The question business owners ask me most often is “Why can’t my company grow?” Good question. You are not going to like the answer. It’s because you dear business owner are good at something and you need to be good at three things. Let’s examine how to rebalance your business processes and learn how it will unleash pent-up growth.
Business is like a three-legged stool. There is one leg each for Sales, Operations, and Finance. All three legs need to be the same length in order for the stool to be level and well, be an effective place to sit if I understand what the purpose of a stool is. When learning about a new client, I generally find that the business culture is decidedly geared towards one of these three disciplines. A Sales culture is dominated by the selling process and the firm often errs in favor of Sales goals above the efficacy of Operations or Finance. Operations cultures are generally process driven and often serve to curb Sales by leveraging operational limitations. Finance-driven companies are frequently steeped in analysis and sometimes introduce controls that also hinder business growth. The caricatures of these three types of company would look like people we have all met before:
- A Salesperson that protects the client from paying full price, working within operational limitations, and honoring terms and conditions. In Sales cultures, all revenue is good and saying no to a customer is always bad.
- An Operations Manager that thinks every job was undersold, is quick to say the company is too busy to take on another project, and considers all outsourcing to be a threat to quality (and his authority). In the Operations culture, the needs of Sales and Finance run counter to “doing our best work.”
- The Finance caricature is a stodgy accountant that thinks quality is too expensive and believes that most customers are happy with average if it will save the firm money. Customer service takes a back seat to following the rules, and there are lots of rules – like, don’t spend money. The Finance culture behaves as if Sales and Operations are trying to steal from the company.
Now that we have established an over-simplified characterization of ALL companies, what can we do with it? Most business owners are good at one of these three things. Some can sell, some can deliver, and some are investors. Their companies mirror that characteristic and suffer for it. Shoring up the two short legs is preferable to curbing the long one (remember, the long leg is what the owner thinks is important). While it is challenging at best to completely change the focus of a company culture, it is possible to achieve speedy results by rebalancing an initiative. Let’s examine how to grow.
In order to jumpstart a company’s stagnant growth, we need to focus on all three business skill sets and apply equal energy to each. In Sales, we need to better define the highest priority target customer. What is their job? What kinds of pains can we solve for them? What is the beneficial outcome we can provide? Sales’ knowledge of the customer is valuable if we ask the right questions. We ask Operations how can we define an appropriate response to this customer? Over- or under-engineering a project will adversely affect the outcome, so the insight into the customer as provided by sales will help Operations tailor the response appropriately. Finance can help with growth by doing a better job of defining and predicting profitability. Analysis of the past will help to forecast the future. If all three groups work together, the net result will be profitable projects that meet the needs and wants of clientele that will hopefully do more business with us in the future. Profitable, Sustainable Growth.
Moving from a single-focused culture to three-way balance isn’t as simple as it sounds. You have probably made some attempt to introduce corrections to your system and become a stool with two even legs and one short one. We can use the three-legged analysis in the form of a Venn diagram to quickly reveal where the weakness is.
The Jumpstart growth model requires three initiatives: Customer Segmentation and Prioritization, Value Engineering, and Project Cost Forecasting. If you get all three in sync, you can expect Sustainable, Profitable Growth. But what happens if one element falls behind? If we successfully segment customers and focus on the right ones while value engineering each job to the best result for that segment, but fail to properly forecast costs, then we can expect margins to be low. We will take on too many jobs that dilute overall profitability. If we value engineer and estimate costs correctly but fail to identify appropriate target segments, then it will be difficult to retain business. The scattershot approach to sales won’t leverage our strengths towards repeatable business. And if we neglect to engineer deliverables even though we have the correct target customer and great cost forecasts, we will have trouble converting prospects. The disconnect between their needs and our response will allow the customer to look further for a partner.
Using the reverse, we can analyze a condition and discover the cause. If customers are buying from you once and not coming back, check your segmentation. You have either misidentified your targets or you are not solving their problem. If they won’t buy at all, check your engineering. It could be that your response or solution is not meeting their needs. You could be over- or under-complicating the transaction. And if your margins are still consistently low, check your math. Your cost assumptions are not lining up with reality. Perhaps you are leaving money on the table?
Jumpstarting growth is often an exercise in three areas at once. Apply your sales expertise toward better understanding of target segments. Use your skills in operational delivery to design a product or service response that matches the buyer. And use your Finance skills to better analyze your cost basis and use that information to build profitable budgets. Each leg of the stool can do what it does best with the same goal in mind. The end result will be more of the best kinds of customers buying an appropriate solution at a decent margin.
AV-Matters Blog is written by Tom Stimson, MBA, CTS, President of Stimson Group LLC, a Dallas-based management consulting firm specializing in strategy, process improvement, and market research for the Audiovisual Industry. Tom is a Past-President of InfoComm International and a current member of InfoComm’s Adjunct Faculty.