Managing a business requires a broad set of skills and attention to all parts of the business. Many CEO’s are good at making or selling “things” (goods and service offerings) but some don’t spend enough time monitoring the overall health of their business. Keeping close tabs on the performance of the business is critical, particularly as our economy works its way through this recovery. The easiest things to monitor are sales and cash in the bank, but that is only part of the picture. Positioning the company for growth requires additional effort to understand and monitor not only sales but also those activities that impact profitability and cash flow.  A key to successfully growing the business is identifying a set of key metrics that provide the visibility to help chart the course for the company’s growth, let’s review “What to Measure:”

Margins - The first step is to understand your gross profit margins (sales minus cost of sales). Begin by segmenting sales into groups of products or services that are similar, such as product families. Segment the cost of products and services into those same groups or product families. This will enable the monitoring of margins by product family and make decisions about pricing and position you to monitor costs in each product line.

Expenses – Next, monitor those costs that create and market the products and services, such as research and development, marketing and sales expenses. To the extent possible, group the costs to design and market products so that those costs can be compared to the margins generated by the sales of those products to facilitate decisions about continued and new investment.

Receivables – Once the products and services are sold and the quicker the receivables are collected, the sooner the cash is available for supporting the business. Speeding collections starts with taking orders accurately, invoicing correctly and following up with customers to ensure that all steps have been done by the company to support the customer’s approval process. Measuring these key steps will help reduce issues and speed collection resulting in better cash flow and reduced write-offs and increased profits

Inventory – If the company creates or buy products for resale, measure how quickly the overall inventory turns (inventory used or sold), and if the company has a process that supports it, measure how quickly groups of inventory turn. Every dollar tied up in inventory is a dollar in cash unavailable for other operating needs.

Operations – Look for operational metrics such as employee counts, number of hours billed, square footage, etc. Besides looking at those operational metrics, try to combine financial metrics with operational metrics to provide a fuller picture of the business.

Measurement steps – Create a scorecard using a spreadsheet or by purchasing a scorecarding product. In either case, look for a balance between the level of effort to collect the data and the frequency of providing the information. Start at a higher level of information and keep it simple. Add more complexity as additional areas are identified that warrant more analysis. Look at the trends in the metrics over several years to get a big picture view about where things are improving and where attention is warranted. Also, check with the bank to get industry standards so that a baseline can be established for comparison purposes.

By frequently measuring the important trends in any business the management will be in a better position to control the growth of the business.

I use to discount that response, “but we are different”, because I knew that they were not different when looking at the “required” activities needed to correct their situation.  However, after many years of working on many different operating and performance challenges for organization, I have come to the conclusion that they probably are different, but how?

Like people, organizations are like “snowflakes”, no two are exactly the same.  Even identical twins are not identical in every way say clinicians.  Why would an organization be treated as if it were the same as another?

Have you ever seen two organizations with the same exact cultures?  Cultures evolve over time based on leadership influences, operating practices, environmental factors, and results (positive or negative).

Have you ever see two organizations with the same exact operating processes?  Operating characteristics are created from external influences and proprietary methods and practices that have proven to generate the results required by the organization.

Have you seen any two organizations treat their customers in exactly the same way?  Customer relationship management is not a computer system, but a reflection of the respect that the organization has for their customers, and the customers respect they have for the organization and its products or services.

So what is the significance of knowing that no two organizations may be the same? It is important NOT to prematurely classify a company or its workforce as having the same issues or initiatives as others that may be in their same market, industry or organization type.   This means internally and externally to the enterprise.

If you’re a CEO, don’t make the mistake of trying to clone your new assignment into an exact copy of your previous assignment, no matter how successful you were.  You have a new environment that may need changing, but your success will depend on how you integrate new activities with the existing operation and culture.  It all takes time and patience.

If you’re a sales person, you better do your homework on the prospect and not assume they are like your last sale, they are not.  Your techniques may be the same, but their need for your product or service will probably be for different reasons than you last client.  Get to know them, understand them and serve them—then you will have a loyal customer.

If you’re a vendor or supplier, don’t assume that your customers require the same type of service.  They may require the same level of service, but delivered in different ways.  Your objective it so know them well enough and to care enough about them to meet their requirements for uniqueness.

No matter what your connection is to an organization, do not overlook the importance of having a trusted relationship with that organization.  It is this trusted relationship that will make that connection between the organization and yourself a more successful one.

I see four areas of failure that have an impact on organization because they are unsure of what the future holds.  Looking out into the future trying to predict what actions to take, without keeping focused on the near term, the organization may encounter four key failures:

• Failure to execute
• Failure in focus
• Failure in confidence
• Failure in trust

Failure to execute is an issue during both certain and uncertain times.  If the organization cannot translate their strategies into tactics and act on those tactics, the organization will continue to operate on daily activities as they occur (Parkinson’s Law), whether or not they are the correct actions.  Execution goes beyond planning and strategizing, it takes a work plan and a willing workforce to implement the plan.

Failure in focus comes from being so concerned with the unknown, that there is a paralysis of the leadership and a shortage of direction.  This inability to chart a course and take action is a symptom of an organization that is unwilling to take risk.  The enterprise will move forward, but the wasted resources from a lack of direction can take a lasting negative financial impact.

Failure in confidence points to the level of uncertainty experience within the organization.  If financial strength is an issue and a lack of focus, then the confidence that the direction will produce the desired results is weak.  Without confidence, risk becomes a major issue that cannot be easily overcome.  If a lack of confidence lingers, it can have a long term impact on the organizations culture.

Failure in trust causes operating activities to slow and the cost related to wasted resources to rise.  Internally this factor shows up on inter-departmental turf wars and office political power plays.  Externally the impact is a lack of cooperation, delayed deliveries, incomplete communication and an increased reliance on contractual measurement of performance.  The end result is a lack of cooperation and performance.

Look at these four failures as the trees and the level of uncertainty as the forest.  Knowing how to see the benefit of focusing on the trees will make the forest of uncertainty much less daunting.

Advertising does not build relationships, it only hopes to influence the moment and convert those few seconds into a buying decision for a product.  Word of Mouth (WOM) is the best and most reliable method of promoting a product.

A Testimonial from one person to another brings with it a level of positive bias and a tested experience. These endorsements or referrals are provided from one trusted person or company to another.  It is the trusted relationship that makes the recommendation more credible.

Word of Mouth (WOM) relationship building is growing rapidly due to wider use of social media applications (e.g. blogs, facebook, myspace, twitter).  How can your company use a WOM approach to expand your loyal customer base?  I am working with an organization that has some new and innovative ways to use this technology to help businesses grow – I will be writing more about this approach next month.   To provide a little more introduction and background to WOM, I am offering you a FREE look at an e-book that is the first of a series on how to use digital applications to expand your presence in your market.

Click here for your FREE eBook access: http://wom10.com/Pages/business-tools-book

PR if done correctly can be a game changer for an organization.  PR can also backfire if not taken seriously and can have a negative impact on your image with prospects, customers and your industry.  I recently read a blog post on bNet that outlined the 10 Breakthrough PR Techniques from a Master. The interview with Lou Hoffman, President and CEO of Hoffman Agency, provides an excellent set of techniques and examples of how to use PR to maximize its effectiveness.

Click here for the interview:  http://blogs.bnet.com/ceo/?p=3620&tag=content;col2

What are your experiences, positive or negative, with PR?

Here are five common reasons why new products fail:

1.  Lack of market knowledge- Whether a company is new or established in a market, a common mistake is underestimating the impact of market change.  Markets change for a variety of reasons, and if a company does not stay connected with their market, they may begin operating under obsolete assumptions.  This leads to poor performance and often enterprise failure.  A few examples   of market change are as follows:

• Lower customer demand- Customers are not interested in the product or service.  Three levels of consumer demand are based on the customer’s needs, wants and desires. Depending on how the customer views the importance of the product will determine if they are going to change their buying pattern.    Companies that do not know how their customers view the company’s product will probably not be conscious of the reasons for the customer demand drop-off.Recessionary times tend to impact those products that customers view as wants or desires.  These are usually products that entertain or follow trends, and are purchased with discretionary income (electronics, trend clothing, high-end cars, etc.).  Needs are those products that are more commodity items and are thought to be indispensible (food and personal items, telephone service, public transportation, etc.).
• A change in customer preference- Customers are migrating to other products. Customer buying decisions can change for several reasons.  These reasons can be due to product differences, technology developments, advertising and brand influences, regulatory requirements, and perceived value increases.  Knowledge of current and upcoming market changes is critical to any company’s ability to respond and sustain operations.
• A change in sales and distribution methods-Customers want to purchase their products in a different way. The Internet has changed the buying habits of much of the world’s economy.  How has it impacted your products in your market?  Brick-n-mortar stores are still strong points-of-sale for products if they provide a positive buying experience. Most business-to-business and retail organizations have added Internet stores to sell their products in addition to their brick-n-mortar stores. Wholesalers and distributors are expanding and contracting in many markets, depending on the product type.  If the company’s strategy is not to have a large sales force to distribute your product, then the Internet, wholesalers and distributors may be helpful.  However, the wholesale/distribution route may not be the best approach if your company wants strict control over the sales and service process, and a strong relationship with your end customers.It all comes down to how the customer wants to buy your product.

2.  Lack of product differentiation-The customer cannot see the value of the product being introduced.  This lack of differentiation can be between your competitor’s and/or your own product.   If you’re releasing a new version of an existing product, how are the two products different?  Why would a customer purchase a new version, if the older product still provides value?  How different is your new product when compared to the competitor’s?  Differences that are valued by the customer will influence their buying decision.  Look at your product’s quality and performance from the customer’s perspective.

• Quality-How does the product hold up in comparison to previous products or the competition? Consider how durable, flexible and adaptable the product or service appears to your customer base.
• Performance- How does the product perform?  Take into consideration speed, usability, features, functions and how well it does what it is supposed to do.

3.  Lack of brand recognition-The customer does not identify the new product with your company or prior products. Companies that are not concerned about creating brand awareness are making a critical error.  It is important to balance brand recognition with the cost of creating the brand.  Brands evolve over time as the customer’s perceived value from the purchase of products or company services increases.  The objective is to have customers identify the purchase of your product and/or company with their most positive buying experiences just by seeing the brand (name, logo, motto, song, etc.).

4.  Lack of customer support-The customer cannot get the level of support they want.  A company that is only focused on the sales side of their product or service may fail to build strong customer relationships resulting in a loss of customer loyalty.  Without loyalty, there is nothing to keep the customer from switching to your competition without notice.  A company that is focused on developing a long term sustainable operation knows that it is imperative to develop strong relationships with their customers.  This is accomplished by offering effective sales and customer support.  Except for on-line Internet sales, the front line customer care effort should come from the sales force, even after the sale is closed.  Customer care organizations, departments and services can help satisfy the customers when there are issues that must be resolved, but the sales person who closed the sale should still be involved.  We all know it costs more to get a new customer than it does to save one.  New products that are launched without a customer support effort in place are destined for problems.

5.  Lack of product development process- Many new products never get to market because the company does not have a product development process. Product development should be viewed as a process, and not an ad hoc event.  The process starts with an idea.  The more innovative the organization the more ideas.  The idea gets tested as to viability in the market.  Market viability means that the company knows their customers and their buying habits.  The idea gets a development assessment.  The company must then determine how practical it is to create the product out of the idea.  The idea then gets a value test (i.e. what is the value to the company (revenues/profits, market share, etc.) and to the customer (performance, quality, price, availability, etc.).   If the idea passes all tests and assessments, then a project is chartered, prioritized and funded.  A company without a process for product development is taking a significant risk of having the new product effort terminated before reaching the market.

My definition of an Entrepreneur is an individual or group of individuals that take an idea, and develop that idea and manage their business to the point where it becomes sustainable.  A sustainable business is an enterprise that can generate cash flow levels that support itself on a going-forward basis.  It is no longer depending on investor funding or credit to support its operations.  Investors that have believed in an idea, invested in an “Entrepreneur” and eventually saw their investment disappear due to company failure, know exactly what sustainability or the lack of it means to them.  More than likely that Entrepreneur may have not been an Entrepreneur at all, they may have been a Permopreneur^TM.

What is a “Permopreneur^TM”?  They are those individuals or groups that take an idea and create a business based on that idea, but are unable to generate enough cash flow to sustain their operation on its own.  There are two types of Permopreneurs^TM; The first type are those that are blessed with the gift of turning ideas into business opportunities, and are very secure in their abilities to know when to turn the business over to professional leaders and operators.  They usually employ professional operators to help raise additional funding and direct the company to sustainability.  The second type of Permopreneur^TM is either intentionally or unintentionally headed toward failure.  They are very skilled at convincing investors to finance their idea or technology, skilled employees to join their company, and they believe they can operate their way to sustainability.  Unfortunately, they don’t have the leadership ability and operating skills to keep the company from eventual failure.   The end result is another failed business with a bewildered promopreneur wondering what happened with a following number of devastated investors and employees. A more sinister version of the Permopreneur^TM has no intention of taking the company to sustainability.  Their “rush” comes from raising money to support a luxury life-style while they look for the next idea, and the cycle is repeated.  They have no intention of taking the company to cash flow sustainability.  They know there are plenty of investors that fail to do a proper job of due diligence and are greedy enough to feed the Permopreneur^TM ego with lots of opportunities.

I have had experience with Entrepreneurism for many years, having worked with Entrepreneurs and I have held the title myself.   I have tremendous respect for those Entrepreneurs and Permopreneurs^TM that have successful track records for creating sustainable businesses.  If you consider yourself an Entrepreneur, it would be worth your time to do a self-evaluation to honestly determine if you have the skills (not just the desire) to direct your business idea all the way to the goal line -cash flow sustainability.  If you are not sure, then look for the right time to hand off the company to a skilled leader and operator and consider yourself a successful Permopreneur^TM.

In simple terms, marketing is described as the process of stimulating demand for a product or service.  A sale is the process of closing a sale, and I would add an important factor that is often overlooked as a part of the sales process. That is the collection of sales proceeds that are booked as revenues for the organization.  However, if the organization is non-profit, then sales is the process of closing on the contribution AND collecting the funds.  In many organizations, once the salesperson or team arrives back at the office with the signed contract, they consider that sale complete; and, it is then up to accounting to collect the cash from the customer or contributor.

Most sales leadership will say that sales should be selling, not collecting; and, they are correct in most cases.  Then again, if the customer or contributor does not follow through by paying the funds as agreed to in the transaction, who then has the best relationship with the customer or contributor? Accounting?  Doubtful.  No, it is the sales person who closed the transaction initially.  They should assist in the collections process if there is a need; after all, the life blood of any organization is cash flow, not signed contracts or donation pledges.

Marketing consists of a number of activities that are required to stimulate demand for a product or service.  Those are covered in detail under the marketing process titled The Four Ps of Marketing by Jerome McCarthy.

Going one step further, Arago Partners LLC has published an article which expands the description of the activities of marketing to The Five Ps of Marketing ( http://www.aragopartnersllc.com/documents/MarketingandSalesDifferencesPDF.pdf) .  The activities for stimulating demand for a product are the structural aspects of the product (design, feature, function, quality, etc.), the price, the placement, the promotion, and the profitability.  Each of these five Ps of marketing is an activity that must be developed, tested and launched in order for the sales process to most effective.  Of course, the sales process can proceed while all activities are being completed; but, they should all be in place to enhance the greatest level of effectiveness for the sales process.

As stated earlier, the sales process has the overall objective of closing the sale.  Closing the sale should mean the customer signs the contract or pledge and commits to the payment of funds to consummate the transaction under the terms of the contract or pledge.  So far, the emphasis of this article is to point to the differences between Sales and Marketing, and that primarily means the “closing of the sale”.  The close is the final step in the sales process, so let’s discuss the initial steps that lead up to the close.

The sales process is made up of seven stages:

• Leads
• Qualifying the lead
• Contact
• Presentation
• Handling objections
• Closing the sale
• Post-sale service

Leads- Finding prospective sales clients or customers can represent up to as much as 60% of a sales person’s time, depending on the market and types of products or services being offered.  Since Marketing has the objective of stimulating demand, if there is an effective marketing program in place, the availability of sales prospects should be adequate.  There are several proven techniques for finding prospects: referrals, networking, and lists.

Referrals are the best form of prospect gathering.  They are often from other satisfied customers and come with an endorsement from a satisfied customer, a certain amount of product or service knowledge and a certain level of commitment toward the product or service.  Always make sure to show gratitude to the appropriate customer for the referral.

Networking requires the effort to reach out to prospects, to introduce them to the products or services and to let them know where to learn more about the products or services.  Networking is most effective within associations, social networking groups, trade shows, publications, and events.  Cold calling is usually the least effective and least desirable method; but, depending on the market and product or service, it may be the method of choice.  One-on-one contact produces the most effective results but comes at the highest cost.  Relationship building on a personal basis will produce the greatest results over time, if the sales process is considered a marathon and not a sprint.

Lists can be purchased or developed; but, in both cases, they will contain a number of prospects who meet a profile that should be conducive to a sale of the product or service.  Lists can be developed as a result of doing a mailing, telemarketing, surveys, contests, a give-away, and follow-up from networking at large events.  There are several listing organizations that will sell a directory or list of names and contact information based on a desired profile.

A method for determining the effectiveness of a lead generation program is to compare its results to the Rule of 45, which simply states that 45% of all leads should be converted into a sale.

Qualifying the lead- Converting a lead into a sale implies that the lead needs to be evaluated to see if they truly are a candidate for the product or service, which, in turn, increases the probability of closing the sale.  This evaluation process requires a certain amount of information about the prospect to determine if there would be a demand for the product or service.

Are they in an industry that would have a need for the product or service? Have they shown interest in the product or service in the past, either directly or indirectly?  Would their operation need the product or service?  Would they have the financial strength to purchase the product or service? Are they similar to other existing or past customers?  All these questions are ways to qualify the prospect before taking the next step.

Contact- Either prospects will initiate contact or the selling organization will initiate contact with the prospect.  In either case, it is important to be prepared for this first contact with a plan as to what is to be accomplished.  The goal is to move the prospect closer to a decision to purchase the product or service.  An effective sales contact establishes a level of interest in the product or service and gains a commitment for a second contact. This can be either a face-to-face appointment or a second call with the potential to send out additional information about the product or service to be used during the second meeting.  As long as the prospect’s final answer is not an unequivocal NO, then the contact was a success and there is still an opportunity to make the sale.

Presentation- This stage provides the opportunity to present the pertinent information about the product or service that is thought to be of most value to the prospect.  All the reasons why the prospect should want to purchase the product or service should be explored during the presentation.  Highlight the strongest benefits of the product or service as well as the potential cost savings or ability to generate greater sales by the prospect.

Show how the prospect can better compete in its marketplace due to the benefits of the product or service.  If the presentation is a telephone call, try to send materials in advance of the call so that the prospect can follow along with your presentation while on the phone. If possible, tailor the presentation to the culture of the prospect.  If they have a casual culture, then do not prepare a long, formal presentation.  Just use talking points and brochures/catalogs that can be referenced by the talking points.  Make sure to rehearse the presentation, try to anticipate any objections, and be prepared to convert the objections into positives.  If the presentation is in person, arrive 10-15 minutes early, dress professionally, know who you are meeting with as well as their direct contact number, and provide handouts of the presentation materials. If applicable, bring a sample product, demonstrate it, and be prepared to make a follow-up appointment before leaving.

Handling objections-There will be objections during the sales presentation.  The handling of these objections in a positive manner can still lead to the sale.  It is important to address each objection head-on.  Objections often point to a lack of understanding by the prospect, and their objection is a way to show they need more information about your product or service.  A few proven techniques for handling objections are as follows:

Ask the prospect to explain their reasons for not wanting to purchase the product; take notes in order to be prepared to address these issues.

If the prospect is incorrect, carefully show the facts about the product that would refute the prospect’s error. Do not say “you’re wrong”, as that will put the prospect on the defensive and bring the conversation to a quick negative close.

Paraphrase the prospect’s objection to make sure you understand their position, soliciting a confirmation from the prospect that you have the correct understanding of their objection.

Closing the sale-This stage separates marketing from sales.  Closing a sale requires a prospect to commit to purchase the product by signing a contract, issuing a purchase order and or making a down payment.  Verbal commitments should not be considered closed sales, no matter how strong the relationship with the prospect.  Sales should be considered closed once the revenues are booked on the selling   firm’s accounting system and the prospect begins making payment, either partial or in full, for the product or service.  There will be signs during the sales process that indicate the prospect’s readiness to purchase the product. Here are a few to look for:

• They ask about specific price, terms, warranties, availability.
• They ask about options and features, especially if customized to their application.
• They request a sample or trial of product or service.  Make this a condition of the sale and make it available once the sale is closed.
• They discuss customer support.
• They ask for references from satisfied customers.

To help the prospect come to the decision to purchase, try the following:

• Incentives can help, whether in price, feature, service or delivery.
• Trials of product or service as a condition of a sale.
• Walk through all the positive reasons the prospect has already mentioned that the product or service is good for their situation.  Make sure to keep a list during the sales presentation, so it can be used at this stage.
• Ask them for the sale.  “We want your business. You understand the benefits of our product or service to your organization, so let’s get your order entered.”
• Fight through the objections until either the prospect declares unequivocally that they do not want the product or they move forward and enter an order.

Post-sale service-The only way to insure future sales to an existing customer base is to make sure they receive the services that they expect.   Long-term relationships built upon positive service results increase the potential for additional sales from existing and referred customers.  Referral prospects provide a much lower sales cost, because they come already interested in your product or service as a result of the benefits they have seen from the organization referring them.  That existing customer has done most of the “heavy lifting” of the sales process and now the closing process is all that is left.

Post-sale service is most often neglected by organizations and is one of the primary causes for unsatisfied customers and loss of future business.  Organizations invest heavily in marketing and public relations to promote their product and organizational image, all for the purpose to increase sales or donations.  Yet, if the post-sales services are not maintained in a positive fashion, then those investments are not likely to produce the desired results.

Marketing and Sales are very much aligned in the purpose of increasing revenues for most organizations, but they clearly are different functions, requiring different skill sets and strategies.   Another way to look at it is marketing hooks prospects and sales lands customers.

Intentions-These are deliverables that are planned to be delivered in the future.  This is the weakest of all metrics.  It is difficult to see how an organization could build a compensation plan around rewarding for nothing more than “hope”.  Yet, many corporations reward senior management for just that, “they had great intentions”.  We even re-elect politicians based on their “intentions”, and we seem to accept that metric over and over again.  I am not sure why?  If you want to grow a culture of discontent within your company, reward your management for intentions.

Actions-These are deliverables that are focused on activity.  An associate of mine uses the tag line “doing=1/2 done”.  One of my favorite sayings is “don’t confuse efforts with results”.  Rewarding actions or effort is a way to move initiatives forward, but not a way to get them done.  I can see a compensation program that would breakdown a larger project into steps or stages, and reward based on the number of steps completed, but there are very few other examples to support rewarding actions.  Rewarding actions will not hold the workforce accountable for the end result, yet there are a large number of organizations that do just that; reward the starting of something, but not the completion of it.  Unfortunately, it appears many governments (local, State and Federal) seem to have adopted this method for rewarding their agency officials.

Results-Results are definite deliverables.  These are usually dates, dollars, ratios, numbers or other such “objective” measurements.  They are tangible events that can be tracked and measured.  Compensating your management and workforce based on results will provide a greater level of accountability to your company.  Without accountability, the enterprise will aimlessly move forward in a manner much like a sailing ship without a rudder.