For over a year now I’ve been reading everywhere about the crisis and prognosis as to what will and what will not sell. Various managers try to outdo one another in creating new economic forecasts and potential market development scenarios. One may try in vain, though, to look for reference to old mottos valid for business in times of up- and downturns in the economy.
It seems that pursuing economic activities in a way that the effects of market deviations are minimized, requires arcane knowledge. In every line of business one may find stars of the season thriving on a bull market, just to change their brand in a lucrative “hostile” take-over a few moments later. During the current slowdown in the economy business representatives tirelessly talk about what they would like to sell, trying to fulfil the legacy remaining after the prosperity time investments.
Such anachronisms (not in the case of all lines of business) are outsourcing services or sensational model of investment financing. I come from the IT trade and sometimes when I hear what some excellent market moderators have to say I clutch my head in astonishment asking myself why they have changed from visionaries fulfilling market’s needs into plain sellers trying to dispose of everything that fills their warehouse’s shelves during the crisis. In the following part of my article I will revive some rules allowing every entrepreneur to operate more firmly and steadily during economic fluctuations.
“If you wish for peace, prepare for war”
If we think over the current situation we may find that the capital turned out to be a good which, by a momentary appreciation, caused work depreciation. The IT trade, especially the part involved in managing system implementation, is in 99% dependent on human resources. Thus obviously, in the current situation consultants’ fluctuation will be monthly higher in those companies where money supply (income) will decrease. As in all of the economy, the qualifications of human resources will be less important than their stability within an implementation team, guaranteed by a healthy financial policy of a company. This major point proposes that potential projects will be won by those consulting companies which have perhaps a smaller volume of projects on the market, but will be able to sustain during the crisis a stable consultant team.
Have no illusions! In this line of business newly assembled teams, due to the increase in labour supply, just like our national team, will not be able for a long time to accurately carry out implementation projects. Thus, let us build stable teams with stable and guaranteed in our financial policy budgets, not for a year but for two or even longer!
“Everything in moderation”
The time of prosperity allows us to diversify our products and services. Many companies take a deep plunge and try to sell products and services in selling which they have little experience. That, of course, allows to develop clients’ wallets as well as organization itself.
Frequently analysing sales structure I come across sales representatives responsible for products or services but having no technical or substantive support. When the market swallows up everything, such a representative manages to make sale. After such a charge all that is left on the battlefield are wounded clients with scarcely implemented solutions. As a result, other less observant potential clients often fall for a reference list of companies who after in-depth analysis turn out to be companies who only bought the system.
Returning to the core of the issue, by building resources in our company in a stable manner, we will have mixed feelings concerning the huge alternative costs of lost sales. During the slowdown in the economy we can count on a stable sales with a growing profit margin based on proven and reliable references. There is also an additional bonus in a form of correction work for companies which were not our clients up to now. This usually ends with so needed long-term servicing contracts.
“A bird in the hand is worth two in the bush”
A successfully carried out implementation project not only strengthens our relationship with a client but also increases considerably our chances to sign a dedicated servicing contract. Characteristic for such contracts is that they are long-term which increases stability and predictability of income to our account. The quality of implementation is directly reflected in the profit margin from a project. Yet, that has to be backed up by a stable and experienced team. As you can see, a long-term focus on a quality of services and not artificially generated income from empty license sales is the way to go. In fact it is the only way guaranteeing fixed income during times of recession. Some may say that the percent of collection of amounts due is a significant issue. Yes, a satisfied client in one out of ten cases may not pay on time, but with such a percentage of collection of due payments we will make it through the crisis!
“If something may go wrong—it will go wrong”
Last year I came across a trade anecdote concerning a failed referential visit. Why failed? If the Project Manager assumed that something in his project may go wrong, similarly the client, without an articulated fear, instinctively led the reference visit to a failure despite of his best intentions. In times of distinctive fear and awareness of money value, client rarely makes decisions on the basis of sales representative’s assurances (whose credibility is decreased during such times). The clients looks for a partner in that purchase not amongst the potential providers but amongst those who already bought it and are content with their decision.
“If you have no idea about diamonds—meet a jeweller” Warren Buffett
During difficult times our efforts must be focused on those consumers who are the most fitting to our client’s model and especially on those, who apply the sustainable development strategy and forecast a long-term economic fluctuations. Their investment decisions are based on their long-term development strategy. This makes a partnership attractive as it guarantees a constant aspiration to develop both entities despite of the changes around. What must be noticed though, is the effect those aspirations have on the fulfilment of accepted investment plans. How to select such clients? All the needed information is right there. Our finance department and close relationship which is not just focused on mechanical enquiry about client’s new need; but understanding and sensing the direction and rhythm of client’s development. Such a perception of valuable information allows us to adjust to sequential investment plans and capture them in our resource management. Simple, but how highly effective.
“Success in sales does not depend on the people you know. Important is, who wants to know you” Dale Carnegie
Modern marketing awaits the time of stretched out purchase choices and long negotiations. What does modern marketing mean? Sales marketing. This is not a new area—a lot of IT companies pursue such activities and by activities I mean telemarketing, information materials shipment, or seminars. We tend to forget that only meticulous gathering of information (during such activities) about the companies behaviour will allow us to make sound decisions whether to begin commercial actions; and those are nothing but pure costs. Numerous companies after the first sent information or the first made telephone call ceases contacting potential clients. At best, those companies tirelessly repeat the same information activities. The solution for effective using of such communication channels is hiring an experienced analyst who knows, using knowledge of a given trade, how to foresee client’s further actions and accordingly adjust the next publicity materials.
“I can’t be everywhere; so I’ll be where I can freely breathe.”
Whichever—economic crisis or slowdown—trade specialisation is a strategy of survival and development. It is simple, as long as our selected trade is characterised by resistance to economic fluctuations. Such trades usually produce items or services from the lowest levels of Maslow’s hierarchy of needs, which are e.g. food, medicine, or energy. The demand for those good is so steady that it is highly unlikely that they will be excluded from the basic basket of goods. Specialising in those lines of business will allow our company to have stable partners for all times.
The only way for a steady development of our company is acting and planning in perspective of many years and taking into account cyclical nature of economic fluctuations and meaningful knowledge about our clients. Disregarding these rules will lead us to standard approach promoted by our surprised by the crisis managers, instead of using a chance to strengthen our position on the market.
In that case, where one can find a company supplying highly qualified solutions implemented by a tight and experienced team? The answer is—on the market.
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.” Warren Buffett
Adam Piętera (born In 1974)—Sales and Marketing Manager in SI-Consulting S.A. (Inc.)
Adam Piętera for the last 10 years gained his experience in the leading companies on the ERP market. He cooperated with T-Systems Polska and QAD Poland Sp. z o.o. (Ltd.) amongst others. He is the author of numerous sales, ERP and CRM implementation publications. His articles were published in Manager, Modern Marketing, and Monitor rachunkowości.