Business Stupidity on the Increase

by Dave Kurlan
Reprinted from the July 2001 issue of Smart Selling

How has the uncertain economy affected your company so far? Are sales down? Are they down so much that revenues are not sufficient to cover expenses? Let’s use one company’s experience as an example of how many companies are responding to the current downturn.

George is the VP of Sales at Go-Figure, an accounting software company. When his boss demanded that he must drastically cut expenses to compensate for sales that were only 50% of goal, he responded by following his gut instinct. George pulled his remaining ads from the magazines in which he advertises, called the headhunter and put a hold on hiring 3 salespeople and cancelled the sales training he had scheduled to begin next month.

George met with Anthony, the company’s president, and boasted that the expenses he cut would save the company about $250,000. Anthony could only shake his head. THE SHORTFALL WAS MORE LIKE $2 MILLION AND THOSE CUTS WOULD HARDLY MAKE A DENT. But what else could he do? In addition to George’s cuts, Anthony laid off half of the 120 people at the company and stopped making lease payments on their computers and furniture.

Feeling confident that revenue would cover the seriously reduced expenses, Anthony went on summer vacation knowing that George would have good news when he returned. But two weeks later, sporting a new car, sun tan and walking into a reorganized company, Anthony could not believe the change. How could he have anticipated that after six weeks of cutting expenses, the news could be even worse? Sales were now off by 75% from their original expectations. How could that have happened? Could anyone have seen this coming?

So where is the real surprise here? It makes perfect sense that IF YOU STOP OR CUT BACK ON YOUR ADVERTISING, FEWER CALLS AND LEADS WILL COME IN. It also makes perfect sense that when you lay off half your staff, those who are left will have a morale problem. COMBINE A COMPANY WIDE ATTITUDE PROBLEM WITH A LACK OF LEADS AND A SALES FORCE ILL-EQUIPPED TO SELL IN AN UNCERTAIN ECONOMY AND YOU HAVE A FORMULA FOR A DISASTER OF EPIC PROPORTIONS.

Why is it so obvious to us but not to the managers who make these decisions? Most executives don’t realize the importance of marketing, advertising, recruiting and sales development as investments that should be made in disproportion to the sales trend. The worse things get, the MORE important these activities become. COMPANIES MUST RESIST THE TEMPTATION TO CUT BACK IN THESE AREAS AND INSTEAD, INVEST HEAVILY IN AREAS THAT WILL POSITIVELY IMPACT SALES. In addition, companies must realize how unprepared most salespeople are to sell in this environment. Their lack of advanced skills and experience require that you have your existing sales force evaluated in order to determine whether any of them have the potential to excel under these economic conditions. If you have salespeople who possess the required foundation for success, an evaluation will show how you can help them reach their potential. If you have some people who aren’t up to the task, you can make changes now, rather than wait until it’s too late.

Training? There will never be a better time. Train, train, train. Just make sure it’s on the right people and you’re providing the right help. The right evaluation will guarantee success there.

Advertising and Marketing? For goodness sake, don’t cut back now. You should be marketing more than ever, especially if your competitors have cut back. Make sure it’s more targeted and the message is more effective than “pick us instead of them”. This is your chance to establish yourself as the perceived leader in the market.

And finally, DON’T PLAN TO FAIL. Plan to grow while everyone else is tightening their belt. Take sales away from your competitors while they are busy cutting their expenses. Seize the opportunity before you are seized.