Sell your way out of it

One of the most common approaches to accelerating a business in a slump is to simply sell more. It's the most obvious solution to a lack of revenue, but as seems to be the case for most things, it's not always the best strategy.

The problem of selling your way out of it is that if you are losing $1 per sale, the more you sell, the more you lose. In my experience, a slump in business is usually caused by one of the following:

The be clear, by my interpretation, both are the fault of the executives of the business.

How can external forces be my fault?

When I invested in expanding The Radon Project on the West Coast, I put up some tens of thousands of dollars for advertising that played on the day of the Loma Preatta Earthquake. Too late to pull the ads, nobody wanted to worry about the potential of cancer some years out from an invisible odorless gas while freeways were falling on cars with people in them and buildings were collapsing on top of the residents.

That was hardly my fault. But that did not create a business slump, and we didn't have a slump in that time frame. That was a failed attempt to grow the business in a new area. And it was a limited bet with a limited impact. The loss was readily affordable, although of course I wish I had scheduled it for a week later so I could pull the ads recognizing the timing was bad.

In truth, lots of external forces are predictable, and by placing wise bets, you can avoid slumps, but only by understanding (and studying) the market you are in.

Housing slumps, market crashes, the Facebook slowdown, the bitcoin bounces, the tulip bubble, and many/most other such external effects were and are predictable. But more importantly, even if you don't predict, you should prepare.

It's the boy scouts' motto

Be prepared. In understanding your business, you should understand what makes the markets you depend on work. I don't mean perfect knowledge or some deep theoretical construct. I am talking about understanding your sales sieve. Leads, qualification, pitching, closing, servicing, and retaining customers. This includes the cost of customer acquisition, total and reachable market size, time to close a sale, and all the rest of the sales and marketing process.

Part of understanding your market is understanding how it is changing by measuring it. To get a sense of this, if the percentage of leads being qualified starts to drop, or if the time to move from lead qualification to negotiation increases, these are signs that you are entering a sales slump. They are leading indicators, because even though current sales may continue at the same pace for at time, sales will slow unless something is done about it because the sieve leading to those sales is changing.

It doesn't matter that an external force is causing the change, it can be detected as it changes.

But what to do about it?

Make changes! Don't wait!! Figure out what is breaking and treat the symptom regardless of the cause. Of course if you can identify the cause you might be able to do better at making changes, but in many cases, you cannot control the cause or the mechanism producing the effect. All you can do is counter the effect. Here are some examples of things that might work:

There are, of course, other methods. I don't mean to be comprehensive here, but rather just to get you (and me) going.

In summary

Simply selling your way out of it isn't always all that simple. Measurement leads to identification of leading indicators, and leading indicators lead to potential treatments. Selling your way out isn't always just a matter of selling more. It's often about adapting your approach to meet the changing conditions.

Copyright(c) Fred Cohen, 2018 - All Rights Reserved