When Profitable Growth Fizzles
It happens too often.
You launch a new product, service, sales initiative, or marketing program with fanfare and high expectations.
As soon as the kickoff is over, your eyes turn to results. At first, sales trickle in. Then the trickle becomes drizzle. But the downpour never comes.
The program is neither a success nor a failure, but the market response did not meet expectations. These questions remain unanswered:
- Do we have the right product or service?
- Have we positioned it correctly?
- Are we packaging, promoting, and pricing it correctly?
- Do we have the right market?
- Are we selling it correctly?
While your staff will answer these questions with the best of intentions, you are left with the same dilemma: fish or cut bait. Do you reinvest to find out if the initiative can be successful or cut your losses now? Financial analysis only helps so much. Sure, breakeven analysis and return on investment are important tools, but their assumptions will kill you because there is no historical data.
So it comes down to your judgment: “Do I kill the effort or let it ride?” In making further investments, there is another fear. What if, after further effort, the results are still inconclusive?
Here are five steps to evaluate any new product, service, or program initiative:
- Reconfirm the objectives and sales or marketing process of the initiative.
Are they realistic? Many initiatives in business fail because expectations weren’t set, agreed upon, and met. Sales and marketing efforts often fail due to forecasts based on market ignorance or under-funding based on the need to limit risk. If the goal is finding, keeping, or growing customers, clarify this. Or, if the goal is creating more leads, reorders or referrals, make it clear. Otherwise, results are hard to predict or see. - Require the champion and the implementers of the initiative to demonstrate a model for needed success.
Too often, the visionary who developed the idea is not as experienced in implementing it, or vice versa. In fact, it may not even be the same person. Demand a clear model for success. - Establish probabilities of success.
This is where judgment, intuition, and previous experience converge. Bring your team together and agree on the probability of expected results. - Set up a field “test-kitchen” to demonstrate the required success.
Stack the deck in one of the following ways: pick a great sales territory, simple product version, or traditional sales tactic and test your initiative. If it is not successful, let it go. Be ruthless in preventing “scope creep” of the test, and stay committed to seeing it through. - Pick a drop-dead date or event.
At a certain point you must make a decision. Choose a moment in time or define a reaction by the marketplace and let this be the finish line.
Tests like this always force a decision. They should not take longer than two or three months and frankly, in Internet time, can occur much more quickly. The burden of the questionable initiative is that it saps the financial and human resources of an organization, creating dissension and finger pointing. Sometimes it’s better to cancel a promising initiative than to watch it malinger.
And maybe the timing is the problem — it’s just not right for your organization this time.
Why Profitable Growth Now?
Filed under: Business Growth, Profitable Growth, Top Line Growth
Before the financial crisis, most businesses could coast along and rely on their credit lines to make up for shortfalls in sales.
“Good” customers could be subsidized and customers who didn’t pay or went under could be ignored by just borrowing more cash. For the firm, slumping quarterly revenues and rising expenses could be carried forward by financial wizardry and leveraging a balance sheet.
While the lessons of doing business without credit and cutting expenses to the bone have been learned, how can one grow a business back to where it was and forward after the financial crisis? Without fads like buyouts, rollups and ESOPs, an owner, financier or organization should return to the oldest source of creating growth in the book. Sell more products and services and do so at a profit.
Why Profitable Growth Now? by Andy Birol
Profitable sales means focusing on:
- Higher gross margins from differentiating your value and de-commoditizing your products and services profitably
- Knowing that every sale you make is profitable by customer, order item or services
- Managing your balance sheet for liquidity instead of credit where the biggest assets are customers’ predictable purchases.
- Creating a wealthy company that can be sold for cash and secure the lifestyle of its owners now and later.
Profitable Growth is not a fad, or just a program to get by in the short term, but a way thinking about your business, investment or organization. It starts with knowing who is paying you for what value and continuously working to repeat this. It is a pay-as-you-go approach to growing your business that reduces dependence on borrowing money, and increases the wealth of a company and the security of its owners and all who rely on it.
Whether your business has major growth or returning to growth in its plans, this blog will focus on the tools, techniques and real-world examples for creating Profitable Growth!
