Diversifying in a Stressed Economy, Part 1April 1, 2009
In a stressed economy, how do you quickly steer your company into new industries and sources of revenue? This is a question facing many executives within our industry and others. Long-standing companies with stellar track records are faced with the daunting task of maintaining a break-even point while executing painful layoffs and chasing a shrinking marketplace. Assuming that market entry via acquisition is not an option, where do you start and how do you execute?
Before we begin outlining the effort behind the answer, let’s address a few items related to the sales force. Appropriately loading your sales resources is important in guarding against erosion of your current customer share while you approach new markets. The goal is to grow your top line while reducing your percentage of revenue dependency on any one market or set of customers.
To be successful, you need to avoid a few pitfalls of traditional crisis management. First, critically review your sales staff and eliminate nonperformers. This said, it is a good time to reinforce your sales ranks and consider approaching top sales producers from competitors and other industries of interest to you as a means of replacing your less productive sales people—replace order takers with order makers. In doing so, maintain your overall sales capacity.
While the conventional-wisdom support for across-the-board layoffs may satisfy the need to play fair with other department managers, such action will feed a self-defeating cycle of revenue loss and further workforce reductions. Another problem to avoid is arbitrary spending limits. Carefully review spending and reduce nonessentials without hampering the effectiveness of your sales force. Many companies quickly curtail sales and marketing spending and limit or eliminate sales travel expenses to reduce costs—another quick to ensure reductions in revenues. Keeping a close eye on costs and stepping down some forms of elaborate entertainment is prudent, but a harsh retraction is a mistake. Take advantage of your competitors that do and use the extra face time with customers to reinforce relationships and forge stronger ties to potential customers who tend to prefer your competition. Balance is key. You need to spend a large portion of time chasing new opportunities without abandoning existing customers.
A third temptation that may be the hardest of all to resist: burying your sales staff in lengthy opportunity review meetings and paperwork. In stressed economies, executives tend to have a stronger than usual urge to track every aspect of the sales process, create a gimmicky sales contest or impose the latest process-driven sales approach that sits atop the New York Times Best Sellers list. While exploring new approaches and staying in the loop is good practice, do so in moderation. Taking it too far can create other roadblocks to sales success and unhealthy tension within the sales ranks. Work to remove roadblocks and empower your sales professionals to do what they do best. To use an old-school term, your sales staff needs to be on the road “pressing the flesh.” The question that you need to answer with your sales team is, with whom?