The little divide between buyers and sales people

April 5, 2009

Last year, I posted 2 questions on the LinkedIn Q&A just to see if sales people and buyers were sharing the same views on the deal process. I was asking sales people what in their view explained not closing a deal, and I asked buyers what mistakes they found sales people were making that turned them off from buying from them.

Although the survey has no pretention of being scientific, some very clear conclusions seem to come out.

What turns buyers off the most are:

  • Arrogant, pushy or condescending attitude.
  • Telling lies or pretending to know more than they actually do.
  • Talking and telling their story instead of listening to what the buyer wants.
  • Trashing the competition.
  • Sales person not identifying their needs.
  • Poor follow-up from the sales person.
  • Sales people looking for excuses or blaming others or something for poor performance.

What the sales people see as a reason for a failed sales negotiation are:

  • Not having established the customer’s needs.
  • They were not talking to the right person.
  • Their product does not add value to the customer.
  • Poor pre-qualifying of potential customers.
  • Not having established a good enough relationship.

So, clearly the buyers are looking to be treated like mature responsible professionals. They want to hear how the product or service that the sales person offers adds value to them and meets their needs. They are not interested in hearing lies or negative story about other suppliers.
They want the sales person to identify what they are looking for and then hear why the supplier product is the best for them. That is all.

Although sales people acknowledge some of the previous issues, they see the weakness mostly in the preparation and in the person on the other side. None of them mentioned that their demeanor was part of the problem. Addressing the preparation is a good thing, and yet the area where they can score the most is pretty easy: it is about asking questions to the buyer and listening to the answers. It is so much easier to offer the right solution once you know which problems need to be solved.

For sales people it is not about showing all you know, it is about thinking along with the customer. I guess that kills the idea that to be a good sales person you must be a smooth talker. No, to be a good sales person, you need to want to help others. And if your product is useless, then pass the message onto your boss and adjust your offerings.

Copyright 2009 The Happy Future Group Consulting Ltd.


The fun about delegating

April 5, 2009

In this article, I wish to address one of the most effective management technique, which is also one of the most poorly used: delegation.

First, just a few facts
Delegation is in the very essence of management, since a whole team of people have to do the job. This group has been hired for a very simple reason: one person cannot do the job.
In order to make the teamwork towards the goal and work as one entity, management jobs have been created. Their role is not to do the job but to get the job done. And all the trouble lies in this subtle nuance.

What does make delegation work?
You have hired people to do a job, and that is for this very purpose that you have to supervise them.
You have hired them because there are competent; so do not worry of having them do what you have hired them to do. If you doubt their competence, why did you hire them?
You have lots to supervise and to attend to, so define clearly who does what and who is accountable for as well as by when the job goals must be met. Delegating will save you precious time.
Be very specific about what you expect form your staff.
Give feedback and ask for feedback, when you communicate, be brief and to the point. Your staff expects you to do that. And remember that communicating effectively is not the same as talking/socializing too much.
Be present and walk in on a regular basis. Better many short contacts during which you will immediately hear the most important information than long periods of no contact interrupted by long formal meetings.
When you do this properly, as a manager you will feel fulfilled, you will be happy to go to work, as very likely your team will perform quite well. On the other side, your staff will feel appreciated, will have confident and will take more initiative that will benefit your company and will be loyal.

So what does go wrong with the delegation sport?
What situation do you get when the manager does not delegate properly?
The manager spends more time being involved in his staff’s daily activities. The result is staff frustration and lower motivation. Nobody likes having someone looking over his or her shoulder all the time.
The results of such behaviour are many. The most typical are an overworked manager who loses his ability to look at the big picture, wasting his time in things that would be done anyway (remember? he hired competent people) and getting more and more pressure from his own supervisor, as he is having more and more difficulties to meet the deadlines.
Competent people are not interested in working in a messy environment nor are they interested in having the feeling that their boss does not trust them fully. This will result in higher turnover, which will even increase the workload of the overworked manager.
The main cause of bad delegation is fairly simple: an insecure manager who does not trust others.

Copyright 2009 The Happy Future Group Consulting Ltd.


Employee turnover, performance indicator of management

April 5, 2009

We all have heard this a million times: employees are the most valuable assets of a company. It sounds great, but in the everyday life, we can see many examples of companies forgetting this nice statement.
So, in the practice, what is the most valuable asset of a company? Did I hear you say it? Yes! Money! Well, this was an easy one, because management reviews the financial weekly and monthly, while they evaluate their employees only once a year, and that is if they ever do. And when they evaluate, in many cases it is only to bring up all the “bad” things they can to discourage the employee to ask for a raise.
Well, this is what mediocre managers do. The good managers know that the quality of financials are a consequence of the quality of the motivation and therefore of the performance of their employees.
Employee turnover is a sign of the quality of the company culture, and this for a simple reason. Why would people leave a company if they are happy and that they are treated fairly? Really, there are not many reasons why they would or should. Most employees would prefer to spend their all lives in the same organization. And most employees go to work with the desire of doing a good job and thus not have any conflict with the boss. Of course, there are always employees who will look to find something somewhere else, but these are a small minority.
The higher the turnover, the lower the morale and the poorer the company culture. For the reasons that I was indicating above about the general employee loyalty and ethics, it will have to take a fair amount of frustration and actually the realization that there is no hope for improvement for an employee to decide to go browse on the job market again. It has been said before, and it is very true: employees do not leave companies, they leave their manager. Ha! That is a good one for you to ponder about when someone leaves your department, isn’t it? Of course, it takes two to tango and there are many reasons why things do not work out the way they should, and maybe another reason for the employee to leave is simply that communicating on the issues at play did not happen. So it also takes two to divorce.
Managers have performance contracts, but these contracts are mostly linked to financial results (the important asset class) and some “non-financial, which in many cases end up to be some interesting project that are never quantified when it comes to their real added-value or degree of difficulty. Very rarely will employee retention (another expression) for employee satisfaction be an integral part of the performance contract.
And this is quite sad, because employee turnover is a plague. It costs a lot, just like it costs a lot to replace a lost customer. First it will cost financially, because the company has to place a job ad, and might have to pay some severance. Then several people in the organization will have to spend time for the selection process and the interviews. Once the new employee is hired, you can be sure that time (time is money) will be spend on training the newcomer, and this period can last up to 6 months, depending on the jobs. Indirectly, it can cost you money too either because people talk and the turnover will eventually give your company a poor reputation and in some cases because the employee who left might attract with him customers away from your company.
Some managers, reading this would say that the turnover is high because they have to fire people. Well, that is another indicator of the quality of the company, as they would not recruit the right people…

Copyright 2009 The Happy Future Group Consulting Ltd.


Intelligent growth

April 4, 2009

Everybody in the business community will tell you: you must grow your business.
But what does this mean exactly? What do you grow? How do you grow?
For having seen the good, the bad and the ugly of growth, these questions are quite important.
My answer is: Grow your business intelligently! And of course, all business leaders do exactly this, don’t they?
Well…
So let’s get back to the basic questions first!

What to grow?
This is the tricky area.
The risk for a successful business is to think that growth will be linear. In other words, if you produce x units and make a profit of y, by growing to 2x you will make 2y profit. Sometimes you do, sometimes you don’t.
Good business people want to make money and what you should grow is your profit. There is no point of selling more if you do not make more profit, as that means that you do not make money on the extra sales. Then, why invest and hire and complicate your business if you do not have any marginal advantage in doing so? This sounds obvious and yet the number of companies that do exactly the wrong thing is amazing. Volume matters within certain limits but margin must come first.

How do you grow?
The first thing you need to know is how big is the market, who are your competitors, what do they plan to do and how do you compare with them. If they are stronger than you , maybe you should keep a low profile and not go into a frontal confrontation with them.
If you are the stronger player, as most CEO’s like to think of their companies, realize that this does not make you invincible.
The key is a sound and realistic business plan.
Start with the sales plan: how much more can you sell for a profit in the market? Then you have an idea about the required volume of your operations.
Then review all the costs implications that the new situation will create and look at the bottom line. Here the key is to not do any wishful thinking or to make the numbers match because your boss demanded some bold performance from you. A helpful rule of thumb is that you probably will sell only half of the extra volume for the profit you think you can make, and the extra costs will be double of what you expect. Enter these revised numbers in your P&L budget and see what comes out.
Base your assumptions on ambitious but realistic data, and while having a dream is nice, do not let you lead by vain objectives. It is nice to be the largest, only if it makes your company the richest, too. Market share is nice, but it is not an indicator of success, never forget that the force that will drive your ability to get the price you want is the law of offer and demand. Even if you had a market share of 90% but had grown the business beyond what the market can absorb, you will not be able to keep the prices high, and depending on the elasticity for your product, you can very well end up selling at a loss. Always be market-driven!
There is nothing wrong with being conservative. There is much wrong in having your organization taking too many risks.
Another key point in your growth plan is the phasing. You need a longer term view on where you want to be and set yearly goals for your growth plan. Be aware that you can go only one step at a time and that you cannot skip steps. Like with building a house, you start with the foundations, then build the floors one after another, and you do not build floor#2 before you have finished floor#1.
And finally, you have a choice of either growing organically or acquiring another company (see my previous article on M&A).

Remember that the most important for a business is to keep existing, and growth is only one of the ways to achieve this.

Copyright 2009 The Happy Future Group Consulting Ltd.


Mergers & Acquisitions: Buy wisely and manage efficiently!

April 4, 2009

Your business is successful and the next step for growth is to buy other businesses. This is a great opportunity for your company to get to the next level, but be aware that an acquisition can be risky. About 6 out of 10 acquisitions fail to deliver the expected results.

Buy wisely!

Do not rush and do your due diligence to know what you are buying, what the value is of the company you are interested in. Know about the history of the company, how many times it has changed owners and the reasons why.
A cheap company is not necessarily a good deal. If the current owner is selling at a discount, he must have a good reason and you’d better find out.
The best takeovers are acquisitions of well-run companies with a good track record. They have the least amount of potential trouble entering your business and their staff have a positive attitude. Only drawback for the short-term for you is that such good businesses are not cheap. However the return on the investment is likely to be quite good. Poorly performing companies sold cheaply, on the contrary… Should you choose to go for such wrecks, make sure you know how to fix up a business and first of all, get rid of all the managers that have brought that company in its current state, they only would undermine your company.

Manage efficiently!

Once, you have bought your takeover target, make sure things go very fast.
Although you might have not yet decided who should get which position in the new company, you must have already decided how the final organization chart should look like. Move toward this structure as quickly as possible, but do not rush into that either. Make sure you know the potential of all the staff you will now have. Do not lose talents, but find ways of making a good use of it; this is easier than having to go look for them again in the future as they might not be available anymore.
The key for a successful merger is intensive communication, a very hands-on and practical approach. Tell everyone what your vision is, how you see it getting executed and be open to challenging remarks, as there will be many of them. Intensive communication prevents insecurity, gossip and politics. On this last point, have a zero tolerance policy: do not allow politics of any kind, especially when you risk to have a poisonous conflict between newcomers and existing employees from your original company.
Do not spend much time on philosophical and intellectual activities about company cultures, the theory of mergers, hollow slogans such as “mergers of equals”. You need the right structure with position filled by the right people to execute the strategy and that is all.
When you hire new people, you do not waste time telling them about the theory of job hunting or treat them with false compassion. You just do it.
If you have to figure out the strategy after the merger, clearly you bought without a plan. Remember that the failure of preparation is the preparation of failure.
Good luck with your next acquisition!

Copyright 2009 The Happy Future Group Consulting Ltd.


Managing for profit

April 4, 2009

Every company has potential to improve results. Most of the time, sub-optimal performance is the result of not focusing enough on the most effective areas of their business. There can be many reasons why this happens, but short-time priority overriding long-term goals; too many projects given to staff, and lack of time generally are the main culprits.

As such the theory for managing for profit is simple.
Profit being the difference between the company revenue and its costs, many think that it is all about cutting costs and selling more. Well, it is not quite that simple, either. The key is management. It is the ability to organize, to motivate and to lead an organization in such a way that the P&L account be optimized.

Let’s have a look at the P&L account then, and let’s keep it simple.
+ Revenue
– Cost of Sales
= Gross Margin
– OPEX
= EBIT

From this, you can see one very important thing: money comes into a company from only one end: the revenue generated by sales.
Further, you can see that your gross margin must exceed your OPEX in order for your company to make a profit.
These are 2 extremely important points to always remember.
As a manager, you must work to maximize the gross margin while operating with the lowest possible fixed costs possible.
Read this very carefully! I did not say cut the costs and make as much gross margin as possible. This latter statement only leads you to the vicious circle of commoditization of your product, lower quality and service and eventually a mediocre reputation and definitely sub-optimal results.

So let’s get back to the proper statement: “maximize the gross margin while operating with the lowest possible fixed costs possible”.
This means that your focus is on 2 main areas:

  • Maximizing the gross margin
  • Keeping the OPEX at the lowest possible level, yet allowing you to achieve the highest margin.

To achieve this, your business plan is the basis. And your business plan must start by the sales plan, since this the area that will bring you the money to pay all your bills. The reason why your business not only exists but also stays alive and thrives is that you have satisfied customers who want to buy more from you. If you think differently about this, just imagine your company losing customers or getting bad publicity. Ok, now you agree with my statement.

Maximizing the gross margin

Here, too, just let’s have a look at what influences the gross margin:

  • Revenue = Volume x Unit Price
  • Cost of sales = variable costs needed to produce what you sell

To maximize the gross margin, you need to make sure that the selling and the costing are part of the same, since your sales force causes the cost of sales.

The gross margin is the indicator of the performance of your marketing. On the contrary to what many seem to think, it has very little to do with your Production department. This latter one just produces the orders on request of the Sales department.

And this is exactly where general management plays a crucial role: you must make your sales people accountable for the costs they create and for the consequences of their actions, and for them to justify their existence inside your company they must sell for profit, not just move volume, like unfortunately it is the case in many companies.

Sales people must be able to calculate a price that generate profit, and make sales plans that meet this very same objective. Too many sales people tend to prefer to say yes to the customer, because they are afraid of losing them. Loyal customers will not leave you if you disagree on the price, they will negotiate, and that is another area where you must train your sales people to be superior.

That is why any new contract also needs approval of other departments, such as Production and Procurement. This approval is not necessarily a recurrent act, but can also be determined for each line of product, for instance, no sale allowed for a price lower than so much. Deviation from this must be a concerted decision at management level.

Another extremely important item that must be the responsibility of your Sales department is the collection of accounts receivables. Since a transaction is an exchange of goods or services against money according to agreed terms, these goods and services are sold only when they are paid on time. And the best way to make sure that you have solvent and disciplined customers is to make sure that your sales people have done all their due diligence in this area before making a sale.

Minimizing the costs

As well for the cost of sales as for the OPEX, you must minimize the financial impact they have on your P&L account. To do so, you must focus on the following:

  • Negotiate the purchase of your materials and services at the lowest price possible for the quality you need to buy.
  • Buy what you need to have in inventory, but as much as possible try to limit your inventories at the lowest level possible.
  • Have efficient processes and operations. Beware of hidden costs such as too high maintenance and operational costs such as energy consumption
  • Have an efficient organization with as few and as talented people as possible. Do not go in any fancy expensive project unless it will bring you a profit return of at least 50% per year.
  • Offer a fair and motivating salary and benefit package to your employees. Motivated and satisfied employees are more efficient, get sick less and work harder than employees that are not, and this pays off.

Conclusion

To manage for profit, your sales department must be the driving force, they must focus on generating profitable business (“margin before volume”), they must act like entrepreneurs who have a responsibility to the activities they create in other departments, must keep a close eye on accounts receivables, and most of all know how to price what they sell.

To manage for profit you must set up and manage a lean and efficient organization. You must be cost efficient before being cheap. This latter will only work adversely on the efficiency of your company and will cost you a lot more in the end.

Copyright 2009 The Happy Future Group Consulting Ltd.


How to build a team that delivers superior performance?

April 4, 2009

In this title, we have several items we need to address in order to answer the question. These items are:

  • Build the team
  • Deliver
  • Superior performance

Build the team
Either, you start with new staff or have to deal with existing employees, building a team comes down to the following:

  1. First of all, you need to know what results you want to achieve, short-term, as well as long-term. This is the only way you will need what talents and skills you need to have in your team.
  2. You must have in your team all the abilities you require, but how there are distributed between the team members is somehow secondary. Just like a sports team, you need a mix of those skills and talents. The team members must be complementary. You will not succeed if you have only goalkeepers or only forwards.
  3. Next to the talents and skills, you must make sure that the team members are compatible with each other. Another essential element for a successful team is the interpersonal “chemistry”.
  4. You, as the manager, are the one that will have to nurture this chemistry, by making sure that all the team members will work towards the common goal. Individual agendas are simply not acceptable if you want superior performance.
  5. You must make sure that your team members are in a position in which they do what they do best. There no worse waste than having people doing things they are not good at, or not being able to do what they have that can add lots of value to your company. This sounds obvious, and yet it is one of the most common sins that organizations commit.
  6. Since your team members have all their own particular mix of skills and talents, change the jobs descriptions and task distribution to make sure their abilities are used at their maximum, if needed. Changing a job description is easy, but changing a person is not.

Deliver
In order to deliver a superior performance, you need to identify the following:

  1. What to deliver.
  2. When to deliver.
  3. How to measure progress and know where you are in the whole process.
  4. Communicate regularly and frequently with your team members about the progress made and give immediate feedback to make sure that the plan is on track.
  5. Make such meetings efficient and never leave without making an action list allocating responsibilities and timelines for the completion of these actions.

Superior performance
In order to achieve a superior performance, you will need the following

  1. Set superior goals to your team. If you in this, then you will not beat your competition
  2. Set superior goals to your team members. If you fail in this, see above.
  3. Know your competition and what they want to achieve. If you do not know this, how can you know that your goals are aiming higher than theirs?
  4. Communicate a lot with your team members. Make sure they know what you expect from them, and let them know how they are doing. There is nothing like too much communication. There is something like too many inefficient meetings, but that is for another article. If you want to achieve superior performance, count on average a very minimum of half an hour of communication with each of your direct reports per day.
  5. Use performance indicators to monitor progress. This is different from an incentive, such as a bonus. An incentive helps getting a better result (well at least that is the idea) by promising a reward. A performance indicator as the term says it, just indicates how good a performance is at a given point in time, and helps you take corrective action if needed.
  6. Encourage a bottom-up communication. Your staff are the ones closest to the action. You, as the manager, are one step further. What they see, hear and experience is of great value, as very often they have the best views on how to deal with business situations. Listen to what they have to say! All they expect from you is to give them directions and make the harder decisions.
  7. Nurture a culture of entrepreneurship! Since you have selected people with superior abilities, let them express their full potential by delegating and encouraging them to take initiative. Although their level of talent makes this easy, this does not mean that you should be lenient in the way you supervise and manage. Delegating just saves you a lot of time that you can spend on coordinating and communicating.
  8. Nurture a culture of performance! This sounds obvious, and yet this is where many companies fail. This is not about pep talks. This is about creating an environment where beating expectations becomes a game. This is about involving your team members in setting the superior goals. You know when you have achieved this when your staff tells you enthusiastically that they think they can exceed the previously set goals.
  9. Nurture a culture of challenge! By this, I mean healthy positive challenge, of course. Talented people know they have talent and they like to express their opinions. Feel good when your staff challenges your ides and your objectives, especially when they claim that they can achieve even more. Of course, your role here as a manager is to make sure that they are realistic, by challenging them, too. Do not feel threatened by such behaviour; it is very sound and stimulating. Nothing kills initiative and enthusiasm as negativity and dictatorship (on the other hand, authority is good).

Copyright 2009 The Happy Future Group Consulting Ltd.


Making a business plan can be fun when you have a small business

April 4, 2009

(Article of mine published for the Vancouver Board of Trade’s Small Business Council in November 2003)
To many people, business plans have a bad reputation. Here are some common misconceptions about business plans.
Making a business plan is no fun. Actually, a business plan follows the same process as planning a vacation. The same questions need to be addressed: where to go, how to get there, how long it lasts, how much it costs, etc. No one seems to have a problem planning vacations.
You need a business plan to get a loan. A business plan is not a “marketing tool” to access funding, it is the very essence of your company.
Business plans are for big corporations, not for small businesses. All companies obey the exact same business, market and accounting rules. Small businesses are simply smaller.
A business plan is about financials. Surprisingly enough, it is not. The financials come at the very end, after all the elements of your business have been thoroughly described and analyzed.
A business plan does not need to be a complicated process. Here are some tips to you get started.
Define the vision and mission for your business.
Start with the sales plan because money flows in from revenue; make sure you have that right from the start.
Know the strengths and weaknesses of your company.
Review the opportunities and threats in your business environment.
Set your objectives and determine your strategies.
Go backwards in your supply chain to identify the cost items directly related to realize the sales, then review all the other cost items. This way, you set up your profit and loss statement.
Only then, quantify all your assumptions. These are the financials and provide possible scenarios for your business.
Do not forget to make a cash-flow statement.
Always be in charge of the plan. If you do not write it yourself, make sure the writer consults with you.
Do not hesitate to involve others and ask for feedback.
To sum up, think of your business plan as the best way to make sure you will still be able to plan vacations in the future.

Copyright 2009 The Happy Future Group Consulting Ltd.


Why use revenue to define top companies?

April 4, 2009

(Article of mine published in the Vancouver Board of Trade’s Sounding Board of October 2003)Some of you will likely wonder why I ask this strange question. By recently reviewing such a list, I wondered about the relevance of the revenue criterion. Indeed, this review raised an interesting question: What does top 100 really mean? Are the companies the best? Are they the most profitable, the most sustainable, the most viable? Or are they just the ones cashing in the most revenue? If so, what about the cost side, in particular the cost control aspect, of business we hear so much about when we hear business specialists comment on company performances? Are the high revenue companies also the most cost efficient?
Clearly, investors and money lenders are much more focused on profit than on revenue. And what about working capital and cash flow? It seems we hear about them only when it is too late.
To define the best, it would be quite interesting to present the list based on an indicator such as economic value-added (EVA), which is a combination of profit and working capital. Such an indicator provides a good estimate of how the company uses its resources and how it financially performs. It also reflects how much wealth is created and allows simple comparisons between companies, not so much on how big but on how efficient and viable in the future they will be. Using this indicator as a management tool will also create a totally new approach to business, by aligning goals from all departments and staff, from the CEO down to the workers. Everyone will have the one and same objective: A higher value for the organization, which nicely meets the current trend towards more value-added products versus producing mostly commodities and raw materials. Further, an EVA-like approach would help make communication and employee compensation simpler and more consistent.
Creating more value for companies, together with a positive competitive atmosphere between businesses of all sectors, would stimulate our economy to excellence.

 

Copyright 2009 The Happy Future Group Consulting Ltd.