature has trained us to accept the changing of its seasons, and you don’t hear too many people exclaiming, as Nature contracts, “Oh no! What’s gone wrong? Another Winter!” And yet, while every market, including yours, is a broader part of Nature and so breathes in and out with a rhythm resembling the seasons, you’ll still hear plenty of people exclaiming, at the next contraction, “Oh no! What’s gone wrong? Another Recession!”

Surprise, surprise! Did they expect that unlike anything else in their experience, markets in general would just continue to breathe in – and expand forever? Come on! If it did that, the logical result is pretty obvious, isn’t it?

So the market, like the seasons, has contracted and if we are smart we’ll adjust our behaviour to harmonize with it – or wear the consequences.

So, what changes do you think are called for right now?

From the outset it’s smart to accept that changing behaviour is hard for most people, and even harder for most groups of people – and most businesses are a “group of people”.

So just how hard is Change?
On a scale ranging from one (easy) to 100 (impossible) I see a strong case that Change is an 89 in difficulty.

Why?
Because for every 100 people diagnosed with heart disease and scheduled for bypass surgery, only 11 will make the changes to their diet, exercise and weight loss recommended to extend their chances of survival. The other 89, while clearly appreciating their need to change to avoid a significantly increased risk of death, fail to do so – because Change is hard!

So, before we get into the “What change do we need to make to meet our changing market?” a better question might be, “What will I have to do so that I and those I work with can change?”

I’m going to save the answer to that one – the $64,000 question if you like - to the end, and begin with what changes are indicated.

Space dictates I take a narrow approach here, so I’m going to address the question of, “What changes to selling processes would be wise in a softening market?”.

1. Don’t do kneejerk cuts. Don’t cut sales budgets or staff without first analysing the likely effect of doing so. A 10% cut in sales staff or resources projected to result in an 8% drop in sales might sound tolerable, but if the bottom line effect of 8% less sales is 12% less profit, it’s illogical to cut.
   
   
2. Think counter-intuitively. If your opposition is cutting staff, then market coverage, contact frequency and standards of services must generally suffer. That may also mean that some good sales people who were previously inaccessible to you are now on the market, enabling you to top-grade your own team and to step up coverage, contact frequency and service levels to clients who are still out there needing to buy. Don’t underestimate the power of the positive message you generate into your marketplace with this move, and be aware that a nervous market will gravitate towards strength and certainty in uncertain times.
   
   
3. Look for Savings, Then Spend. If the market is softening, and you have managed your cashflow in the past so as to provide a capital reserve, you are going to get more bang for your buck on any purchases in a soft market as people compete keenly for your business. This could be an excellent time to embark on a project that could cost a lot more in a stronger market. The “strength message” applies again.
   
   
4. Be flexible. You could just cut 10% of your sales staff. Or, you could ask all of your sales team to take a 10% cut so that you can keep them all. The actual financial cost to them will be less than 10% due to the effect of marginal tax, and the effect on morale and esprit de corps is likely to be huge. If things tighten further, consider asking your sales team to take one day in ten off (say, every second Friday) – that saves another 10%, is likely to add positively to their work/life balance and keeps the team together so that you are at full strength if the market surges momentarily, or recovers fully.

 

The Three Stages of a Downturn

(Time to read this article: 7 mins)

In a study of 375 of the Fortune 500 companies, Bain & Company identified three stages to a downturn and two contrary behaviours to each stage. The stages are:

1. Storm clouds – the first sign of trouble.
2. Wet and rainy weather – sales plunge.
3. First rays of sunshine – customer purchases increase again.

In Bain’s study they found that the ‘losers’ respond to each stage ‘intuitively’. At each stage, losers:

1. Exude confidence – don’t alarm the team or the market.
   
2. Slash costs – reduce staff, quality and services.
   
3. Spend lots – regain momentum, make it up to staff and customers.

Winners act counter-intuitively. At each stage, they:

1. Reality check then plan – they provide their team with an objective analysis of their situation and share their contingency plans.
   
2. Partner – they treat staff and customers as partners, take a “we’re all in this together so let’s work out how to get through these tough times”, and favour action over analysis, often buying up faltering competitors. (That strength message again.)
   
3. Ramp up – because they’ve maintained capacity there is no need to “jerk into gear” to meet a rising market. They are well placed to ramp up activity first, then resources to keep pace with their market.

There is researched evidence across similar companies showing that those with little or no lay-offs in a downturn significantly outperform those with larger lay-offs.

The maths for this is simple: As most downturns last an average of 11 months, wage savings from lay-offs are more than offset by the combination of severance costs, declined productivity, rehiring costs and training.

Here are three strategies proven by winners to work in a downturn:

1. Count your chickens. Make sure that you are looking after your existing customers better than usual (if that’s possible) because there’ll be plenty of hungry competitors out there ready to do anything to steal them from you. If you step up first, and raise service levels when everyone is talking doom and gloom, you’re going to be a beacon in the dark, and attract both old and new customers alike. You’ll also raise the bar so high your competitors will waste a lot of valuable resources trying to jump over it.
   
   
2. Find your lost chickens. Lost and lapsed customers – and ones you just plain mislaid, are still more likely to buy from you again, than is a new client. So it makes sense to go back, find those lost chickens, apologize, crawl over broken glass if need be and win them back into your pen. We all lose customers in good times for the simple reason that sales people like the thrill of chasing new customers more than the drill of looking after old ones, so there will be lost chickens on your books. If you dropped them because they would not meet your price, see if there is a way you can meet their price point profitably with an economy offering.
   
   
3. Steal someone else’s chickens. With competitors cutting service levels you have the perfect opportunity to raise yours (having first done it for your own customers, you should be good at it!) and steal their chickens. If you’ve retained all of your sales force when the market is rife with tales of lay-offs, you’re in the perfect position to ask your entire sales and service team to step up to a new mark and secure their company’s future (they know they are thereby securing their jobs, so you don’t need to raise this as a threat).

Here are some interesting odds calculated for four types of sales behaviour. They might not be precise for your industry, but I’ll guarantee their relativity is accurate regardless of your market:

1. Sell a current customer a current product: 2:1
2. Sell a current customer a new product: 4:1
3. Sell a current product to a new customer: 8:1
4. Sell a new product to a new customer: 24:1

1. Improve your pipeline management. In good times sales people tend to tolerate a certain amount of wastage from their pipeline (the flow of people who are at various stages of the buying process). In bad times, they’ll sometimes hang onto non-buyers to comfort them that their pipeline is still healthy – when it’s not! (We do a lot of work in this area, and there is insufficient space for detail here, so please email me if you’d like more).
   
   
2. Improve your selling process. Again, when times are easy, selling processes can get sloppy and still bring in the bacon. In tight times, a better level of performance is needed just to get by, so review and then improve your team’s overall performance at the coalface. (Again, this is one of our training specialties, so email me for more, please.)
   
   
3. Improve your activity rate. Contact more people and run a better process while doing that. Add more prospects to your pipeline, increase your follow up rate and frequency, raise your standards all around.
   
   
4. Count everything. Selling is a numbers game and results always improve when you subject its various stages to analysis, reflection and feedback.
   
   
5. Hold your pricing and increase your value. Giving away margin in tight times will only add to the negative effects of having to work harder for the same sales dollar – if your cost of each sale goes up because you’ve had to raise the bar to compete (or dominate) then, more than ever, you need to maintain margin. Instead of cutting price, add value, improve service, follow up, relationship build. Don’t be surprised if this pays off in unexpected follow-on sales.

 

Your 2011 “To Don’t List”

(Time to read this article: 8 mins)

When you advise business people as we do, you realise very early in your career that all of your new clients are “full” though some will tell you that they are “150% full” which translates to “I’m on the verge of being out of control, I’m spinning my wheels and I’m drowning in a bunch of half-finished business and personal projects!”.

Once you have that Vision crystal clear, you’ll find yourself looking to it repeatedly in the following steps.

1. Don’t do stuff that doesn’t align with your Vision. If your latest bright idea doesn’t move you strongly toward your Vision, ask yourself why you would do it. That’s going to save some of you a huge amount of time!
   
   
2. Don’t do stuff that does not pass the WB@ Test. If you can’t become “World Best @” whatever it is that you are proposing to do, why would you do it? (Now, don’t get all frustrated; instead, work out what you could be “world’s best at”, and do that instead!)
   
   
3. Don’t be cool: Instead, be excited! Catch your team doing things right (ie, doing expertly things that move the business strongly towards the Vision that you so persuasively sold them), then make a fuss! Praise them, loudly, in the most un-cool fashion. Keep doing this when you discover behaviour that moves you towards the Vision, and you’ll find everyone in the business starting to focus on that type of behaviour.
   
   
4. Don’t work with people who aren’t passionate about the Vision and their role in bringing it about. Working with people who aren’t passionate is hard; working with passionate people is easy and uplifting and exciting – but only if you ask for their commitment, give them authority, monitor their performance and provide timely feedback.
   
   
5. Don’t start the day until you’ve planned it. Invest the first one minute of every day focussing on your Vision, the next minute on the point at which you have to arrive by the end of the day, and the next eight minutes planning the things that must be achieved that day to make that happen.
   
   
6. Don’t plan your whole day. Leave 40% of your available time free, to handle the unscheduled tasks that will happen: team seeking clarification; opportunity analysis; client contact; stuff. Planning 100% of your day is counter-productive, as it springs from the belief that you can organise the universe so it won’t find, and interrupt you. Be realistic, and leave 40% of your time fluid to handle what happens in great style.
   
   
7. Don’t do immediate stuff before you do urgent stuff. Immediate things are emails, phone calls, customer-initiated contacts, drop-ins – an accidental fire in your waste paper basket or an unexpected compliance matter. Urgent things include planning, strategic thinking, meetings with and coordination of your team, development of systems, customer relationship development, and so on. Get these backwards (as most people do) and your productive time will drastically decline.
   
   
8. Don’t open emails. There, there (I can hear the sharp intake of breath), it’s alright. What I mean is, “Don’t open your emails until you have planned your day and until you’ve had your five-minute stand-up meeting or teleconference with your key people so that the whole team is off and running in the direction of your Vision. Then (and only then) you can open your emails. (They don’t call them “crackberries” for nothing, do they?)
   
   
9. Don’t do low priority tasks. Until you’ve done the highest priority task of the day (the second highest actually after planning your day, which is the highest). Watch what happens to your personal productivity if you set priorities at the beginning of the day and then discipline yourself to hold to those priorities as the day grows busier. Get this right and you’ll get more of what matters, done!
   
   
10. Don’t put up with timewasters. If something or someone in your business wastes time, make them or it an item on your Task List, assign it a priority and fix it – if not today, then this week, this month or this quarter. That may entail investing scarce time in training; or in pulling out of the bustle and sitting quietly to design a better system for doing something that repeatedly wastes time or resources. This could take in the adoption or integration of new technology that you have been avoiding up until now.
    
    
11. Don’t do $5 an hour work. Look at your time as being worth $100 an hour or $1,000 an hour to your business. Install that perspective and sooner or later you’re going to start asking yourself, “Why am I spending $500 on cleaning up, when I can hire someone else to do it for a fraction of that?” Put an hourly rate on all of your people then take a look at what some of their activities are costing you. If they looked at themselves the same way, do you think they’d find a better solution, and improve their return on your investment in them?
    
    
12. Don’t settle for less than business mastery. Anyone can become an expert in anything within five years – if they set a goal to achieve that, and if they are prepared to devote time, resources and priority to doing the things that are needed to learn and grow every day.
    
    
13. Don’t just read this. Start writing out your To Don’t List today. The Universe rewards action, and the mere fact of your writing out your To Don’ts will have an influence on how you work thereafter. Writing out your Vision will be a much bigger influence, however, so why not start with that?