Please don't blame the crisis

May 28 2012 - No, it's really not the fault of the crisis - you yourself are to blame. If turnover is lower, it is because business is not good. But why hasn't business dropped for every company - what is the difference between you and your competitor? And why do things that go easy go even easier for one entrepreneur than another? Does the difference lay in the fact that some work harder, possess more skills or may have more insight?

Under the microscope

Recently I met with a client, a company that specializes in job boards. Part of their business has a reasonable turnover but they want to improve the other part, the part that is unsuccessful. Together we will develop a proposal for a new job board, but first I started to ask questions. The fundamental problem facing entrepreneurs who want to change is investment. Where do you get the money to reverse the situation when you're already in a downward spiral? Should you change the situation by trying to build something new from scratch, as my client tried, or put your existing activities under the microscope? In my view the last option is inevitable. How many clients does your existing business deliver. Which employee sells the product to those customers and why doesn't it deliver more clients? You are a niche player; how big is your market share in that niche and is it growing or is it declining?

My client had no answer to any of my questions. This is common among entrepreneurs. They have sales people, but don't know how many hot or cold phone calls or appointments on a weekly, monthly, quarterly or annual basis these employees make. Let alone knowing which companies are called and why they are called. And what is the conversion following such sales actions? Often entrepreneurs have no sales strategy whatsoever.

Sales strategy and pitch

Imagine a sales person who makes ten phone calls a day on his or her own. Probably most of these calls will be to existing customers, because without guidance or stringent evaluation of results, the sales person would rather take the easy road and choose to call existing customers instead of winning new ones. What would it do for your turnover if you changed this selling process by first finding out what the current situation was and then planning a sales strategy with a good sales pitch for new prospects in your niche?

First, consider why recruiters might want to buy specifically from you. The underlying question is: what is your core business? In this case the core business is selling jobs. Pointing out/drawing a "value circle" can be helpful to get some answers. Central are the recruiters and the vacancies you want them to place with you, for example a vacancy with a commission of 500 euro (in this case the value of a single placement). The surrounding circle can be filled in with the reasons why your job posting is worth that 500 euro's. If you know those arguments well, it becomes a lot easier to sell the vacancy to a customer or even a prospective customer.

Efficiency Improvement

With a reasonable conversion of, for example, 10 percent of the phone calls by your sales people (if properly targeted) you could expect approximately one new job posting a month. It is not inconceivable that, while you still have no growth policy, next month your salesperson has suddenly spoken to 500 contacts. (For the sake of clarity we have not taken into consideration the possibility of selling packages with multiple placements or up-selling to more extensive publication capabilities). With a conversion of 10 percent this adds up to 50 new customers with a turnover of at least one job placement per customer. Then your turnover would increase by 50x500 = 25,000 euros.

This is without any additional investment and without having to employ more people. With this profit you could also consider hiring another sales person, which could further double this performance improvement.

Focus on your own inefficiency

With the money left over, you come to me. Together we will start a new activity such as a new job board, proceeding from the new situation and with the knowledge that it is mainly focus that makes a business successful.

I was in shock at the customer's response. Actually he knew all this, but along the way he just lost focus. My customer was in his turn shocked that, although it wasn't rocket science, he still needed me to realize this. I ended the conversation with the following statement. It might be so that the economic crisis has reduced the economy by 5 percent. But if your business is 50 percent inefficient the decrease really doesn't matter. Do not look at the market until you have first looked at what you can change in your situation. How can you run your company more efficiently? A low turnover is never the fault of another or of a force from outside. People still make money in a bad economy. And I suspect that these are the people who understand the above statement all too well…

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