“Woe is me, my sales are down 10% and my profits
are slipping away. What should I do?”
Maybe you are not facing this quite
yet. But if the economic forecasts are correct, you will be in 2008.
Classic marketing theory says, in
a down economy, you should increase your expenditures for marketing and sales. You
ask, “How can I increase my expenditures when I anticipate my sales will drop; how will I pay for these?” Well, there are some options.
- Reduce your costs of data acquisition and invest this money in growth. *
- Increase your productivity through benchmarking and/or better technology. **
- Add new products. **
- Increase your prices (good luck with this in a down market).
- Or, bite the bullet by reducing your personal compensation to spend more on marketing and get paid back from
future sales.
Then we hear, “Hey,
I have been doing fine. Why should I worry about this? Well, ask those background screening companies that were doing great but all of a sudden lost major clients
through bankruptcy or merger or just loss of business activity (ENRON, Countrywide, WorldCom, all the mortgage companies and
real estate companies). How would you have liked to have had your company ready
for sale with a signed Letter of Intent, only to find sales decreasing so much while waiting to close the deal that the buyer
decided to not pay the price you agreed on because your sales volume dissipated? Ouch!!! And this has, in fact, happened.
So, coasting in this industry is no
longer a good option. Whether you want to sell out or continue in business, you must grow or shrivel. Look at HireRight, Inc. They are a great example of what you
have missed over the past ten years. 2007 sales of Sixty Million Dollars!!!
What would your company look like if you had even 10% of that volume? And they just publicly announced that due to macroeconomic factors, their forecast
of volume in 2008 from existing customers will be flat. Yet, they project a 10-13%
overall increase for 2008 (an increase of over $7,000,000). Where do you think
these sales will come from? They say from small and mid market customers (SMB)
and international sales. So, whom will they take these customers from? From you? Do you have the technology? Do you have an ATS, or at least a partnership with an ATS? Do
you offer electronic I-9s? Do you have the marketing, sales and customer service effort to retain your existing clients and
get some new clients? Can you be price competitive? Will you be investing $1,000,000 in additional sales staff in 2008 like HireRight?
So, is this a totally gloomy outlook? Well, HireRight doesn’t think so. Equifax doesn’t
think so; they bought TALX last year ($1.4B). Reed Elsivor doesn’t think
so; they bought ChoicePoint for $4.1B.
Of course, if you feel overwhelmed by all this because
you don’t feel able to thrive in harder times, maybe it’s an optimum time to sell your company, while the multiples
are still good and your sales are holding up.***
Regardless, the point is to take
action. Make a plan and work it.
Doing nothing different might really sink you and all that you have worked for may slip away.
If you would like to discuss this
further, call Bruce at Berg Consulting Group.
* Berg Consulting Group can save you
up to 50% with our Better Vendor Program.
** Berg Consulting Group can help
you.
