Lesson #366: How to Sell Your Business--A Step-By-Step Guide

 

I am in the middle of a sale process for one of our portfolio companies, and I wanted to share some useful tips to ensure your sale process goes as smoothly as possible.  This article will focus on the actual “process” of selling, so you can better understand what levers you can pull to your advantage in getting the quickest sale at the highest price. 

When Should You Sell Your Business?

The first part of answering when to sell your business is related to your business condition.  If you cannot clearly show growth in revenues and profits over the last couple years, it will be really hard to sell your business at an attractive price.  And, if there is anything negative going on in your industry (e.g., COVID impacting restaurant demand), it would be best to wait until those external factors are no longer an issue.

The second part of answering when to sell is related to the business prospects.  Are you bullish or bearish on the future?  If bullish, why sell now, wait to capture additional revenues and profits first, before selling.  But, if bearish, and you see the company ready to run into a wall, you may want to time your exit at the peak before the revenues collapse.  But in a typical scenario, a buyer will be doing due diligence on your industry and business, and they need to see a reasonable path forward to revenues continuing to grow under their ownership.  So, in all cases, make sure you can easily answer the question on how revenues will grow for them in the coming years.  Because if you cannot credibly sell that story of future growth, they will most likely not be interested.

The third part of answering when to sell is your personal psyche.  Are you tired, bored or burned out?  Maybe it is time to move on.  Are you no longer enjoying working with your team and you need a change?  Maybe it is time to sell.  Do you want to spend more time with your family, or need cash for another project?  Time to think about selling.  So, assess where you are personally, and that will help point you in one direction or the other.

Who Should Manage the Sale Process?

How you sell your business is really a function of how large your business is.  I would say selling a business under $500K in profits is typically more “do it yourself”, as it will not be large enough to get the attention of the normal business brokers.  There are plenty of websites you can list your business for sale to help get your business discovered by potential buyers (e.g., BizQuest, BizBuySell, BusinessesForSale.com) for a minimal listing fee.  If you go that route, look at examples of other business listings to figure out the best content and information to share in your listing.  Make sure you have a good lawyer lined up to help you with the negotiations and documentation of the sale agreement.

But, if you are a bigger in size, it is always best to engage a licensed and trusted business broker to assist you with the sale process and do all the “heavy lifting” for you, including drafting the sale brochure, creating target buyer lists, doing outreach to such buyers, negotiating the deal and helping you get to the finish line.  Business brokers come in all shapes and sizes, typically with a focus on certain geographical regions, certain industries or certain company sizes.  So do some research with your professional network or online for the best business broker for your exact situation.  Business brokers do typically come with a monthly retainer (e.g., $10,000 per month) plus a success fee from the sale (e.g, 3%-8%) depending on how large the expected sale proceeds will be.

Who Should Buy My Business?

There are typically three types of buyers: (i) strategic buyers already operating in your industry; (ii) financial buyers that are simply looking for investment opportunities; or (iii) other entrepreneurs looking for new companies to operate.  The valuations typically are ranked in that same order of categories listed, where a strategic buyer can typically see more ways for “one plus one to equal three”, getting synergies out of the business.  And financial buyers and entrepreneurs are typically looking for the “best deals” they can get.  So, start with strategics and go from there. Also think about things like: (i) do I trust this buyer to run the company (especially if any earn-out payments to you are involved); (ii) will they keep my team in place or treat them fairly if severed; and (iii) do they have the purchase proceeds, for both their equity and any needed loans, in hand.  As you will learn, not all buyers are created equal, so do your due diligence on them, the same time they are doing their due diligence on you.

How Quickly Should the Process Go

A normal sale process is typically around a 6 month process. The first month you are preparing your marketing materials and target buyer lists, the second month you are doing outreach to those buyers, the third month you are fielding questions and calls with the interested parties, the fourth month you are negotiating best terms, the fifth month the buyer is completing their due diligence and the sixth month you are getting the sale documents drafted and signed.  Depending on market conditions, it could take much longer than that.  If buyers are worried about the economy or interest rates, that will decrease the pool of investors that will be interested in moving forward until those issues are resolved.

How Should You Approach Negotiating

At the end of the day, “the market is the market”.  You may think you are worth one thing, but buyers could be telling you something completely different.  So, be flexible here.  And if there are 10 key points you are trying to negotiate through, pick the most important ones that you are going to “dig in on”, and be flexible on the others.  Negotiation is a two-way street and both parties have to be happy to get to the finish line.  But, in all cases, there are a couple rules of thumb that I live by: (i) your first offers are typically your most interested buyers and highest odds of getting to the finish line; and (ii) time kills all deals—the longer the negotiating process takes, the higher odds the buyer gets frustrated or disinterested and moves on.  Don’t sabotage your own odds of success by being inflexible, unreasonable or moving too slowly.

How Much Should I Expect for Valuation

Valuation is directly proportional to your: (i) industry; (ii) revenue/profit size; and (iii) growth rate.  Are you in a hot industry, like artificial intelligence, or a boring industry, like car washes?  Are you selling a $50MM revenue business or a $5MM revenue business?  Are you growing at 50% per year or 5% a year?   All these questions matter and dictate valuation.  So be realistic on what you can reasonably expect to receive by learning what similar businesses have sold for in the past.  As a ballpark, expect your EBITDA sale multiplier, which dictates valuation, to be in the 3x to 10x EBITDA range for revenues between $1MM to $50MM, depending on your answers to these types of questions.

Closing Thoughts

Selling your business can be an exciting time, but it can also be a daunting process.  So be sure to surround yourself with experts that have “been there and done that” to help you through the process.  That includes hiring a good business broker, an experienced M&A lawyer and seeking mentorship from others that successfully sold their businesses.   If you need any help here, don’t hesitate to reach out.  Good luck!

Also, don’t forget to check out these other articles I wrote on How to Find Buyers for Your Business and How to Structure the Sale of Your Business for additional details.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #365: The First 100 Days With New Employees Will Dictate Success

 

You probably have heard the importance of the action plans of the “first 100 days” after a new President takes office or after you begin integrating two companies after a big merger, but I am guessing you haven’t heard it applied to your recruiting and onboarding efforts with each of your new staff members.  Unlike in most marriages, where you have been dating for years prior to “tying the knot”.  Often times in recruitment, you have someone joining your “family” after only a couple hours of “dating”, which means you are typically “living with each other” for the first time, in the first months of their employment (after the fact). It is in these “first 100 days” that will dictate if this “marriage” will work or not, and how you handle these first few months, is critical both ways.

What You Need to Do to “Romance” the Employee

This is no different than when you are dating someone prior to getting married, only you are doing it after the “wedding ring is already on their finger”.  You as the employer need to be on your “best behavior”.  These are the formative days of the employee deciding whether or not they are going to “love you” for life or not.  During these times, you are going to want to ensure:

The Employee is Properly Welcomed.  The rest of your staff needs to stop what they are doing and take the time to properly welcome the new staff member to the team.  This may include taking them to lunch on their first day on the job, taking them out to happy hour in the weeks after they have started (yes this is an ongoing welcoming process, not just “one and done” on their first day) and assigning them a “mentor” that can help them navigate the organization.   It is critical during this period that what you promised them during the recruitment phase actually materializes in their day-to-day job.  So, ensure their expectations are properly set upon hiring, and properly met during this welcoming period.  It’s very hard to change a first impression once it is set, so don’t allow yourself to get any “egg on your face” out of the gate, or they will soon be looking for the door towards a new employer.  And, the last thing you want is a revolving door with talent.

The Employee is Properly Onboarded.  Employees aren’t just going to step into a role and know exactly what to do on day one.  They need to be properly trained, duh!  But you would be surprised how many companies don’t have a formal training plan in place for every one of the positions they are hiring for.  That is the equivalent of throwing the new staff member to the wolves, and hoping they learn how to survive.  Prior to the start date, you need to have documented: (i) the full job description and key expectations of the job, including any KPIs they will be managed by; (ii) the curriculum and materials for which they will be trained to be successful in the job; and (iii) the training calendar of key people within the organization they will meet in their first weeks on the job, who are in charge of training the various aspects of the company and the role.  The more comfortable they feel with their training, the more confident and “loved” they will feel.

The Employee is Properly Cultured.  When working with a new staff member, they need to learn and feel the culture you are trying to promote within the organization.  For example, in one of my businesses, we aspire to have a S.P.I.R.I.T. culture, where all employees strive for Service-First, Positive-Minded, Innovating, Respectful, Intrapreneurial and Team-Oriented behaviors while on the job.  You can’t simply slap that on a slide in your strategy deck; you need to live those behaviors in your everyday job, and that starts from the top.  If you want the new staff members to live by those rules, it is important they see it manifested in their interactions with the rest of the staff.  So, make sure the entire team is demonstrating those desired workplace behaviors, which they naturally should be if they are “living the culture” of the organization.

What the Employee Needs to Do to “Romance” You

This is not a one-way street; the employee needs to be “dating you”, the same time you are “dating them”.  In the first 100 days, you are looking for the new employee to be living up to the expectations they set during their recruitment process.  Do they really have the skills they said they have?  Are they behaving in the way you want new employees to behave, culturally? Are they hitting the goals you have set for each other?  If so, full steam ahead.  If not, you may have a problem on your hands.

What to Do If The Magic Wears Off

If things are not going to plan after the first 100 days, you really have one of two options. First, you feel the relationship is salvageable and there is a clear long-term path forward together, most likely with additional training or whatever.  Or, second, you need to pull the “ripcord” and mutually decide this isn’t working out as planned, and both parties need to agree to part ways.  Hopefully, in your offer letters, you incorporated some type of “first 100 days” probation period language, that will legally enable you to exercise these rights if things are not working out.  But, in no scenario, should you keep the employee if you do not see a reasonable path forward together.  Like in any marriage built on an unsolid foundation, they will most likely end in a divorce anyway, so you might as well get it over, sooner than later, before the problems fully fester into “cancerous breakups” over time.

Closing Thoughts

Many good entrepreneurs put a lot of energy into recruiting great staff members to join the team.  But many of those same entrepreneurs, don’t put enough energy into what to do with those same new employees once the actually get started.  That is where the “rubber really hits the road”.  Your long-term success, both as a hiring manager and as a company (depending on good employees), will be decided in those first 100 days after a new employee gets started.  So, don’t blow it, remembering you only have one chance to make a good first impression, both ways.

 

 For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #364: Do Major Holiday Discounts Help or Hurt Your Business?

 

What is it about Memorial Day, July 4^th, Labor Day and the Christmas season?  They bring out all the big discounts, which gets shoppers flooding to the malls to save money, especially on big ticket items like cars and mattresses, as examples.  And the sellers of those products bring out their best prices during these holiday seasons, trying to capture has much market share against their competitors as they can.  But the question I ask is: why?  Yes, you are driving more revenues, with the holidays often representing 30% of their total annual volume.  But, if you are sacrificing material bottom-line profits by slashing prices in the process, why play that game?  This post will dive deeper into whether you should or should not deeply discount your products, during the holiday season or in general.

The Psyche of the Typical Consumer

 Before trying to address this topic, it is important to understand the psyche of the typical consumer.  Throughout the generations of shopping, retailers have trained consumers to expect certain behaviors, including when to expect discounts.  One example worth calling out is J.C. Penney.  J.C. Penney was one of the most successful retailers in history, commanding a dominant market share at their peak.  But retailers like Kohl’s and Target starting to take market share away, through better quality products and better prices.  Kohl’s was particularly effective with their Kohl’s Cash, that would give the consumer a credit on their next order at the same time they were checking out on their current order, giving the customer a reason to return to the store for another purchase before losing their cash.

J.C. Penney tried to combat this, and save their company, with an “everyday low prices” approach, getting rid of discounts altogether.  But that strategy did not work.  Consumers were simply too trained by the other retailers to look for discounts, that they only shopped from the stores offering them, even if the net prices of the products were exactly the same.  This “no discounting” strategy may work well for a high-end brand like Nordstrom, serving an affluent demographic that is less price conscious.  But it does not work well for penny-pinching, mainstream consumers.  So, the point here is:  discounts definitely play a major role in the psyche of the mainstream consumer, and you need to decide when and how best to use them.

The Typical Economics of a Holiday Sale

Let’s look at the mattress industry, as an example, that runs heavily discounted promotions during each of the major holiday seasons.  Let’s say the average mattress costs $1,000 at regular prices.  And, that price drops to $750 (25% off) during the holiday sales.   And let’s say a mattress seller is doing $100MM in revenues per year, with 30% of their annual sales happening during the holiday periods.  That means their typical gross profit margin of 50%, may drop to 25% during the holiday sales.  And their bottom line net income margin may drop from 20% to -5% during the holiday sales.  What that suggests is that $70MM of their revenues at full price are driving $14MM in bottom line profit, and $30MM of their revenues at the discounted price are driving a $1.5MM loss, for a total net income for the year of $12.5MM (a 12.5% blended profit margin).

My Initial Reaction

I feel we, as businesspersons, are so focused on scaling revenues and market share, that we don’t put enough thought behind, “at what cost” did those revenues come.  To me, I could be perfectly happy, not participating in the discounting seasons.  Yes, I would end up with a much smaller revenue business, leaving 30% of potential revenues “off the table”.  But my bottom-line net income and profits margin would actually have been $1.5MM higher, by not “giving the product away” at deeply discount prices.  The point here is:  just because everyone else is doing it, doesn’t mean you have to do it too, as profits may be a much better metric to maximize than revenues, depending on your goals.

What You Risk By Not Discounting

Profits is not the only metric you need to concern yourself with.  There may be some downside risks of not participating in the holiday discounting seasons.  That includes: (i) there are certain individuals that cannot afford your full price, and can only afford your discounted price, so you are consciously leaving that demographic unserved; (ii) by not getting your brand name front-and-center during the holiday sales, your competitors are getting more “mind share” of leading brands in the industry, potentially leaving your future brand awareness in the rear-view mirror; and (iii) you are not taking into consideration the lifetime value of the consumer—yes you lost money on the first sale, but you will make it back with their customer loyalty on the second, third and fourth sales.  Many of the major retailers just swallow the bitter discounting pill for reasons like these.

Concluding Thoughts

So, the real question here is: should you or should you not be heavily discounting your products during the holiday seasons?  I think the answer to that question largely depends on the market you are serving and what your competitors are doing.  If you are a high-ticket product, discounts can be very helpful to acquiring customers that would otherwise have been lost.  But if you are a high-end brand where customers are less price-sensitive, they most likely would have still purchased at the higher price.  To me, discounting is a tool you can use to clear out distressed inventory.  But it should not be a tool you use to capture market share at all costs.  Sometimes it is better to stay out of that battle and live to fight another day, at much higher profits.  That said, if you are a high repeat purchase product, acquiring customers at a deeply discounted price can be a great way to accelerate longer-term revenues and profits through repeat sales from those customers.  Good luck making the right decision for your business.  It will come down to which metric is most important to your business—near term revenues or profits, or long-term revenues or profits.

For future posts, please follow me on Twitter at: @georgedeeb.

 

[VIDEO] How Strategic Partnerships Can Propel Your Business

I was recently interviewed by ASBN, an online "television network" serving the small business community, about how how strategic partnerships can help propel your business to new heights.  As you will learn, piggybacking on a big established brand and distribution partner can be a very smart way to affordably grow your revenues.  I thought this video turned out great, and I wanted to share it with all of you to make sure you consider partnerships like these in your growth plans. I hope you like it!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above.

Thanks again to Jim Fitzpatrick, Shyann Malone and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

What to Know About Selling Your Business

I am in the middle of a sale process for one of our portfolio companies, and I wanted to share some useful tips to ensure your sale process goes as smoothly as possible. This article will focus on the actual "process" of selling so you can better understand what levers you can use to get the quickest sale at the highest price.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] Smart Leaders Hire Smarter People Than Themselves

I was recently interviewed by ASBN, an online "television network" serving the small business community, about how smart leaders need to hire team members that are smarter than themselves.  As you will learn, you never want to be the smartest person in the room.  I thought this video turned out great, and I wanted to share it with all of you to make sure you helping to take your recruiting and management game to the next level. I hope you like it!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above.

Thanks again to Jim Fitzpatrick, Shyann Malone and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

Why You Need to Pick Your Co-Founders Very Carefully

 

Picking your co-founders and other key partners could be one of the most important decisions an entrepreneur makes. Many founders simply look for a complementary skillset to round out the management team's needs, but getting this decision right is so much more than that.  Startups are hard enough to build as they are, yet having to add the burden of making the wrong personnel decisions can really set your business and peace of mind into a tailspin. This article will help you get it right to give your business the highest odds of success.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #363: Trying To Scale Your Startup? The Odds Are Not In Your Favor!

 

My colleague and serial entrepreneur, Scot Wingo, of ChannelAdvisor, Spiffy and Triangle Tweener Fund fame, recently posted on LinkedIn, how hard it was to scale a business. He referenced data from a book by Verne Harnish, the founder of Entrepreneur’s Organization, called Scaling Up: How a Few Companies Make It . . . and Why the Rest Don’t. 

The core of the story was this graphic:

What the graphic basically says is, of the 28,000,000 businesses in the United States, only 0.061% actually get larger than $50MM in revenues. And 96% of all businesses, never get larger than $1MM in revenues. I was so taken back by the data here, that I thought it was worthy of a deeper discussion.

Why is It So Hard to Scale?

Very Few Best Educated Entrepreneurs. The US News & World Report only lists 39 universities as being the best undergraduate entrepreneurship programs. Let’s estimate that the average class size at those business schools is 1,000 per school and that 10% major in entrepreneurship (or 100 per school). So, there are 3,900 highly regarded entrepreneurship graduates per year. With an average career length of 44 years (from 21 to 65 years old), that means there is a pool of 171,600 people best trained in entrepreneurship. There are 333.3MM people in the United States, and 28.94% of them are “working age”, creating a pool of 96.5MM workers. That means only 0.18% of workers properly knew what they were signing up for in the world of entrepreneurship, before diving in headfirst. Now, all of a sudden, the numbers in the chart don’t look that far off of what should have been reasonably expected.

Worth mentioning, notice I focused on entrepreneurship majors. I intentionally ignored business majors. Most business degrees are pumping out graduates that work in large companies. And the skillsets needed for running a Fortune 1000 sized company are materially different than the skillsets needed for taking a piece of paper idea and turning it into a successful business.

You Don’t Do Your Homework Before Launching. For many businesses that launch, they do so without building a proper business plan, including doing homework on their industry and competition, identifying affordable sales and marketing opportunities, and ensuring there is a good product market fit. Would you take a test in school, without first doing your homework, or studying for the exam? Of course you wouldn’t. So don’t do it when launching a business, especially given the large amount of dollars you will be putting at risk, potentially getting flushed down the toilet with the low odds of success being talked about in this article.

You Don’t Have the Right Skills Needed. You have to be honest with yourself. Are you the right person to actually launch this business and execute the business plan? Do you have the right skillsets required for strategy, management and fund raising? You most likely don’t. So that means you need to hire the people with the right skills or surround yourself by mentors and advisors that have “been there, and done that” before, to help get you up the learning curve. There is very little room for making mistakes in the world of startups, given the capital requirements.

You Don’t Evolve As the Business Needs Change With Scale. The graphic above illustrates four “valleys of death”. These are the points where most businesses “stall out” in their growth curves. Why is that? Go back to the last paragraph; they don’t have the right skills needed for that next phase of the company’s growth. The skills it takes to grow from $1MM to $10MM in revenues are completely different than the skillsets needed to grow from $10MM to $50MM. The bigger you get, the more complexities there are. Bigger companies have to start thinking about things like international expansion and mergers & acquisitions, which were never given a thought for the smaller business. So, as you scale, you really need to re-assess your senior management needs to make sure that new team, has also “been there, and done that” for the skillsets needed for the next phase of your growth. They are materially different.

They Run Out of Money. Some startups run out of money for things out of their control, like a crash in the economy or the financial markets. And other startups run out of money, simply because they under-budgeted for what their entire needs would be, or they were too aggressive with their revenue growth assumptions. Oftentimes, by the time they realize they are out of cash, it is too late to raise new capital, as a fundraising process can often take up to six months. So plan far ahead and keep your eyes firmly glued to your “gas tank”.

When The Going Gets Tough, The Weak Throw in the Towel. Startups are full of disappointments and let downs. You may need to listen to 100 people say “no” before you find that one person that is willing to say “yes”. Not everyone has the “fire in the belly” needed to break down those walls and push the company on to future success in the face of all these headwinds. So, if you don’t like the idea of feeling like you are constantly “pushing water uphill”, you probably shouldn’t consider a career in entrepreneurship. It is not a career for the weak of heart.

Why Do Venture Investors Take This Level of Risk?

With this low level of success in scaling businesses, why do venture capitalists even invest at this stage?

First of all, professional venture capitalists are exactly that . . . professionals! They have done this for a living for decades and have listened to thousands of entrepreneurs pitch their businesses and know what it takes to succeed. So, for many of them, they are confident in their own experiences from their past portfolio companies to “defy the odds”.

Secondly, they employ a portfolio strategy: out of any one fund they make 25-30 investments. They know 90% of them will break even or lose money. But they also know the 2-3 that breakthrough will generate a large enough return to generate an impressive return for the entire fund. For example, if they make 20x return on 10% of the portfolio, and break even on the rest, the fund still yields a 25-30% annual return to their investors over a five-year period. Point here: diversification is key, don’t put all your eggs in one basket.

Lastly, the best venture capitalists know how to game the system. Let’s say they are investing in marketing software companies. The good ones have relationships with CMOs at many companies, that can help them do due diligence on the merits of the startup’s idea and become initial customers for that startup (which is the hardest part of scaling—finding customers). What will be your “unfair advantage”?

Should You as an Entrepreneur Take on This Level of Risk

After reading this article, do you think you have what it takes to be one of the 0.061% that can break through to over $50MM in revenue, which is what investors will be listening for? Do you have a good, well-researched idea? Do you have the right team in place? Do you have the capital lined up to succeed, in both good times and in bad, with enough cushion in place for the unexpected hiccups, for which there will be many? Are you prepared to hand over the CEO reins for the next chapter of your growth? Do you have the intestinal fortitude to plow through all the roadblocks? Do you have an “unfair advantage”, that will help you with customer acquisition? If so, maybe we will be singing your praises in the years to come. But there are very high odds, based on the data above, that we will not. So, be honest with yourself before rolling the dice and putting your life savings at risk. Especially, since you won’t have the luxury of a portfolio strategy, like a venture capitalist has, with all your eggs in one basket. Batten down the hatches, it should be wild ride. Prepare for the worst, and hope for the best.

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] Why Entrepreneurs Need to Keep It Simple Stupid

 

I was recently interviewed by ASBN, an online "television network" serving the small business community, about how entrepreneurs need to follow the K.I.S.S (Keep It Simple Stupid) method in approaching their business.  As you will learn, if entrepreneurs want to increase their odds of success, staying religiously focused on one thing, is a lot more effective than chasing multiple "flavor of the month" tangents down rabbit holes.  I thought this video turned out great, and I wanted to share it with all of you to make sure you are simplifying your strategies and processes throughout your organization. I hope you like it!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above.

Thanks again to Jim Fitzpatrick, Shyann Malone and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

The First 100 Days of Onboarding New Employees

 

You probably have heard the importance of the action plans of the "first 100 days" after a new President takes office or after you begin integrating two companies after a big merger, but I am guessing you haven't heard it applied to your recruiting and onboarding efforts with each of your new staff members. In many marriages, couples date for years before getting married. In contrast, in recruitment, someone can join your organization after only a few hours of interviews, which means you are essentially living and working together from the start of their employment. These "first 100 days" will dictate whether this union will work or not, and how you handle these first few months is critical.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #362: Firing Long-Term Employees is Hard, But May Be Necessary

I consulted a client that had to do something they had never done before—they had to cut a long-term employee that had been with the company for over 5 years.  Once an employee has been with a company for that length of time, they have basically become “family”, so that is the equivalent of cutting your “brother or sister.”  And, most employees that get to 5 years of service, must have been doing something right during their employment, otherwise they wouldn’t have lasted that long.  But, things can change.  And, in this case, the employee no longer was a high performer, they had quickly become a poor performer, and that was causing broader challenges for the business, as described below.  This post will teach you how to handle situations like these, and why cutting your “brother or sister” may be the only option you have.

A Little Background

For purposes of this article, let’s say the employee here is named James.  James was part of the sales team.  He started out of the gate slow in his first year, but he quickly picked up steam with training and effort in his second year.  He was a high performing sales person for a couple years straight.  James loved his job and the company, and the company and his peers loved him.

But something happened in year five; his sales levels cut in half of the previous years and there were much higher instances of clients becoming very upset with James for lack of responsiveness and for making mistakes on their projects.  So, not only were revenues down, customer complaints and resulting fixes required were way up, which meant the rest of the entire team needed to step up and fill that void.  Many conversations would happen with James, trying to get him to improve his performance, and each time he said he would try to get better and that it would never happen again.  After a year of underperformance, and repetitive missteps by James, the company finally hit its breaking point and terminated James.  So, here a few lessons out of this story.

Employees Can Change

Good performers can go bad, like in this example.  And, bad performers can become good.  People are humans, and things are happening in their everyday lives.  Maybe their health goes bad?  Maybe their kids are becoming a bigger burden?  Maybe they are caring for ailing parents?   Whatever.  So, just because you had a good performer, doesn’t mean they will stay one, and you need to reassess their performance, as if the clock was starting new every quarter.  Which can be really hard for employees you have grown very close to over the years.

Cutting Friends is Hard, But Sometimes You Have No Choice

In this story, James was integrated into the fabric of the company, and he was well liked by everyone.  Which bought him some “leeway”, in terms of a runway to fix his mistakes, as compared to a brand new employee with no history with the company.  But, you can’t let your friendship with an employee blind you to his performance.  When customers are complaining, your brand is getting tarnished with negative reviews.  When your fellow staff are complaining, your credibility as a manager is getting questioned as to why are you continuing to let this poor performance happen (as it is directly impacting the rest of the team’s day-to-day job cleaning up his mess).  Make the tough decision and part ways sooner than later.  It should not have taken over a year in this case to resolve the situation.

Unpunished Poor Performers Get Increasingly Bold The Longer They Get Away With It

If you set a line in the sand, and the employee crosses it, you need to live by your word and take action.  In this case, the line was set in the sand, James crossed it on three separate occasions, but he continued to keep his job.  All that did was embolden James to believe he would never get fired, regardless of his actions, and he continued in his old bad ways, as he believed there was no real punishment coming his way.  And, when the punishment finally came, a year late, he was pretty much in shock that it actually happened.  So, if you set a line in the sand with an ultimatum, in terms of expected performance of a staff member required to not be terminated, you need to live by it if that goal is not met.

Never Lose Your “Street Cred” With the Rest of Your Team

The longer you let a “bad apple” stay with a company, the higher the risk that employee spoils the “whole bushel” and has everyone looking for the door.  Employees want to work in reasonable working environments, and repetitively doing extra work to put out other employees’ fires is not a desirable situation for anyone.  And, employees want to work for a boss they can trust to do the right thing, even if it means making the hard decisions.  They are looking to you as the leader, to help them “put out the fire” created by other bad employees.

The Economic Impact of Keeping a “Bad Apple” Employee

In the case of James, his sales dropped to half of the rest of the sales team.  That was worth about $500K in revenues and $50K in company profit per year.  That is not an insignificant amount that a replacement salesperson could have retained.  And, the economic impact of hundreds of upset customers spreading negative reviews online or to their peers, could be worth 3-4x this amount.  I always said, you gain 2-3 customers from positive word of mouth, and you lose 8-10 customers from bad word of mouth, as customers are much more vocal when they are upset, than when they are happy.  So, when you add those two factors up, lost sales plus lost prospective sales, this was a $200K-$250K bottom line impact to this business.  That’s why you need to take action, sooner than later.

Closing Thoughts

So, hopefully, none of your long term high achievers will turn into poor performers in your businesses, as that rarely happens.  But if they do, don’t repeat the mistakes my client made in this case study.  Act swiftly, making the hard cuts within three months of the poor behavior not getting resolved.  And, act fairly, treating a long term employee with respect (e.g., offer a high severance payment for their long tenure with the company).  It is never easy cutting employees, especially long-termers which you view as “friends and family” of the company.  But, sometimes, you just have no choice.

For future posts, please follow me on Twitter at: @georgedeeb.

Do Major Holiday Discounts Help or Hurt Your Business

 

What is it about Memorial Day, July 4^th, Labor Day and the Christmas season?  They bring out all the big discounts, which gets shoppers flooding to the malls to save money, especially on big ticket items like cars and mattresses, as examples.  And the sellers of those products bring out their best prices during these holiday seasons, trying to capture has much market share against their competitors as they can.  But the question I ask is: why?  Yes, you are driving more revenues, with the holidays often representing 30% of their total annual volume.  But, if you are sacrificing material bottom-line profits by slashing prices in the process, why play that game?  This post will dive deeper into whether you should or should deeply discount your products, during the holiday season or in general.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #361: Let Ad Campaigns ‘Breathe’—Over Optimization Can Suffocate Results

 

I have been a digital marketer for over 30 years, living by the mantra of making data-driven decisions that maximize your return on ad spend (ROAS).  Like any good marketer you will always be testing and tinkering with your ad campaigns to optimize your copy, creatives, lading pages and messaging in a way that will get you the best results, in the form of your highest ROAS or lowest cost of customer acquisition (CAC).  But something happened with one of my businesses in the last few months, where over-optimizing the campaign actually caused the wheels of the bus to fall off.  I had never seen that before, and I thought this case study was worth sharing with you, so you don’t repeat this same mistake.

The Situation

We had been growing our Restaurant Furniture Plus ecommerce business pretty consistently over the last few years.  The growth strategy was almost entirely Google Ads focused, where if we wanted to increase revenues, all we needed to do was spend more money with Google year-over-year.  And, that we did, increasing our annual advertising budget from $100,000 to $2,000,000 over the last few years.

Things were largely going fine.  As we scaled advertising spend, our revenues scaled along with it in a pretty consistent straight-line kind of way.  We weren’t overly optimized in our efforts, we simply managed the campaign with a few high level metrics to make sure we were heading in the right direction.  Those metrics included our ROAS and our Cost Per Lead (CPL), which were largely unchanged over the years, ignoring one-time anomalies in the market, like COVID in 2020.  We biased CPL over CAC since we could easily tie Google Ads into our Call Rail tracking data at the campaign level, and we couldn’t easily connect our CRM data to Google, at the time.

But, after we upgraded our CRM with one that better enabled a direct data tie to Google Ads,  we thought the campaign could perform more profitably if we engaged a more sophisticated marketing agency that had more experience in running campaigns based on CAC instead of CPL.  An agency that would be more “in the weeds” than we were as business executives, optimizing everything within the campaign, including the keywords, creatives, landing pages, product segmentation, audience targeting, etc.  We felt the biggest opportunity was managing the campaign at the CAC level, as opposed to the CPL level, since we figured knowing if a customer purchased from us was more important than if they contacted us.  Sounded pretty reasonably, right?  But, keep reading.

Our Ad Agency’s Plan

Our advertising agency was very bullish on connecting our CRM data directly with Google Ads, to let Google know which ads of theirs lead to actual buying customers.  The agency had a lot of success with their other clients with this strategy, and there were confident it would work for us.  We did a lot of work to set that up, and launched it, crossing our fingers it would lead to a material decrease in our CAC and a material increase in our ROAS.

But, what followed had us all scratching our head.  Instead of improving our campaign, this action actually hurt our campaign.  All of our marketing metrics started to move in the opposite direction—our CAC doubled and our ROAS cut in half.  None of us really had an explanation for what had gone wrong, until we started to do a little more digging.

What Happened?

The single change we made, which we thought would help us, actually hurt us.  We changed our primary data point that we wanted Google to optimize for from number of leads (e.g., phone calls and email form fills) to number of customers (e.g., closed transactions in our CRM).  And, more specifically, we didn’t care about online customers that purchased on our website, we only cared about offline customers that purchased with our team of expert project managers, because our average order size of offline orders was 3x that of our average order size of online orders, by adding that personal human connection and having the opportunity to upsell the order.  But, from a data perspective, that meant we went from sending Google 1,000 datapoints a months, from the phone calls and emails, to only sending Google 100 data points a month, from the offline transactions that were directly sourced from Google.

Remember, Google is an algorithm, and it needs data to digest to do its work.  And, the more data, the better.  By making this move, we were effectively “starving” Google, by cutting back the datapoints.  And, what does Google’s algorithm do when there isn’t enough data to work with?  It becomes paralyzed and doesn’t know what to do?  So it starts “spraying and praying” across its entire network, where it can hopefully generate more useful data and results to work with.  And, what happens to your advertising effectiveness during this time?  It basically gets flushed down the toilet.

The Fix

Once we learned what the issue was, it was a simple fix:  we basically return to our old ways, telling Google to optimize on the leads data, instead of the transaction data.  That started feeding Google’s algorithm again, and good things happened.  Our ROAS and CAC returned to the historical levels, once the campaign wasn’t strangled and suffocating anymore.

The Lessons Learned

There were many lessons learned here.  First of all, we mentioned it above, Google needs data to work with, and there is a minimum amount of data that Google needs for its algorithms to successfully do their job.  We had basically choked it.  Secondly, there were a lot of very smart veteran marketers around the table that all collectively bought into the strategy that failed.  So, even experts can make mistakes.  In this case, the agency’s success with other clients was due to those other clients being materially larger than we were, sending Google a lot more data than we were able to send them.  And, lastly, there is a point in your marketing campaigns that you simply have “over-sharpened” your pencils, to the point the tips break off when you press on them.  Yes, campaign optimization is good and needed, but over-optimization could end up being the noose around your neck.  So, as you are tuning up your campaigns, don’t turn the dials up too high, or you may bust a few springs along the way.

For future posts, please follow me on Twitter at: @georgedeeb.

Trying to Scale Your Startup? The Odds Are Not in Your Favor!

My colleague and serial entrepreneur, Scot Wingo, of ChannelAdvisor, Spiffy and Triangle Tweener Fund fame, recently posted on LinkedIn, how hard it was to scale a business.  He referenced data from a book by Verne Harnish, the founder of Entrepreneur’s Organization, called Scaling Up: How a Few Companies Make It . . . and Why the Rest Don’t.  The core of the story was this graphic:

What the graphic basically says is, of the 28,000,000 businesses in the United States, only 0.061% actually get larger than $50MM in revenues.  And 96% of all businesses, never get larger than $1MM in revenues.  I was so taken back by the data here, that I thought it was worthy of a deeper discussion.

Read the rest of this post on Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb@georgedeeb.

[VIDEO] A 'Fresh Set of Eyes' Can Help Turnaround Struggling Businesses

I was recently interviewed by ASBN, an online "television network" serving the small business community, about how a "fresh set of eyes", can help turn around struggling business.  As you will learn, sometimes the founders are simply too close to the business, to clearly see the "forest through the trees".  I thought this video turned out great, and I wanted to share it with all of you, to see if a fresh set of eyes can help your business.  If so, you know who to call.  I hope you like it!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above.

Thanks again to Jim Fitzpatrick, Shyann Malone and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #360: How to Survive a Difficult VC Funding Environment

 

CB Insights, a leading research organization that tracks venture capital financings, recently released its report on the state of the venture capital market in 2023. The long story short is: it was a terrible year for raising capital. The global market was down 30% year-over-year, to its lowest levels in six years. The U.S. market fell to its lowest levels in 10 years, down 21% in the last quarter alone. Gone are the days of “unicorn” creation (companies worth more than $1 billion), mega-sized financings, and excessive valuations. And, investors simply can’t exit the investments they have already made, with an anemic IPO market. A pretty bleak picture if you are a startup raising capital today. So, what are you supposed to do to navigate these choppy waters? Buckle up and read on, for some useful tips based on my past experience surviving markets like these.

Step 1: Batten Down the Hatches—Cut Expenses

Don’t fool yourself into thinking your story is better than all the others, and that you will have no problem raising capital. Once VC’s put their heads in the sand, it is pretty much across the board, with a few exceptions if you happen to be in a hot market like artificial intelligence, fin tech, retail tech and sustainability. So, that means you need to get your expenses down to the absolute bare minimum. And, yes, that most likely means making the tough decisions of downsizing your staff, to survive the storm.

You need to hunker down to focusing on your core business (no side projects) and most profitable product lines, remembering that your marketing efficiency during a down market will also be negatively impacted. So take out your hatchet, and start chopping away at all non-core and discretionary expenses. And when you are done, if you do not have enough cash on hand to survive the next 18-24 months without requiring any additional financing, you have not cut enough. Keep cutting until you get to that point, even if it means you are cutting into your “flesh” at that point. Because if you don’t, you will never live long enough to survive and fight another day, which is the primary goal of this exercise.

Step 2: Revise Your Business Plan for a Downside Case

If your original business plan was to grow 50% per year, spend unlimited marketing dollars, add many new product lines, and expand into new markets, forget it. You will need to table that plan and dust it off in a couple years. For now, you are in survival mode. Focus, focus and more focus is what is needed right now. And whatever assumptions you made in your original plan, cut them all in half. Your cost of customer acquisition will double in a down economy, which means your revenues could cut in half of where they are today. So, focus more on getting additional revenues out of your existing customer base, where you can. And, if you do not have any revenues from a specific initiative you are working on today, those should get zero attention in this market. Only focus on your highest revenue producing product lines, and double down on those.

Step 3: Talk With VC’s to Learn Their Revised Goals and Keep Networking

Just because investors are not writing as many checks, does not mean you stop speaking with them, as they are still sitting on a lot of “dry powder” of un-invested capital. But when you approach them, instead of raising capital and asking for cash, you are asking them what they are looking for in the limited investments they are making today. And, getting their reaction to your revised business plan to see if you are heading in the right direction or not. If they give you any constructive feedback or suggest pivots, listen to them, and consider taking those actions, if it will help you raise capital a couple years from now. And once you and they are on the same page, and you have set some reasonable goals for yourself, keep in touch with them and hit those goals. VC’s are still prefer to invest in the best teams over the best ideas, and if you can prove that you accomplished the goals you set out for yourself, a year after the fact, you will earn a ton of credibility with them for when you re-approach them for a capital raise once the markets improve, and you have over a year of relationship-building with them under your belt.

Step 4: Seek Alternative Investors Outside of Venture Capital

If you have cut all you can cut out of your expense base, and there is still a capital need, you will need to seek alternative investors outside of the traditional venture capital industry. This could be friends and family, angel investors, crowdfunding, venture debt, credit cards, asset backed loans (e.g., securing inventory, equipment, real estate), revenue share loans, home equity loans, etc. Time to pull up your bootstraps and get creative in your potential funding paths. But focus on equity investments, if you can. If you go down the debt path in a down market, it could end up being the noose around your neck, tightening with each month that passes.

Step 5: Think Out of the Box

If the venture capital market is closed based on a flight to higher quality investments, maybe the private equity market is still open for larger businesses raising capital. Maybe consider rolling up a bunch of companies into one bigger business that is more of the size that private equity investors like. For example, the VC’s may not have liked your $1MM profit business, but if you merge with four of your same-sized competitors, the PE investors may like your $5MM profit rolled-up business. There are creative ways to enable those “mergers” in a cash-free way, based on pro rata revenues or profits, and then help those additional shareholders get an exit down the road, when raising PE capital. Roll-ups are a pretty complicated topic, so get some help if you decide to pursue this path. This article I wrote about roll-ups may help you.

Closing Thoughts

When the venture capital markets close, it is critical to take actions like the above to ensure that your business does not close, permanently! Make the tough decisions now, to live and fight another day. Your current shareholders and future version of your business, built for the years that follow, will thank you.

For future posts, please follow me on Twitter at: @georgedeeb.

Firing a Long-Term Employee is Hard — But Often Necessary. Here's Why.

 

I consulted a client that had to do something they had never done before—they had to cut a long-term employee that had been with the company for over 5 years.  Once an employee has been with a company for that length of time, they have basically become “family”, so that is the equivalent of cutting your “brother or sister.”  And, most employees that get to 5 years of service, must have been doing something right during their employment, otherwise they wouldn’t have lasted that long.  But, things can change.  And, in this case, the employee no longer was a high performer, they had quickly become a poor performer, and that was causing broader challenges for the business, as described below.  This post will teach you how to handle situations like these, and why cutting your “brother or sister” may be the only option you have.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] How to Define What is an Entrepreneur?

I was recently interviewed by ASBN, an online "television network" serving the small business community, about how to define what exactly is an entrepreneur.  As you will learn, it comes down to being a leader, a visionary, a risk taker, a pitbull and a superhero.  I thought this video turned out great, and I wanted to share it with all of you, to see if you have what it takes to be a successful entrepreneur.  I hope you like it!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above.

Thanks again to Jim Fitzpatrick, Shyann Malone and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #359: How to Cut Dead Weight Out of Your Business

 

In business, you need to be running as efficiently as possible.  But, I have seen many businesses carrying a lot of “dead weight”, which is holding them back.  Some of that dead weight are smaller things, like being overstaffed or spending too much for services.  Or, poorly investing their sales and marketing dollars.  And, some of that dead weight is pretty material, like operating too many divisions or focusing on channels that don’t have a material payback.  This post will help you learn how to identify the various types of dead weight, so you can assess your business and see if there is any pruning to be done.

Strategic Dead Weight

Strategic dead weight is building a strategy plan that has you focusing in areas that the business really shouldn’t be focused on, investing resources in a way that is either not driving an ROI or it has become a distraction to more profitable areas of the business.  This could be things like supporting too many brands or divisions, or too many products, or too many sales channels, collectively taking focus away from the real core competency or most profitable product line of the business.

Operating Dead Weight

Operating dead weight is basically running the business inefficiently.  That could be having a staff that is too large in relation to the true business needs, or renting an office that is larger than you truly need, or paying more for services than is truly market rate, or worse, paying for services you really aren’t using at all.  Every penny matters in early-stage businesses, and ineffectively investing your precious cash resources means you are flushing dollars down the toilet that couldn’t have been better invested in other higher ROI activities.

Sales and Marketing Dead Weight

Sales and marketing dead weight, is investing your payroll dollars into salespeople that are not driving enough sales to hit their goals (or at least cover their costs) or investing your advertising dollars into campaigns that are not driving a profitable return on ad spend (ROAS). You need to be religiously studying your sales team’s performance and your advertising team/agency’s performance to ensure they are hitting their goals.  And, not only in the aggregate, but line-by-line for each specific campaign, to optimize and prune accordingly.  You always need to be cutting your “losers” and re-investing those dollars to “double down” on your “winners”.

A Strategic Case Study

As a strategic example, when we acquired my current business, it was operating two brands, Restaurant Furniture Plus, targeting commercial buyers, and Your Bar Stool Store, targeting residential consumers.  When running two of anything, that meant double the effort.  We needed to build and maintain two different websites and two-different marketing campaigns, as an example.  When we studied the financials by brand, we learned that Your Bar Stool Store was driving around 20% of the revenues, but only 5% of the gross profits, as its average order size was only $2,000 compared to $6,000 at Restaurant Furniture Plus.  And, there were material operating inefficiencies with serving the consumer market, which often resulted in a lot more phone calls to answer and a lot more claims and returns, which created a lot of extra work.  At the end of the day, Your Bar Stool Store was break even at best.

We decided to shut down Your Bar Stool Store, the original brand of the company, to help us cut our “dead weight”.  It helped us increase our strategic focus on more profitable commercial buyers, it helped materially improve operating efficiencies, and most importantly, it helped us re-invest those marketing dollars into the higher performing commercial business to materially accelerate our revenues and profits.  The “sacred cow” of the founders was sacrificed, to help propel the “better business” to newer heights.

Closing Thoughts

Small businesses cannot afford to be carrying any dead weight. They need to be nimble for maximum speed, and laser focused on what will drive the most profits.   Any things that get in the way of that goal, need to be sacrificed for the greater good, no matter how much you like that “sacred cow”.  It may result in some short term pain, but trust me, the long term gains in focus, efficiencies and profits will quickly mend those wounds.  So, what are you waiting for?  It is time to take out your magnifying glasses and start scouring for any dead weight in your business.  And then, take out your hatchets for larger inefficiencies, or scalpels for smaller inefficiencies, and start cutting away.  Your bottom line profits will thank you!!

For future posts, please follow me on Twitter: @georgedeeb.

Lesson #358: Revenues Lost is More Important to Measure Than Revenues Won

Revenues, and resulting profits therefrom, is often the primary metric that businesses use to measure their success.  I would argue there is an even better metric to measure, which is “lost revenues”.  What revenues did you lose during the course of the year, and what were the specific reasons you lost those customers?  Why do I say this; because you typically close 20% of your leads and lose 80% of your leads?  If you can figure out how to reduce that 80%, you can materially grow and accelerate the 20%.  And, increasing your conversion rate by 10 percentage points, is the equivalent of increasing your revenues by 50%!!  This post will help you figure out how to best define and measure your potential reasons for lost revenues, to help you get your arms around how to best lower that amount.

What Are the Typical Reasons for Lost Revenues

There is a wide range of reasons for losing revenues.  Some are related to your company, including your product, pricing, sales and marketing efforts.  Some are related to your buyer’s company, including having management approval and budgets in place.  Some are related to individuals involved in a transaction, including your salesperson, the buyer at your customer’s company or some other middlemen that may be involved.  And, some are related to other outside factors, including competition and economic conditions.  The key is figuring out which of these is the exact reason you lost each sale, documenting those reasons in such in a way you can build reports to learn from, and putting action plans in place to address each of these hurdles, to remove those constraints from your future sales efforts.

Issues Related to Your Company

Remember the four P’s of marketing you learned in business school—product, price, promotion and place?  Each one of those are variables in whether or not someone will buy from you, or they will look for solutions elsewhere.  So, you need to do lots of research here?  Ask your customers what they do and don’t like about your product.  Lean into the positives in your marketing messaging and fix the negatives and try again.  Test the elasticity of demand by changing your pricing and seeing at what price the most revenues are created.  Test different marketing messages, to see what offers resonate the most in terms of driving conversions.  And, make sure your products can be discovered at any and all places a customer may be looking for them.

Issues Related to the Buyer’s Company

The largest issues at the buyer’s company are whether or not they have the management approval to proceed, with an established pre-approved budget in place.  No matter how much a junior level staff member wants to purchase something, if their bosses won’t let them or they do not have enough funds in place to purchase your product, they won’t and can’t.  So, as you are going through the sale process, make sure you ask these very important questions—who are the key decision makers involved here, and have budgets been approved?  Then, you can work the decision makers to get them sold on the idea, and know you won’t be wasting your time on projects that don’t have a cash budget in place to afford the purchase.

Issues Related to Individuals Involved

Like the band Depeche Mode said, “People Are People”.  You may not get the sale because of the specific people involved.  Maybe your salesperson is not very good, and needs training?  Maybe your client has personality conflicts with your salesperson, and doesn’t want to work with them?  Maybe you are working with a middleman, like a design agency, and the designer is just using you for ideas and doesn’t really have a contract in place with the client yet.  It could be a myriad of reasons like this.  So, make sure you have a firm handle on the “people issues” of the persons involved in the transaction, and maybe try selling into other people at the same target company that are more open to a transaction with your business.

Issues Related to External Factors

Sometimes you are not getting the sale because of external factors that are out of your control?  Maybe your big competitor just dropped their prices, and you didn’t react quickly enough.  Or, maybe the economy is soft, and buyers are just nervous about making a big discretionary purchase right now.  Maybe your product is seasonal or cyclical, and people just aren’t going to buy snow shovels in July, or voting booths in non-election years.  Or, maybe government regulations are getting in the way (e.g., they won’t purchase your product because it is made in China with high tariffs incurred)?  So do whatever you need to do, to track these external drivers, and have a message that best resonates with your customers despite whatever hurdles are presented in the market.

What Needs to Be Measured Here?

You pretty much need to be measuring every single thing that was discussed above in this post.  Are you tracking the success of your marketing campaigns, A/B testing with different offers and creatives?  Are you measuring the success of your various salespeople, and cross fertilizing best practices and weeding out underperformers?  Are your tracking your competitors’ moves?  Are you asking the right questions of your customers that didn’t purchase from you, as to the specific reasons they didn’t purchase from you?  You will be amazed how much intelligence can be gleaned from your customers by simply asking them the question.  And like with anything else in business, you can’t manage what you are not measuring, so make sure you have reports that measure all of the above “lost revenue” drivers, so you can see “no” turning to “yes” more frequently through higher conversion rates over time.

Closing Thoughts

Hopefully, you now have a better understanding on why it is so important to focus on the reasons behind the 80% of sales you lost, instead of celebrating the 20% of sales you won.  If you focus on the 80% of lost revenues, you may be able to increase your win rate from 20% to 40% and double your sales in the process.  Good luck!!

For future posts, please follow me on Twitter at: @georgedeeb.