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CRM A Short History

Back in the mid to late 80's, marketing concepts emerged in response to changes in the marketplace that forced many large companies...

Getting real ROI from CRM Collaboration and Technology

The field of Customer Relationship Management (CRM) is at a crossroads. The promise - while still very much alive - has in too many cases not been...

How to Align Sales Compensation with Corporate Objectives

Sales people are more likely to perform activities which support the corporate objectives when their compensation plans are in alignment

How to develop an Effective Sales Forecast

The ability to effectively forecast sales can have a significant and positive impact on sales and operations as well as the overall financial health of a corporation.

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Friday
12Mar2010

Sales Forecasting Without a Net

Most businesses can take steps to build a pretty tight sales forecasting model using a bottom up and top down forecast by revenue, but when it comes time to break it down by product this can get tricky for custom manufacturers of parts used in medical devices or similar products. Why? Because aside from custom manufactured parts and custom devices and applications, what you are really dealing with is “custom customers”.

Now if your business sells a commodity or has a short sales cycle our use of the term custom isn’t really important and it may not be much of a challenge to forecast by product, but for those with a long sales cycle and/or a custom product it can be much more complex.

Here is an example of such a process and the different players and timeframes involved all of which will affect the ability and the accuracy of forecasts. Time can act like a slinky compressing at one point then stretching out at another when new issues arise.

Using our example of the medical device industry, sales people talk to prospects and identify opportunities. Those opportunities are usually the start of a long sales cycle lasting many months and sometimes longer where the actual quantity of a product may be up in the air even if the prospect says they are interested in purchasing 1 million parts right up front. No point here in adding this to any forecast unless it just makes you feel good to see big numbers on a spreadsheet.

To elaborate further, here’s a typical scenario: Custom manufacturers of products used in medical devices are approached by Design firms or Product Designers who want to know if what you are selling will work in their product or application. After some initial qualification of the product they often start a testing process and build a prototype to see if everything works together. The eventual purchase date is still subject to a number of factors from FDA approval testing for medical devices to the actual launch date of the product. At some point after it is determined your parts work as intended the task of actually purchasing your products often gets turned over to another person in a purchasing department at “some company”.

We say “some company” because the actual name brand of the device or product may be responsible for sourcing the parts that go into their device, but more often than not, they will outsource the assembly of the device to a contract manufacturer. Now we can conceivably have a third party enter the process and they may have their own ideas on quantity and pricing (that is fodder for another blog). 

Let’s assume at this point that the customer in question is serious about purchasing and we have gotten beyond the terms and conditions discussion (yet another topic for another blog).  Now we are reaching the stage where we are finalizing the actual order quantities and release dates. At this point there are still factors beyond our influence or control that can impact the opportunity. The market for the device may have changed, either up or down. The company making the device may have had a recall of some other products. Does Toyota’s unintended acceleration come to mind? That certainly put the kibosh on a lot of new parts to be ordered for Toyotas yet to be built.

Let’s jump in at this point with a caveat. If you are trying to track and manage all of this through customer service, forget it. Our clients who are most successful in these scenarios all have well trained inside sales people who can talk like engineers about the products and act as traffic cops throughout the whole process.

At a high level we can raise visibility for corporate planning and production about the opportunity in the mid stage, however, because this is a custom product much like a tailored suit, committing resources to producing the suit until the deal is final is not a good idea.

From our experience, for situations like this the best you can do is to have a very detailed historic sales database to draw from and develop sale trends based on actual sales of the component parts that make up the end products. Then you can apply management discretion on top of the trends based on the opportunities that are known. Some opportunities will be from companies you have worked with before and therefore you have a better feel for their buying cycle and the validity of their forecasts of both timing and quantities. Others will be from companies you know nothing about. It is important to have an opportunity management process that identifies these custom customers at each stage of the opportunity and agree on when things show up on radar.

The management discretion and the end result need to be a conservative forecast given the uncertain nature of a string of interdependent outcomes. At any step along the way of the customers’ buying cycle we may hit a dead end, a change in parts, quantity and/ or delivery date.

The take away here is that even though it may seem you have a lot of data, a great opportunity management process and CRM to track it in forecasting for a custom manufacturer selling to medical device manufacturers is not a slam dunk.

Thursday
11Mar2010

Board to Death

Does your company have any board members who are not employees, owners or family members? If so take a moment to think about who is on it, what their backgrounds are, and what may influence their input. Even if you do have outsiders this may still be a worthwhile exercise.

Try to put yourself in the shoes of each board member one at a time and then consider a number of challenges your company faces. Imagine what decisions might serve their personal goals or biases that might not be in the best interest of the company.

Possible scenarios are endless, but here are a few to ponder as you look within your company:

The owner’s son: He may be in charge of Sales and Marketing but has a Finance background and is really not well suited to a role in sales let alone sales management. Imagine his perspective and input when the board is discussing what it will take to increase sales. Is it likely he would be resistant to bringing in strong and aggressive sales talent for fear they will eclipse his work and expose his shortcomings? If so he may be able to convince the rest of the board that he is going to “try harder” or change some comp plans, or some other changes. If no one realizes what is going on you will just get more of the same. Isn’t this just rearranging deck chairs on the Titanic?

The Age Demographic: What if all your board members are over 65. How open do you think they might be to investing money in new technologies and social networking like Twitter and Facebook? How will this bias to the old way of doing things impact your company?

The Role: What if most people on the board are Engineers? How will that impact the perspective of the board? Nothing against Engineers, my father is one, but if you have too many people with the same perspective or mental hard wiring you may not be seeing the bigger picture. The same would be true for all Accountants, Sales People, HR People, etc.

Hopefully you get the picture that everyone brings their own unique perspective to a board meeting both positive and negative. If you get it wrong and ignore the obvious red flags you will be holding your company back and may be contributing to its demise. This makes it even more important to make sure you have a wider representation of perspectives and why bringing in an outside Advisor to your board is worthwhile.

Tuesday
16Feb2010

Under Cover Boss

Have you seen the new reality TV series on CBS called Under Cover Boss? If you are looking for ways to grow your business this certainly is a great idea especially if your business is large and spread out.

The premise is quite straight forward. A boss, typically the business owner or CEO goes out “under cover” or disguised and performs a variety of roles in his or her company that are several tiers below them. In most cases these are the front line employees, sales, manufacturing workers, or even their managers.

What happens is that the boss gets to see the inner workings and people that are doing a lot of the heavy lifting in the company and whose opinions or perspectives are rarely shared unfiltered with upper management. They get to see both the good and the bad things that go on in their company that would otherwise go unnoticed. This gives the boss an opportunity to reward for and encourage more of the good behavior and to address the shortcomings or poor behavior.

If you like this concept of getting unfiltered reality on the ground floor of your business but are not quite prepared to don a wig or fake moustache perhaps we can perform the role of under cover observer for you.

We already engage with our clients' customers to get their perspective on what it is to be one of our clients' customers. This is often an eye opening experience for most of our clients because they either have not been getting honest feedback from customers or if they were they discounted it and discarded it.

Either way if you want help getting a better handle on what is going on in your business or with your customers we can help; just give us a call.

In the mean time check out the series or catch a rerun.

 

Monday
14Dec2009

The Dear John Letter

This is required reading for those interested in turning their business around using outside assistance.

There are several ways to avoid getting this kind of letter; one way is to not start a project until you are capable of doing the hard work of changing your company. This is a difficult process and not everyone is up to the challenge despite what they might think at the outset.

Just like a fitness instructor can't exercise for you we can't improve your business without your 100% participation and buy-in to the process. Getting up at 6AM to go running or do calisthenics is seldom fun for people who are out of shape, but you are not going to make an improvement if you stick to your old routines and eating habits. Enough of the introduction here is the letter:

Dear John,

Unfortunately changing a business is not a "comfortable" process especially when it entails abandoning ways of doing things that at one time served you well. In order for this to be a successful engagement we need your buy-in and commitment to the changes we are proposing and for whatever reason that has not been there.

Our focus has been on the "results" you wanted to achieve but it appears the process and documentation are of greater importance to you. We would not be doing our job as independent consultants if we compromised our strategy in order to better connect with a client. It is our belief that you can turn this company around, but only if you follow a strategy like we have outlined and put roles in place that are accountable for results and eliminate the need for ownership to micro manage them.

Given your desire to get different results while continuing to do things that make you comfortable we don't believe that this is a project that can be successfully. We wish you well with whichever path you choose to take.

Gilmore Lewis, LLC

Monday
14Dec2009

Are You Documenting Your Demise?

All too often I come across business owners who put the proverbial cart before the horse and get more excited about documenting processes before they actually improve them. Documenting a flawed process is like paving cow paths (that zigzag all over the place) as opposed to mapping out a more efficient, and direct path and then paving it.

Some business owners get all excited about the E-Myth, and even though I believe this is a key element in building a scalable business, they tend to overlook those pesky parts about Business Development and jump right into the documenting part too soon.

I can only guess that they gravitate towards documenting things they are already doing because it is something they know they can take immediate action on. Just because someone is willing to “do what it takes” to document an existing process does not mean they are ready to make the hard decisions that are associated with implementing a new strategy.

If all you do to improve a business you know is having trouble growing is to document some processes, you might just be documenting your demise.