The global pandemic has caused crisis after crisis to hit US companies. These crises include:
- global supply chain problems affecting worldwide shipping
- increased prices due to the shortage of components or subassemblies
- labor shortages
To assist our clients, Sean O’Shaughnessey and Kevin Lawson teamed up to create the following webinar. The webinar originally aired on January 13, 2022.
The following is a transcript of the webinar video above. It has been sparsely edited to increase its readability, but many of the idioms and poor spoken grammar have been left in place. The transcription was automatically generated by Sonix.ai and, as capable as that product is, there are times when words are missed or sentence structure was incorrectly interpreted. We have tried to catch all of these software misses, but we are confident that some still remain. The below text is provided for those that would rather read than watch a video.
Kevin Lawson: Good morning, and welcome everyone to the CEO workshop Drive Revenue During a Crisis.
I’m Kevin Lawson, and I’m joined by Sean O’Shaughnessey. We’re glad you’re here. Thanks for being on time and early. A couple of quick notes about today’s session. We got quite a few on the line, so everyone’s coming in muted. There will be a time when we’ll unmute you at the end of the event, but also, we’ll distribute a follow-up for those of you who have to check out early. We’ll have a follow-up message to all attendees, so be able to look out for that this afternoon. It will be in your email. There is a lot of great content coming your way, so please use the chat feature inside the Zoom tool when you have questions. We use that as a way to relay your questions to Sean.
We’ve added some additional time at the end to field additional burning questions before we all adjourn. Thanks again for your time, and let’s get started.
Sean, the floor is yours.
Sean O’Shaughnessey: Thank you very much. Kevin, I appreciate that.
As a little bit of order, I am going to quickly turn off my camera, which means I’m going to go out of slideshow mode, but I don’t like looking at myself when I present. Plus, I sometimes will stand up when I talk so. I hope everybody understands.
Thank you very much for attending. I appreciate you taking the time out today. Today we’re going to talk about driving revenue during a crisis. Specifically, the crisis we’re going to talk about is the thing that’s in the news a lot right now: supply chain disruption and increasing prices due to inflation. All of those things are potentially affecting you and how your salespeople. We can help manage that crisis and get them motivated. And maybe some things that you need to be worried about as a company. Hopefully, I will cover everything that we need to discuss. As Kevin said, we will have time at the end for questions and comments if anybody wants to do that.
Supply Chain Issues Are Everywhere
So I think everybody has seen the news. You’ve seen pictures like this, and you probably know more about container shipping than you’ve ever thought you ever wanted to know. Maersk, one of the biggest shipping companies around, says the worst delays are still in front of us due to workers on the land. They were looking at boats being unloaded at the time of this quote of roughly four weeks of both sitting in the ocean waiting to reach land.
The Drewry World Container Index, which I didn’t even know such a thing existed until I did some research for this presentation, measured the cost of moving a 40-foot container, that’s what those boxes are that you see on that ship on those two images, increased 170% from a year ago. I know some of my customers have complained about this increase. The cost of a container has gone up and up and up. They’ve had to absorb that or figure out how to deal with that in their business. And maybe yours has as well. The Chinese producer price index surged 13.5% in October, while the U.S. Producer Price Index grew at 8.6 percent, which was a record at that time. I don’t think it’s gotten any better since the October number, although I don’t think November numbers are out. We can see that there are issues throughout the world. You’re not unique if you’re facing some of these issues. We need to deal with them effectively and potentially make them to our advantage.
When Will It End?
Many people say it’s not going to be over soon. Many prognosticators predict the future, and I will not predict when this will be over. Siemens is a very large company, and we can assume Christian’s getting excellent advice from his people. He thinks these issues are going to be around for a long time. You can read his quote.
Economist Aneta Markowska, who I didn’t know until I also researched this, suggests that they’ll significantly improve by the second half of 2022. And remember, we’re only in January, so the second half of 2022 is what, 6-9 months away?
Jeremy Nickson of Ocean Network Express gave a little bit more bad news. He said if July, August, and September are bad, we’re not going to be through this supply chain crisis or in this price increase crisis until 2023.
Prices Are Rising
I don’t think anybody is surprised that prices are going up everywhere. We all buy gas for our cars. And I don’t think anybody is surprised when you look at the price of the pump, and you know that the price has gone up considerably. You may not have done the math about how bad it’s been for your vehicle, but you’re spending more to get to work, and so are your employees. Buying a car has gotten a lot more expensive. Staying in a hotel has become more expensive; buying protein products such as meat, poultry, and fish has become considerably more expensive. You can see all of this in the list here, and this is a comparison of November 2020 to November 2021.
If your employees, the people on your team, aren’t complaining to you and saying, “I think I need a raise because it’s just not going as far as it used to,” then they probably will be soon. And that’s just a fact of life. It takes more for them to live. That puts pressure on you as an employer, and you need to deal with that. But we all know how difficult it is to hire good people in this economy.
Just this morning, I was reading the Wall Street Journal, and there was a great article talking about executives’ list of 2022 worries. In that list of 2022 worries, 900 global CEOs were talked to by the Conference Board, who I also had never heard of until I read the article. More than half expect price pressure to exist to mid-2023, about 15 to 18 months from now. I’ll let you read the quote from the CEO of Honeywell, but he said, “inflation is here.” I think we’ve all seen this. You probably joined the seminar, actually to understand what that issue is and how to deal with it. I’m not telling you anything you don’t know. I’m not going to beat this up anymore.
Is This Affecting Your Business?
I’d like to have a little bit of conversation about what it means to deal with all these issues and how we get through this in a way that makes sense?
In other words, is this affecting your business? Are your costs rising? Are you having difficulty getting raw supplies? Will this disruption affect how you run your business now?
If you’re a glass is half full kind of a person, you might come back to that question and say, “No, I’m not going to change anything. We’re going to be fine.”
I’ll push back on that a little bit. This is an opportunity for you to change how you run your business. It is an opportunity for your company actually to get better. A lot of people look at what I am explaining and say, “Gee, that doesn’t make a lot of sense.” Until you understand what has happened in history when good or great companies are working better after a crisis, after the economy has had a speed bump, and we’ve had several speed bumps in the history of our country in the last 20 years after those great companies become even better.
Will You Thrive In This Crisis?
I’m going to refer to a quote from Andy Grove of Intel. If you’re not familiar with Andy Grove specifically, you’ve definitely heard of Intel.
Andy was one of the company’s founders and ran the company for many, many years. He made Intel into a company that we all know and has affected our lives. The very computer that you are watching this very event on probably has an intel something in it. If it doesn’t have an Intel processor, it probably has something from that company. They are one of the most dominant companies in the semiconductor space. And one of the most dominant companies in America.
Andy said (and I don’t know if this is the original quote, but it’s always attributed to him), “Bad companies are destroyed by a crisis, good companies survive them, and great companies are improved by them.”
This is an opportunity because we are in a crisis. We are in a challenging economic environment where it is important to think about how you improve so that when you come out of the crisis, and there will be a day when we come out of this crisis, that you’re a better company, you’re actually farther ahead.
Ten Things To Make You Great
I’m going to go through 10 things right now. I’m going to kind of dig into some of them in a little bit more detail. The ten things to make you great.
The first thing to talk about is making things worse by doing nothing. Whenever you see a disaster looming, the single most important thing to do is to take action. Sometimes we are like deer in the headlights—we standstill. We don’t know what to do.
We kind of panic, and we panic by not doing anything. You’re frozen to the spot. The problem is that we need to leap into action at this point. Things will always get worse, and they will always get worse quickly, so your actions matter.
The second thing to make your company great is to deal with facts and not fiction. In the middle of a tough time, it is really easy to start freaking out based on what could possibly happen. Our imagination can run wild when things are tough. You hear all kinds of things on the news and start thinking about all the bad things that can happen to you or your company. Most of those things will never happen. Let’s be honest; our imagination is typically much worse than reality. We need to get ahead of that and realize that what we feel in our heads are not facts. It’s fiction. You need to deal with the facts on the ground.
Cement your relationship with your existing customers. We’re going to talk a little bit more about this a little bit, but this is very, very important. In fact, it’s one of the most important things that I’m going to talk about is your customers are going through the same tough time they are experiencing the same issue. This is a time when you can get closer to your customer because they are having problems and challenges. They may have reached out to you and said, “How are you handling this? The product you are selling me is very important to me. How are you handling getting it to me in a timely manner?” They may not ask you if you’re going to raise the price, but they’re definitely worried about it. This is a time when you can get closer to your customer. I’m going to talk about this more in a couple of slides from now. You must think about this. Your customer is the most important thing in this process. You need to spend time making that relationship better.
You also should spend this time rethinking your business. What’s working in your business today? What isn’t working in your business today? This is a time when it’s really easy to make a decision and say things that aren’t working. Things that are not contributing to your profitability maybe you should stop doing those things because now it’s a good time to do it. Get rid of that dead weight, make that go away, and make it get better for your company overall.
But it’s also a time to go out and chase business. I’m going to talk a lot about this in the coming slides. This is when we can do more business development. That may seem like it’s the wrong thing to do. Often, companies will start going to panic, and they’ll say, “We can’t ship, so let’s not go get more business.”
Well, that’s exactly what you shouldn’t be doing. You should go out and chase more business. Most of you, most of the clients that I work with, most of the clients that Kevin works with, our customers typically have less than 1% market share. In fact, you could argue that we have a 0% market share in just about every product that we work with. When you look at the global market for our client’s products, we probably have close to 0% market share in just about every one of those clients. When you have 99% or 99.99% percent of the marketplace to go after it, it doesn’t make sense that you worry about the economy. What makes sense at that point is getting more customers.
Now your competitor is also in panic mode, and he may or may not be going after getting more customers. Still, you need to take this opportunity to go after and get more customers. I will talk about that a little bit in another slide coming up.
Now we’ll get into more of the good feeling portion of this list.
Be careful whom you spend time with. One of my favorite sayings is ‘if you lie down with dogs, you’re going to get fleas.’ Stay away from those people that are the naysayers.
That might mean that you have to stay away from the news. Let’s be perfectly honest because there’s a lot of bad stuff on T.V. I’m not saying being uninformed, so let’s not go there too much. Be careful who you hang out with. Be careful who is giving you bad news. Be careful that they’re not dragging you down. Try to align yourself with uplifting people trying to do better and improve the companies they work for. Those are the people you can look to for reassurance that this will be over. We will get out of it on the other side. Life will get better soon.
This is also a time to invest in your business. It’s time to put a new coat of paint on the building. You need to make it look new and fresh. You need to fix a website. I don’t care if your website’s six months old, three months old, or six years old. Fix it. Spend the time to make it better. If you need help with that, then give Kevin or me a call. We know many people that can help you fix your website but upgrade your website.
Create a new corporate image. Create a new logo. Build some excitement. Adopt new fonts in your slides. Whatever makes sense in your world. You need to do that now because you need to invest in your business. You need to make excitement happen in your business. You need to make your employees excited about what’s happening in your business. This is a time to double down. This is a time to get better, and you can’t get better without investing in your business.
Similarly, you have to invest in yourself. The great thing is that you came to this seminar. This is wonderful advice I give to everybody who wants to figure out how to invest in themselves. Go to seminars and learn from others.
Read a great management book. Read a great sales book. Kevin and I can recommend some of those if you like but work on training yourself. Work on making yourself a better person because now is the time to do it. When we get done with this crisis, you’re going to appreciate that you are more informed and more knowledgeable about how to run your business.
Kevin Lawson: Sean, when you get to a stopping point. I’ve got a direct question that came in via chat and maybe before we get off the slide.
Sean O’Shaughnessey: Sure. Absolutely. That sounds great. Let me get two more points, and then let’s do that. Thank you.
Along those lines, find someone to mentor you through challenging times that could be somebody that you appreciate in business, somebody in your community, somebody in your social group, that’s fine. I suggest joining groups that help other businesses get together things like Vistage or other kinds of networking groups. I’m happy to introduce you to Vistage; if you’re not familiar with that organization, so give me a call. Find somebody to mentor you, to get to help you through it, to provide you with advice. They’re not going to solve your problem, but they’re going to provide you with advice on how to get through it. Kevin and I do this regularly with our clients, so if you can’t find anybody else, at least reach out to us. We’ll try to give you as much advice as possible, help you through your business, and help you make it better.
And finally, learn from experience. This can be cliche, but it’s absolutely true. The reality is this will be over. The crisis will be over. Life will come back to a new normal, whatever that new normal is. You need to make your company be ready to fight harder, be leaner and meaner and more active, and be able to be a better competitor in the marketplace.
So, Kevin, this is the end of that slide. What’s the question?
Kevin Lawson: Actually, two questions. The first one came in right after you started talking about the global supply chain. It says, “We make a product that has some critical subassemblies that we sourced from Asia. We cannot find another supplier of the parts domestically, and now our shipments are being dramatically delayed. What do we do if we have already had order cancellations due to our challenges and shipping product?”
Sean O’Shaughnessey: Great question. I will cover that in a little bit, but let me give you the high-level answer for that. The first thing you do if you’ve lost orders today because you just can’t ship and your customers have given up on you, you need to truly double down on your business development activities at this point. And you need to lock in those customers you still have and make sure they’re on board. You spend extra time on that. You are in a situation where you have to make up ground. I’m going to do some math here soon, a little bit about discounting, and it’ll be kind of the same kind of math. I can help with that offline. You need to accelerate your business development. You need to find new customers and aggressively do that as fast as possible. I’ll make some suggestions on how to do that in a couple of slides, but that needs to be your number one focus in your business right now.
Kevin Lawson: Good. The second question is, “What value does reviewing supplier expenses play in helping push cash to the bottom line?” Again, that’s, “What value does reviewing supplier expenses play in helping push cash to the bottom line?”
Sean O’Shaughnessey: Sure. I’m going to make some assumptions on that question, and maybe whoever asked it can ask another question. But I assume you’re talking about your suppliers, the people who supply your company.
There is value in reviewing their expenses and helping them be a better company. Same thing if you can get that with your clients. Suppose they can help you drive your costs down; there’s a lot of value in doing that. It helps your company. It helps everything else. You can do this to your vendors as well as you should. Hopefully, your clients can help you. Typically, they have larger buckets of cash than you do, so maybe they can guarantee orders. This allows you to guarantee orders to your vendors, which can drive down some costs. There’s a lot of value in working both up your chain and down your chain in the supply chain world to drive down those costs into working together to solve those problems together. And the great companies absolutely will do that.
Anything else, Kevin?
Kevin Lawson: No, the queue is currently empty, thank you.
Sean O’Shaughnessey: Great, thank you.
Is Your Sales Team The Answer To This Crisis For Your Company?
Is your salesperson or your sales team the answer to these problems? Communicating to your customers and prospects is critical. And that message or what you are saying to them is critical. If you are the CEO or the leader in your company, maybe that should come from you to your clients. But it also needs to be communicated via your salespeople. Therefore, it needs to be communicated effectively on what they should say, how they should say it, and what they should communicate. I’ll talk a little bit more about this later, but the big thing here is don’t hide things from your salespeople. Don’t treat them as minions. Treat them like fellow business executives so that they can effectively deliver the message that you want to deliver to your customers and your prospects. You must have open communication with your team and your customers in this whole thing. We’re going to talk a little bit more about how the sales team works and how it can work better.
One of the last slides before the wrap-up slide will be my most critical suggestion. What I think is the biggest suggestion I can give you during this time. Please don’t fall asleep while this is going on, I’ll try to wake you up, and I’ll try to change my voice, or maybe I’ll clap my hands or whatever to wake you up at the end. But please don’t fall asleep. Please stay with us until the end because I think you’ll get a lot of value from the last slide.
At a high level, your customers probably understand what’s going on. In fact, I would say that they almost definitely understand what’s going on. Your customers do not expect you to be unscathed in this crisis. They aren’t unscathed in this crisis. They read the paper; they watch the news. They can see what’s happening to their other vendors. They understand that if you were having delivery issues or increasing your costs. They understand that they get it. Now they may not like it, but they get it. And this is a time when you could have that honest conversation about what’s driving your company, what your challenges are, and how that might align with theirs.
And as we just talked about in the question that Kevin just asked, “How do we get them to help us be a better company?” This is very important to understand because they can be your biggest asset to helping you through this crisis, especially if the crisis is really affecting your company’s profitability.
Don’t Offer A Discount To Shipment Problems
I’m going to do four slides here that go together. I put one of four into this section so that you can understand that they kind of flow together. I’m trying to go through a math problem a little bit in this process. I’ll try to go slow and try to give good examples. Hopefully, it all makes sense. If not, please ask questions at the end or chat over to Kevin.
Discounting is a bad thing, and you’re going to get this request. It’s not unusual that the discount request is coming from your salesperson, so they get a call from their best customer, and they say, “Hey, we can’t make our shipments. We have to delay our shipments because we have supply chain problems. We’re going to miss our shipments to you, Mr. Customer.” The customer calls back, and they say, “Well, if you’re going to do that, then I want a discount.” Or maybe they didn’t say that, but the salesperson thought he said that as that happens a lot.
Discounting is bad, and part of the reason it’s bad is it creates this expectation of a future discount. The reality is if you give a discount to a customer, you have given that discount to that customer forever. You’re never going to get it back. You might be able to incrementally move it forward. You might be able to do annual price increases coming forward in the future. However, you’re always going to be starting from a discount, so you don’t want to discount, and it’s really, really bad for your business, and it devalues your value.
Discounts also complicate your business dealings. If you’re a company that doesn’t regularly discount, then now you have to deal with:
- this price is five percent less.
- That customer is 10 percent less,
- That customer is eight percent less.
You have to manage all of that, increasing your sales operations costs.
You can do that. Spreadsheets can do that. CRM systems can do that. ERP systems can do that. But it does make it more complicated, and it makes it more difficult. You want to avoid it. It just makes your life more difficult. It’s also just not good for your company, which I’ll talk to you about the second. It also demonstrates a lack of confidence, eroding trust in you or your company.
It demonstrates that “Gee, I got a request for a discount, and I immediately gave it to you.” Maybe they shouldn’t have asked a year ago. How long have they been paying too much?
When you provide a discount for a customer that’s already been purchasing from you at a higher rate, they have to think back and say, “Gee, all that money I spent before now, all I had to do is ask for a discount, and I got it.”
This is an issue. You don’t want to give that perception to the customer. For a while, they were overpaying because that’s not true. They were paying the right price. You need to avoid the discount for that reason.
Discounts squeeze your profit margin unnecessarily. It makes a big difference. A little bit of a discount is very difficult to overcome. It’s common for people to say, “Well, I’ll make up my discount by having more volume.” The example I will give you in a few slides will show that you have to have a massive amount of volume to make up that discount. It’s going to be shocking if you’ve never done this math before.
Finally, it may force you to cut corners or at least consider cutting corners within your company. You might have to lay people off. You might have to buy inferior product that goes into your product if you’re an assembly manufacturer of some kind. You might have to do things that you don’t want to do, and that is also not a good thing to have to happen. You need to run your company effectively. Your customer needs to understand that you have to run your company effectively. We want to not offer discounts, especially for something as simple as shipment problems. If they say, “We’ll buy ten times more if you give us a 10 percent discount,” maybe that is a reason to give a discount. It does not make sense to give a discount because we’re in a supply chain problem and have this global economic problem.
It’s difficult to make up a discount. I’m going to show you how difficult this really is with some simple math. I will make up a product. This may not be relative to your company, but please play along with me and take notes if you want. In fact, you may want to scribble down some notes on a piece of paper. I’m going to do some math and refer back to other things in the past.
Let’s assume that you have a 50% gross margin on your product and sell that product for $500.
Let’s also assume that your net margin is 11% after paying for all of your overhead, all your employees, all your insurance benefits, and all the rest. 11% is really pretty good, especially depending on your business, but 11% is pretty good. That means you have $445 of overhead costs. You make $55 on that $500. You make 11%. That’s after you’ve paid for everything else. And that’s what you have to take home to the bank or give to your stockholders.
At List price, your gross profit is $250 per unit. If you sell a thousand units at list price, you will gross $250,000. Your net margin is only $55. You will only make $55,000 of net profit on those one thousand units. $55 for each one, which is 11% times one thousand units, is $55,000. That’s what you make on 1,000 units.
Your company is different. I get that. But this is an example I’m going to use.
If you discount that product by 10% due to supply chain issues because your customer is pushing back, you will sell the product for $450. Remember, the product’s list price was $500, so now we are taking $50 off the top. If you haven’t made changes in your company, your gross cost is still $250. You still have to pay for everything else on your product that you had before. Now your gross margin is $200 per unit that didn’t go against your vendors; you didn’t get supply chain help from your vendors. You just took it on the chin. You took $50 out of your gross margin.
Now you’re making $200 per unit. For at a thousand units, your gross profit is $200,000. If you want to make the same gross profit, you will need to sell 1,250 units. That is a 25% increase in sales just because you gave somebody a 10% discount. $250,000 is the same gross profit. That’s the gross profit we made at the list price: $250,000. Now you’re making $200 per unit instead of the $250 or before. That means you will have to sell 1,250 units to make the same amount of gross profit. 25% increase in sales for a 10% discount. It’s really hard to make up 25%. If you can increase sales by 25%, then why in the world do you care if that customer is pushing back on you asking for a 10% discount? It’s almost better to say no. Let the customer walk because you can increase your revenue by 25%.
It actually gets worse. Once again, if you discount that product by 10% due to supply chain issues, you will charge $450. Your overall cost, though, was $445. Remember, we were making $55 of net profit per product. $445 taken away from $450 (which you sold it for) means you only made $5. That’s it. You went from a $55 per product margin per unit to a $5 per unit margin.
At list price, you had a net price profit of $55,000 when you sold 1,000 units. To make the same net profit, You will now have to sell 11,000 units, which means an 1100% increase in sales due to a 10% discount.
The math is really simple. You want to make $55,000, then divide that by $5 because that’s all you’re making per unit now, and it comes out to 11,000 units. That 10 percent discount is really hurting the profitability of your company,
It’s almost better if you can make that up by volume. If you feel like that 10% discount will be made up by volume because you will sell more. You have to sell a lot more because your costs didn’t change.
Obviously, you can change your costs. You can lay some people off. You can buy inferior products. That’s not an immediate fix. If you’re trying to fix it on the sales side, it just means that you have to sell a lot more products. If your salesperson comes to you and says, “I need to give a discount to save this customer,” you need to question that logic. You should think, “Maybe I don’t want that customer because it’s very hard to make up that discount.”
Kevin Lawson: I’ve got one question from the chat here for you related to discounting. How do you keep salespeople from immediately going to discounting? Would you suggest policy or training?
Sean O’Shaughnessey: Both, actually. I’m glad you asked that because I suggest both.
First, I would have a policy starting immediately that no salesperson can offer any discount again. Whatever discount you already have with your customers, I’m sure some customers have deserved a discount from you. Still, you can’t give them any more from this point forward. Everybody loses the ability to give a discount until they come back to you or come back to the team. However, you set up your discounting structure, perhaps with your CFO, whatever makes sense to your company.
So that’s the first thing I set up as a policy.
The training portion is to do almost that same calculation that I just went through with your customer and explain to them, “Look, this is what this means. Let me explain how this works.” They’re probably pretty smart people. They probably have their MBAs on their staff as well. They can do this math with their products, so they will not be surprised if you do this math with them. That training session you have to do with your salespeople to have that really good conversation with their customer and explain. “Look, this doesn’t make sense for me. This is not a win-win situation for my company and me. We can’t do it. What else can we do to make this right? What else can we do to fix this problem?”
That was a great question, and thank you very much.
Should You Increase Your Prices?
Should you increase your prices during COVID, during the time of a pandemic, then in time of a supply chain disruption? If you don’t know how to train your salespeople, reach out to Kevin and me, and we’ll be happy to do it. That’s what we do.
Because you may have to, the reality is your vendors are doing this to you. They have increased your prices without you even asking. I showed you that chart earlier with your cost of gas. Suppose you operate trucks to deliver your product or operate vehicles to deliver your services. Your costs went up. Just the simple fact of life, and you’re just going to have to absorb that.
Or should you? You should pass this on to your customers. Remember, your customers are getting hit by all of their vendors. They may not be happy about you coming to them and saying, “Look, we need to talk about the pricing structure here. We need to fix this. We need to make it better.” It is not likely that you’re going to lose a customer over it because they’re hearing it from everybody. You are just one of the many that they have to deal with. It is the same with how you are getting it too. You are getting it from all sides. They are as well.
The key thing here is to develop a partnership with those customers to solve the problem and make a better combination of you and your customer together to create the right value for that product.
Even if you can absorb the hit in your supply chain, maybe your margins are so strong that you can’t absorb it. I specifically chose an example earlier that made it look really bad,
But maybe your margins are better for your product. This analysis may be a way to increase your margins. Once again, you won’t give back price increases after the COVID nightmare is over; your prices will stay there. And so you can absorb those costs, you can defray some of those costs by raising your prices to your customers. But then you’ll have that price increase when things are better and not as competitive. It will put you in a better situation to potentially be more profitable.
In other words, you could be like Andy Grove talks about. You could be a great company getting better. If you don’t know how to increase your price or you don’t know how to drastically increase your profit, then that’s once again. That’s what Kevin and I help companies do all the time. Please reach out to us, and we’ll be happy to give you some advice along the way and help you through that process.
Are Your Salespeople Scared?
Are your salespeople scared? And I’m going to tell you; I have been in sales for thirty-seven years. I’m old. Some of you saw my picture before I turned off my camera. I have a lot of gray hair.
Scared salespeople are bad salespeople. We just are. When we get scared, we do stupid things like offering a discount to save a customer. This is why you need to make a policy to say you can’t do that. Scared salespeople are simply bad salespeople. You can’t let your salespeople be scared. You may need to rethink your compensation plan depending on how it’s set up so that your salespeople aren’t scared.
So they aren’t worried about how they will buy braces for the kid? How are they going to save for their college education? How are they going to make their mortgage payment?
You may need to rethink your compensation plan so that the salesperson knows that if they’re doing the right things, then they’re OK; they’re in the boat with you. And they’re part of the same situation that you are.
Do you currently pay commission when a customer pays you or when your product ships? In other words, the customer has not paid the invoice, or when the product ships? This is very typical for companies to do. They’ll pay a commission for one of those two events.
If you cannot ship your products, you may risk your salesperson’s variable compensation. They did all the hard work. They convinced that customer to buy. They got that order in the door. But then, for reasons outside of their control and outside of your control, you can’t ship your products. If you cannot fulfill those products, then the order is at risk.
In that situation, the salesperson is not getting paid his variable commission, which is how he makes money. If you have the right kind of compensation plan (and again, Kevin and I can help you fix it), you will have a compensation plan with some base and some variable. We can talk about if that makes sense in your industry, but that means that variable compensation is at risk, and that makes salespeople scared.
Now you can say, “Suck it up. You know, we’re all in this together. Suck it up.” Well, suck it up kind of works. But remember that salesperson, if he’s any good, he’s got four offers in his pocket so he could find another job. You need to think about that. Don’t let him be scared. Don’t let her be scared.
Consider variations of paying. Maybe partially upon receiving an order and then partially upon shipping in order or when the customer pays. Now, I fully understand that you may have to talk with your salespeople about clawback. And if you don’t understand what clawback is, it’s basically that we paid you, but the order never happened. We never got paid. The customer didn’t pay us. We need to claw that money back from you because you didn’t complete the order. You might have to have that conversation. That’s an easy conversation to have. Once again, Kevin and I will be happy to help you have that conversation. We’ve had that conversation over and over and again in our careers. We know how to do that. We know how to set that up, but that is a possible opportunity to make your salespeople less scared.
The other way to make them less scared is to empower them. Salespeople can see through lies because they are born liars. Let’s be honest. The common joke, lips are moving; therefore, the salesperson is lying. It’s not 100 percent true. Obviously, it’s a joke, and it’s a bad joke, in my opinion, but that’s OK. But if you lie to a liar, a liar knows. We can see through it. We’ll know if you are not telling us the truth. Give them the truth. Empower them to know what’s going on in the business. Do the calculation on the profitability that I just gave to you with them. You’re going to have these slides, so you’re going to be able to walk through that with them.
Don’t let your best salespeople leave. If your business is in trouble, the last thing you need is your best salesperson walking out the door, so don’t let him walk out the door. Turnover in sales is incredibly difficult to recover from. As before, we can help you give you some ideas on how to make that happen, but don’t let them leave. If they’ve already left, then we need to help you because now you need to act fast. You need to fill that void. The calculation of I’ve lost the salesperson, that revenue that that salesperson is responsible for is not coming in the door is worse than the calculation I did for you earlier on discounting. It’s actually a bigger discounting hit into your overall company. Having an open headcount is incredibly painful for you to make your financial goals. You need to address that issue very, very quickly and work hard at doing it.
Get close to your customers. Use this opportunity to align your ability to sit with your customers and work with your customer to find out when they need the product? What is the timetable for their needs? When do they need to receive the product that you are shipping to them? If they know that they need some in three months, six months, and nine months, then work with them to develop that ability to give you advance orders or give you some visibility into that need. Advance orders are fantastic. Letters of intent are fantastic. You can then take those and potentially buy long lead-time items well ahead of schedule. When we talk about the pile-up of the boats in the Pacific Ocean and the Atlantic Ocean trying to get into our country, it’s not like things aren’t going through. They’re just going through slower, and it’s taking longer to get through. If you can place an order for those subassemblies or those parts weeks earlier or months earlier, then maybe you can completely alleviate the problem. That confidence of can you sell the product at the end of the time? Once again, if you can work with your customer. Get close to your customer. Become a partner with your customer. You can get ahead of it!
Also, you may be swapping out parts if you can’t get this part from Asia. Now you will get this part from Mexico or somewhere in the United States. You fix that supply problem by swapping out the parts. Now your product is a little bit different. It’s not as good as the other product, or maybe it’s just a different format. It’s got a different rating or whatever. You need to work with your customer and say, “Hey, if I make this change, is this going to be OK? And are you OK with that?” Because they’re going to have two different things that they’re buying from you; shipped yesterday then tomorrow.
DON’T STOP SELLING!
This is that big slide that I was telling you about before. This is the number one slide of everything I can tell you not to do and to be successful in the future. Don’t stop selling!
Your first reaction when you have a hard time shipping product is to tell your salespeople to stop selling that thing because you know we can’t fulfill it.
Don’t do that.
That’s the worst thing that you can possibly do. Sales is a constant process. Your customer is buying whether you sell to them or not. You could potentially lose the order. The customer can buy from a different vendor if you stop selling to them. You don’t get to make that up. You just don’t. You need to constantly sell. You must do it every day. That product that is hard to fill; keep selling it. You have to sell it. If you stop, as I said, the prospect may be from a different vendor.
So you need to help the sales team find new prospects even more diligently and more aggressively than they did in the past. This is the time to sell. This is the time to go into overdrive. This is the time to work hard. And this is especially true if one of your existing customers. I think this is one of the questions that Kevin asked earlier had or had the list. This is especially true if one of your existing customers has stopped purchasing. Now you have a void. You were shipping 10000 units a month, and now you’re shipping nine thousand five hundred. You’ve got to make up that other five hundred, and you’ve got to make that up very fast. And the way to do that is to find new customers. Remember, you probably have a one percent market share at best. Many people out there can be your customer who are not your customer.
Your Reaction In A Crisis Is Critical
Your reaction to this crisis is critical. Bad companies are destroyed by crisis. Good companies survive them, but great companies are improved by them. And you want to come out of this. On the other side, being a great company at this time, take the steps, the steps that you need to increase your revenue and get closer to your customers. This is the time to do it. It’s a perfect opportunity, and don’t let a good crisis go to waste. We’ve learned that from some of our political leaders.
Our Next Webinar
I hope you’ve enjoyed this session. We are going to do it again. We’re going to do a different topic. Our next webinar is going to be on February 16 at 11:00 a.m. Eastern. The topic is going to be “CRM for the growth-focused CEO.”
It’s not going to be a features and benefits chat. We’re not going to try to sell you a product. That is not our goal. Instead, we’re going to focus on how to use technology to:
- increase your sales,
- shorten your sales cycles,
- capture relevant information that helps you be more competitive,
- and focus on your customer even more.
It’s forty-five minutes long, and it’ll be a great opportunity for you to learn how to increase the growth of your organization.
Very quickly, a little bit about Kevin and me.
I’m the CEO of a company called New Sales Expert. After thirty-seven years in the selling industry for many big companies (and some of those are listed there in that second paragraph). I decided that it was better for me to focus my attention on small and medium-sized businesses on a fractional basis. I do that because I love bringing new products to market. One of the things that I enjoyed most as I looked at those companies in the past that I worked for was that I really enjoyed selling new products. I’m really jazzed about selling a product that no one knows how to sell.
I’ve done that to a lot of companies. Some Fortune 500 companies are on that list. That’s what I do. I help companies that struggle to get their sales teams started, that struggle making sales happen. I help them get past those. I help them break through that ceiling that’s holding them back. Or that wall that’s holding them back. And I helped create an environment to make revenue happen.
Kevin is also similar to me. He’s a B2B sales professional in the owner of Lighthouse Sales Advisors. We’re two different companies and just happen to work together a lot. He’s worked for I.T. and distribution companies, tech founders, and I.T. consultants throughout his career in sales, sales, management, sales leadership. Kevin has a great reputation at both tactical and strategic levels. It allows him to rise above the problem, identify solutions and help you execute on them. For 20 years, Kevin’s leadership capabilities have helped him become a major factor in helping his companies be more successful. He is also a virtual or fractional V.P. of sales.
Either one of us will have gladly help you solve your problems at this point.
Kevin, why don’t we open everybody up for questions and comments? I see there might be some chats out there, but I can’t see what they are. If there are any comments you want to suggest or any questions that people want to ask, let’s do that.
Kevin Lawson: Thanks, Sean; that was some really great content. We are a couple of minutes past our time, but I’ve opened up our listeners’ video and microphone options. If you’d like to talk directly, I know some of you have to go already as we race for the top of the hour, so thank you all for being here. And Sean, I will hang on to field any questions you might have. And we look forward and hope to see you on February 16 with our next installment of the CEO Workshop. Thanks, everybody.
Sean O’Shaughnessey: Yeah. And once again, we’re still here, so please fire away on questions or chats.
Kevin Lawson: Here’s one from Mike. Don’t we have a double crisis now? Inflation is bad and getting worse. Mike, you hit the nail on the head. It’s our opportunity now to lean into that and find out how to solve our customers’ problems. Yeah. Great observation.
Sean O’Shaughnessey: I might say we have a triple crisis as we also have a hard time hiring people. I don’t know, a single company that is fully employed. We have a problem hiring people as well. We all have this problem of getting the product in the door, getting products across the oceans because of our supply chain problems. We have all kinds of crises that are going on. It’s a challenging time to run a business,
I’d imagine you have a full boat of competing priorities inside and outside of your company. Never miss taking advantage of a crisis.
Kevin Lawson: Thumbs up, Sean.
Sean O’Shaughnessey: Yep, thank you very much for that, Darren. I’m not going to get political on this. But that was one of the things that people say about some of our political leaders. Never waste a good crisis.
Kevin Lawson: Thank you all again. You’ve been a great audience. Thank you for utilizing the chat and sharing your ideas, thoughts, and questions. It’s enriched our experience as presenters, and we wish you all the best for the rest of your day.
Sean O’Shaughnessey: Thank you very much.
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