“100% of the time an owner has a sales problem operational shortcomings exist.” -Garry E. Meier
Believing you have a “Sales Problem” when operational shortcomings exist is the most common barrier to small business profitability that we saw in 2009 (At Ephor Group we interview more than 400 business owners per year).
Commonly, inefficient financial and capital structures as well as ineffective operating models manifest themselves as a “Sales Problem.” But in reality an organization’s top priority is to improve the way it serves its clients. The second priority is creating an economically efficient operating model. And lastly, ensuring a organizational environment where people thrive takes precedent over adding sales resources.
Before focusing on sales (which typically means adding expensive, high-risk resources with a high probability of negative ROI) organizations commonly forget to ensure the following is in place:
- Economically efficient customer acquisition model (An economically efficient model has been benchmarked against competitors and is more efficient). Also, an efficient customer acquisition model has some of the following attributes established:
- Recurring Revenue Model (long-term contracts, more than 2+ years client retention for 90% of clients)
- Technology is leveraged and enforces client retention and satisfaction
- The Customer Lifecycle (aka Maturity Model) is managed
- Pay-for-Performance policies and practices are prevalent
- Cost-effective demand generation: creating a sales opportunity is cheaper that it costs competitors to create.
- Brand equities in place that generate better margins.
- Client account management practices lead to referrals and additional revenue opportunities: It is easy for clients to get and see the value.
- Retention is monitored, managed, and performing in the top-quartile.
- Client satisfaction is known and the impact of client referrals generates substantial new revenues.
- Alternative Distribution (aka Channels, Joint Ventures, and Strategic Alliances) is established and driving new monthly revenues (i.e. these revenue channels are “1-to-Many” versus “1to-1 direct selling”).
Outsourcing Business’ Alternative Distribution Landscape:
- The NLTV (Net Lifetime Value) and Market Size for each target market (customer segment) is mapped and known.
- Market and Competitive Intelligence as well as analytics are in place and lead to real-time decision making.
No services business will succeed with Direct Sales (including founder’s contributions) being greater than 50% of total income. Knowing and focusing on client profitability as well as alternative distribution is key to creating wealth.