Published
Articles
Originally
Published in The Business Journal of CNY.
Revenue
Enhancement - A New Thought
An obvious title
to get attention maybe, and the clear opposite to cost cutting,
this whole picture needs to be looked at in a broader context. Cutting
expenses is always first in everyone's mind as a "quick fix",
but often, it is instead dying a slow death if not properly executed.
Enhancing revenues on the other hand, is building a clear and defined
future for a healthy company.
Cost cutting
is good and prudent. No question. But it's a hell of a way to run
a "going concern" business. Enhancing revenue (and gross
profit) (this is not the make it up in volume philosophy)
is really strategic planning by another name. Nothing new you say?
Very basic. Not true! Companies quickly jump to cost cutting at
the wrong time, when the money, spent well, would be the more appropriate
thing to do. Don't jump to conclusions. If as much effort was spent
in planned revenue enhancement and market analysis as in knee-jerk
reactions to cutting costs, the company would be much further ahead.
Cost cutting
sends negative signals to everyone (especially employees who naturally
read the worst into it, and assume that they might be next), no
matter how you sugarcoat it. It is not the sign of a company on
the move up.
More sales,
promotions, marketing, and positive moves, sends the winning signals.
Cutting expenses
is a reaction to a problem, but in no way the long term answer to
that problem. Buying time might be the worst thing to do. It can
lull you into a false sense of security, thinking that the issue
has been addressed, when, in reality, the issue that really caused
the problem is being ignored. You can't sweep those issues under
the carpet. It will endanger the future of the company.
Costs cuts are
generally just a reaction to cash flow and low or negative profits.
By that time, the problem has already gone on way too long. In small
business, we have the one big advantage of being able to make decisions
without committees and boards of directors. We don't have a lot
of advantages over the bigger competitors, but this is one powerful
plus not to be taken lightly. This is the major reason that small
businesses can excel against larger competitors. Quick reaction
time. We can make mistakes faster, learn faster from them, and get
on with it.
If sales (and
contribution dollars) were increasing, it is unlikely we would be
thinking of cost cutting. More likely, we would be getting fat,
dumb, and happy. Not good either. What we should be doing is getting
more aggressive and smarter in spending those contribution dollars,
and reinvesting them back into the company in the most cost effective
manner.
I love to see
companies with well thought out increases in sales and marketing
budgets. Of course, this only works with the right accountability
in place, to measure the payback for those expenditures, before
they go too far off-track. Marketing plans, by their very nature,
are ambiguous, and more than ever, need serious results tracking
to prevent sinkholes.
I love to pay
sales people lots of money. Some owners have a problem with that,
which has always confused me. For every incremental dollar they
earn every year in commissions (is there any other way to pay them?),
you get multiples of that dollar as the owner. Good deal! Hope that
they get rich with you. Look no further than Microsoft as a good
example of that when it was a small company like you. Do you think
Bill Gates spent more than a few seconds on pondering cost cutting.
He was on a path to success. Had no time for that.
However, enhancing
revenue is easier said than done. It is a process rather
than a one time deal. The process never ends. When you stop the
revenue enhancement process, you kill the business. Think about
it.
The process
needs to be an analytical look at all of your offerings; past, present,
and future. What's hot; what's not. What was; what is. It's niche
identification to the highest degree. It's staying in touch with
your customers, constantly knowing why they buy, and more importantly,
why they don't. What they are planning for the future, and are your
products, as they stand, in it.
It's understanding
product lifecycles; they all end sooner or later. Get real. Computers
are in today. But, typewriters were in 40 years ago, and where are
they now? Who would have thought that back then. You have to absolutely
understand that. It's new product introductions based on prior proven
successes, not what you think would be neat, but by listening very
carefully, to what the buying powers think is neat. What you and
I think is irrelevant, unless we are totally in-tuned with the total
buying population.
It's geographic
expansion, well planned, through selective additions of sales staff
or reps. Expanding geographically is meaningless if there is no
market in the new area, no recognition of your name, and no group
of people who can create that image.
It's paying
top dollar for top salespeople, who can hit the ground running,
with very short learning curves, other than specific product knowledge.
It's creating
a sales team that will kill to outperform each other, because you
have benchmarked at very high, but attainable standards. They all
clearly understand them, and certainly they played a part in creating
them. They understand what's in it for them, and are driven by the
carrots you have very carefully laid out for them.
It's the entire
company being driven by excellence in customer service, from the
receptionist who answers the phone (live, not memorex), to the delivery
people who represent your company more than you understand, to the
rank and file employees who talk up your company for the great place
it is to work at, up to the owner, who understands that 60% of his
time (at a minimum) must be spent with the customers, face to face.
Revenue enhancement
(better called survival) is a composite of all this and much more.
It is not some bean-counter saying cut expenses to improve the bottom
line. It is much more someone with enough vision to understand that
constant building of sales, image, teams, and relationships, is
what makes winners.
If you think
you are a dying business, you are. If you are driven to be a perpetually
growing business because you know that hard work, planning, never
letting down your guard, never getting comfortable, and always looking
out further that the rest, is the only proven path to that result,
you will win. You've got it! Go for it!
Dennis Hoppe is President of Change Management Implementation, Inc. in Brockport, NY. He has been a small business advisor to owners of hundreds of companies since 1989. Visit his web sites at www.dhoppe.com and www.hmcexecutivecoaching.com, or call him at 800-724-3525.
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