Businesses - Buy A New Mirror!

When sales are strong, all sins are forgiven! But when they are not, the knives come out! Any sales professional who has been through an economic downturn has lived this maxim. When the broader businesses landscape tightens, well positioned companies continue to win. They adapt, pivot, go to the contingency plan. For the maligned, the cracks and fissures amplify.

I've always applied a simple stress test to determine a company's durability. Like a financial institution comparing deposits to loans, companies should test for overall sales health regularly. The key is to test during periods of calm. If an audible must be called, doing it in rough seas is very difficult! Here are a few tenants of the test:

1. Is the mission clear? Sales professionals are too often binary in their thinking. It's not their fault. Distilled down, their sole professional purpose is to grow business! The 0-1, on-off, close-don't close, approach to selling is often overlooked by sales leadership who tend to focus on outcomes rather than activity. Ultimately, the mission delivered to a sales professional should not only include what (grow revenue) but the how (targets, markets, ideal customer profile, product offering, marginal contribution, cost of acquisition, upselling). The example that comes to mind is the salesperson who relentlessly pursues a target to the exclusion of other deals only to close and realize that the account is much smaller than anticipated. In times of prosperity, leadership missteps like this can be concealed. Keeping sales focused on what and the how creates a clear mission where lack of sales execution can be identified- no matter the economic landscape.
   

2. Where does our business come from? An often-overlooked component of sales heath is customer concentration. Businesses should regularly look at the what-if scenario, otherwise known as the "different mirror". A familiar mirror tends to give us the same view of ourselves each time we peer into it. Unfamiliar mirrors (for better or worse) enlighten us to an alternate view. Applied, we should scrutinize our customer base- even when the reflection is pleasing. How many customers make up the business? What are the lifetime values of our top customers? How strong are the business relationships? How diverse is our customer base? Start with top 5 customer contribution as a percentage of total revenue, then move to top 10, 25, 50, 100. Look not only at the currency each of these customers account for but the relationship. The higher the transactional nature, the more risk of defection! It is not uncommon for mid-market companies to be dangerously dependent on less than 5 customers! Plan on customer defection. Assume washout. Model the business for a 20% rapid reduction in # of customers. If what is left staring back at you is still acceptable, then sales is in good health.

3. Are we innovating enough? Fundamentally, salespeople win when they are confident about what they are representing. Even mediocre salespeople succeed when backed by strength. Conversely, good salespeople struggle when the products and services they represent are marginally different than the competition. Seldom, however, does sales have every tool needed to win. Few companies dominate markets. More commonly, the distance between competing companies is narrow. Innovation is crucial in giving sales contingencies competitive advantage. Rarely does innovation translate to patented products or exclusive services - and it doesn't have to. Companies that relentlessly study the competitive landscape, stay up with trends, have regular feedback loops with internal and external customers, establish and maintain (even if slight) the confidence needed to win.

Businesses must seek as much objectivity as possible when evaluating their market position. This objectivity can become obscured over time as focus on financial and operational management dominate company resources. Often overlooked, is how well companies arm their sales contingencies. Continual (even slight) competitive differences can increase new account conversion dramatically, broaden customer base, increase margins. So, before blaming the sales team, buy a new mirror!