Sales ≠ Revenue – Tactics versus Strategy (Part II)

In the first part of this blog, I outlined the 5 basic rules to set up your sales plan in order to meet or better beat your revenue target. They were

1.      Secure the Base

2.      Cycle Time Adjust

3.      Prepare for ‘Shrinkage’

4.      Refine your Focus

5.      Plan the Unexpected

But it not just about hitting the top-line number, it’s about making the bottom-line simultaneously. In the short-term, anyone can ‘buy’ revenue, especially with large projects over-sold, over-promised, and then over-delivered, but that won’t generate the cash to keep the business healthy, pay the bonuses, and satisfy the owners and shareholders. As well as ‘quantity’, you need ‘quality’ sales not just for the profit but to safeguard against sudden changes in the environment. So, here are rules 6-10 for quality:-

  1. Maximise Profitability by Minimising Opportunity Cost – Big spenders might go a long way to helping hit that new higher revenue target but they can also soak up time and money better spent elsewhere. Before deciding who to grow, check your client-by-client profitability. The rules will vary depending on your size and set up but if, for a given client, out-of-pockets are regularly over 50% or time costs on the survey-based work are topping 35%, you’re either undercharging or over-servicing. Either way, if you can’t change the cost model, you may need to look elsewhere for longer term profitable growth. (Of course, you’ll need the right financial systems in place to do this analysis in the first place.)
  2. Avoid Over-Concentrating – As a rule, you’ll make more money out of a million dollars spent by four clients than you will out of the same spent by forty. But if you’re dependent on a few ‘cash cows’, you’re very vulnerable should one of them get acquired, fall on hard times, or re-organise its research buying. By the same token, unless you’re in the syndicated research business where, after the first few, each additional report sold is almost pure profit, a long ‘tail’ of small clients will eat into your margin (usually by due to disproportionate servicing time.) Again, it depends on your size, scope, and the depth of your client service team, but beware once you have any client who accounts for over 10% of sales or if your top four account for more than 25%. Similarly, if you’ve got 80% of your clients at the smaller end accounting for 20% of sales, you need to start weeding some out and putting up the prices. If you increase their prices by 50% and lose half of them you’ve only got 5% of revenue to replace and a lot of resources freed up to do so.
  3. Expand Breadth and Depth – Look for opportunities to increase breadth across the clients with diverse businesses. If you have a good relationship with, say, the personal care marketing team, try to use that to gain consideration from the same company’s healthcare division. Similarly, to increase depth, if you’re doing most of the brand equity work, look to extend into the customer satisfaction, advertising, or packaging areas, depending where you may have an advantage. But again be careful of putting all your eggs in one basket and over-concentrating.
  4. Push Product Quality – In the main, you should aim to have your proprietary products take up as large a share of your sales as possible and incentivise your teams to achieve this. Proprietary products generally command a price premium, are more efficiently executed, and allow you to better and more consistently service as comparisons over time and product category become easier. Once the product is established at the client and becomes one of their KPI’s, the selling time and costs reduce, again freeing up resource to grow elsewhere. But don’t underestimate the amount of ‘internal selling’ and training you’ll need to realise this (backed up with a ‘tamper-proof’ incentive system.)
  5. Programs, not Projects – It’s often more economical to service one client across several related topics than to service the same client on one study across several markets. For key clients, or new prospects, pitch an overall program, with built-in incremental ‘volume’ discounts at the beginning of a planning cycle rather than focusing on a project-by-project approach. In this way, you can service better as you get a more holistic view of your clients’ business and in doing so make yourself more robust against competition. It also smooths out the revenue stream and helps agencies with a traditionally high level of ad hoc work plan resources better. But again, manage the balance of security and dependence with overlapping programs so if one client cuts back, there are still other revenue streams.

If you can couple these 5 Quality and 5 Quantity Rules, your longer term profitable revenue growth strategy will become more achievable.

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