Nothing left to cut – now what?

Your pencil can't get any sharper. You've done everything you can think of to minimize overhead and shrink job costs. With nothing left to cut, you can wait for things to get better, or you can focus on beefing up the top line and improving your competitive position. Here's some of what owners and leaders can do to improve the revenue side of the equation.

Strategy first, then goals.

It’s easy to say, “Our goal is to increase revenue by 20%.” But arbitrary goals are for amateurs -- ambitious, but not meaningful. Before you start “brainstorming” goals at your next staff meeting, ask yourself: what business are we in, who is our customer, what do they care about, and what is our strategy for delivering value to customers?

Your goals should be directly tied to a business strategy. For example, if your strategy is to deliver a “combination of quality, price, and ease of purchase that no one else can match”1 (Treacy & Wiersema) then your goals will be all about minimizing costs, reducing hassle, faster transactions, less waste, and improving efficiency. Focusing on these goals will enable you to attract more of the customers – and more of the revenue – you want.

Typical goals involve profitability, response times, warranty claims, production time, errors, closing rates, market share, return on investment, customer loyalty, retention, revenue size, innovation, and diversification. Set goals. But make sure they are part of a larger strategic plan.

Never, ever waste an opportunity – or a relationship.

The devil is in the details. And the revenue is in the follow-up. Whether you are a plumber, builder, retailer, window manufacturer, flooring distributor, or photographer make sure you have systems in place to keep in touch with customers before, during, and after they buy. Customers who buy right away, and then remember to call you the next time, are about as common as a black polar bear. So if you don’t have a system in place for managing customer relationships as they move through the marketing and sales pipeline, you are losing revenue. Guaranteed.

Be realistic about your marketing budget.

If you want your car to go, you have to fill the tank. If you want your marketing to produce opportunities, and referrals, you’ll need to invest in attracting, winning, and retaining customers. In times like these, retention is especially important; it’s much more cost-effective to keep a customer, than it is to get a new one!

If you are cutting your marketing budget to fatten up the bottom line, proceed with caution. Starving your marketing efforts now, may lead to anemic sales down the road, and leave you staring at the competition’s tail lights when the market improves.

In addition to industry benchmarks and keeping a close eye on the competition, calculating the expected ROI for your marketing plan is one way to determine your marketing budget. Another option: estimate the LCV (Lifetime Customer Value). Then ask, what’s a reasonable amount to spend in order to acquire a new customer?

Focus on the important stuff – revenue and strategy

Be careful not to shift time and resources away from activities that bring in revenue and create customers. Although you may be tempted to handle routine paperwork yourself, better to pay someone to handle the tasky-stuff, while you develop a strategic plan and focus the organization on improving the top and bottom line.

1 Treacy, Michael & Wiersema, Fred; The Discipline of Market Leaders, p. 33