Posted by: DrAlanRae | January 28, 2009

Predictable crises – and how to deal with them

Our research shows that companies hit a well defined series of crises as they grow. A comparison of companies in the US, UK and Ireland found that typical crises hit,

  • When the Founder cannot sell enough himself
  • When more people need to be taken on
  • When the organisation needs to change premises
  • When the product range needs reinventing
  • When the business processes and systems need upgrading

Crisis points currently recur every 3 or 4 years.

To start with, the owner manger engages energetically in sales. However businesses often hit a crisis after about 3 years as a result of several issues needing to be dealt with at the same time. I’ts  common to hit a second crisis after a further 3 years. This looks like a falling away of sales, often as a result of the re-structuring caused by crisis 1.

Crisis 2 is generally resolved by a renewed focus on marketing – product development, talking to customers and by additional finance. In other words – these things are largely about being able to keep marketing activity and delivery capacity in balance. But things don’t grow smoothly – and a real difficulty is the limited range of suppliers.

Most industries are actually quite small. In our own plants for presents business we often only have 2 possible suppliers for many things that we deliver. If we continue to expand we will hit the limits of some of these and may have to start importing things directly with a great leap in finance and storage capacity.

Changing premises which we did nearly 2 years ago involved increasing the IT systems significantly. Needless to say BT behaved with their customary verve and responsiveness and we were reduced to downloading orders from someone’s connection 5 miles away and doing everything manually for a couple of weeks. We had to change our main courier because our existing one with whom we had an excellent working relationship was not allowed by the terms of his franchise to pick up from us any more. It took about 3 weeks before the new franchisee could pick up for us and so white van woman had to drive to Crawley every day during that period.

The most dangerous however, is probably the sales transition to recruiting the first salesman. Most small company owner managers have not had the benefit of working in a formal sales structure.

We were very fortunate in that in the early 80s when we were cutting our teeth in the IT industry there was plenty of sales and marketing training available from our suppliers. In fact most of my practical business education was supplied courtesy of Commodore, Autodesk and Sun. These companies quickly realised what a shower of amateurs they were going to have to depend upon to grab market share. So they thought they’d better teach us something.

Commodore lured away a man called Brian O’Hara from Olivetti who were at that time the last word in sales methodology (where are they now?). He put us through a 3 day training course which was a revelation. I’m still using his stuff now. He taught us that sales is a process and that we need to establish and monitor the conversion ratios between the stages of the sale. I practised this for 15 years with a team of between 3 and 6 sales people that I was responsible for and it’s made a really deep impression.

Most owner managers don’t do this. They get away with a combination of charm and enthusiasm for their products and don’t monitor themselves. So they have no yardstick to use to hold new sales staff accountable. So what happens? They’ve expanded. They can’t sell enough themselves so they try and recruit a salesman. They will pick a “traditional” looking salesman. You know, hearty, affable, presentable, talks a good stick etc etc.

Let me tell you these types will never sell for you. I’ve employed enough of them to know this. Why? Because their need to be liked is greater than their need to get a result. (And anyway they’re only motivated by greed unlike you and me who are often motivated by fear which is a far more potent motivator.)

Some psychometric tests are quite good at flushing this out. It’s always been a swine to get at this in an interview even before we were subject to major restrictions in what you can legally ask in interviews.

So what could you do differently? Hire an office dragon – work out a system with them and get them to monitor you – insist you collect your ratios and discuss them. At the end of 6 months you’ll probably be selling better but more importantly you’ll have the all important ratios. Then you can say – if this is what I do – as an amateur – I will expect you as a professional salesperson to do better. How will you go about delivering against this?

Nothing works all the time but I guarantee it will be better than settling for the most affable suit and kipper tie.

These are just a couple of illustrations from our own business life which shows that  you need to be aware of these transitions and plan them in well ahead.

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