When labor shortages and supply chain interruptions become the norm, many business owners seem satisfied to tread water in hopes of merely maintaining market share. Few even dare to think about top-line revenue growth or, more importantly, boosting profits. But savvy business owners realize that when their competitors are in a holding pattern of complacency, the time is right to target market gains – despite labor and logistics challenges. Can it be done? Can your business grow during such difficult times? Let’s consider some key factors and ways to overcome these seemingly insurmountable difficulties.
Is the Pursuit of Higher Profits on Pause?
Smart business owners tend to agree that increasing profits is more important than growing top-line revenue. Thus, it’s natural to assume that CEOs and owners proactively and intentionally pursue strategies to maximize profitability at all times, right? And yet, based on my experience and recent conversations with CEOs and sales teams, I am not seeing many leaders implementing intentional sales activities or sales strategies that would increase profits in the current market conditions.
What’s causing business owners to hit the pause button instead of pushing for higher profits? Labor shortages and supply chain disruptions appear to be at the root of the stagnation. Indeed, several of my clients have encountered these challenges, and they are not alone. In fact, recent market data indicate that 73% of companies have positions to fill but find it difficult to recruit new employees. Meanwhile, the number of unfilled positions in some sectors have reached a 20-year high. Making matters worse, according to a recent Predictive Index report, 48% of employees have thought about changing careers within the past 12 months. Certainly, many workers have done just that, leaving jobs in record numbers. This massive exodus has been called the “Turnover Tsunami,” and it is certainly making waves in US and global job markets.
Meanwhile, many supply chains are faltering and even on the brink of collapse. “Supply uncertainties, disruptions, and inflationary forces are here for the foreseeable future,” according to a recent Bloomberg article; and the cost to ensure on-time delivery of a container from Asia to the US has increased ten-fold over the past two years. Because some companies cannot afford these higher rates, they can’t utilize warehouse space originally contracted, causing further delays, and impacting the supply chain even more.
It’s a vicious cycle – so vicious that 70% of CEOs and business owners I’ve spoken with over the last few months say they are not concerned with increasing top-line revenue, but they are concerned with being able to deliver on existing orders and retaining current clients. With this shift to a short-term view, several of these leaders have asked their sales teams to slow down business acquisition activities and just focus on customer retention. When asked “Why are you not still aggressively pursuing both acquisition and retention?” the most common answer is “How can I handle new business if I can’t even deliver the existing demand?”
This perspective is understandable but short-sighted. The critical question business owners should ask is this: “What is my sales strategy for maximizing profitability AND retention during a supply chain disruption or labor shortage?” By focusing only on retention, business leaders are missing the potentially significant growth opportunity lying dormant in the current market conditions. And without an executable strategy to maximize profitability, a loss of market share could be permanent.
What should your growth strategy take into account? Here are five essential considerations:
- Not all customers are created equal
If current demand is higher than your ability to supply your product or service, you risk losing a few customers. Most businesses do their best to please and retain all customers while minimizing the impact and managing the fallout; but in reality, their clients become increasingly agitated. As a result, customers are either jumping ship now, or plan to once the market recovers and they can find a reliable alternative. So, would you rather lose your most profitable customer or your least profitable customer? Are your sales team’s activities addressing the smart priorities? Perhaps not, as 78% of businesses do not prioritize clients or prospective clients. Simply put, not all customers are created equal, and your time and energy should reflect that fact. During a supply or labor shortage, your most profitable customers should be prioritized, and you might want to proactively lose your least favorite customers to protect the capacity to retain your most profitable customers. This type of loyalty will pay dividends later.
- Keep selling
Which favorite customer would you love to clone? How would it benefit to win another five or ten customers like them? So, why not aggressively pursue those “ideal clients” now? Their current supplier might be struggling to deliver the products/services they need. So, this can be a prime opportunity to have a conversation with them, share your unique value proposition, and understand what would be necessary to win their business. You will have the capacity to serve them if you proactively free up capacity by offboarding customers who are less profitable or loyal.
- Profit is king
The labor situation impacts almost every industry and results in increased costs of goods. Yet, most businesses hesitate to increase prices or pass the increase in cost to their customers; as a result, profit margins shrink. You might decide to increase prices as part of your annual price increase at the end of the year, but if the impact on profitability is significant mid-term, it’s wise to consider an out-of-cycle price increase.
- Develop/Update your Value Proposition
When businesses hesitate to increase prices, it is often because they are not able to articulate their value proposition. An effective value proposition will help your sales team change the conversation from price to cost and value. To maximize competitiveness and profitability, therefore, develop or update your value proposition and your unique differentiators. Validate these with cost-effective qualitative and quantitative research. For example, qualitative research can take the form of one-on-one conversations with a cross section of your customers, followed by quantitative research via a more formal customer survey.
Based on these considerations, once you have updated your strategy, share it with your sales team. But remember, most people need to hear something seven times before they act on it. So, consider the following as part of your implementations plan:
- Communicate: Share the information verbally with your team and follow it with a detailed reference document
- Workshop the implementation: Ask sales team members to present back to one another how each item will be implemented for at least two of their accounts. This will help team members internalize the information and think through aspects you might not have considered. It will also give you the opportunity to provide feedback on anything that is misinterpreted.
- Roleplay: The team may feel uncomfortable delivering the new strategic messaging to customers. But these customer conversations and delivery of the value proposition to prospects is key to your plan’s implementation. With that in mind, roleplaying becomes critical. Just as NFL players practice the same play several times, sales professionals should do the same. This will help them more comfortably fine-tune and deliver their message, while overcoming objections.
All businesses and their markets vary. However, don’t write off this approach because you foresee unique industry-specific challenges even in the midst of common labor and supply chain difficulties. Rather, be proactive. Adapt your approach and execute a responsive and strategic sales plan designed to increase revenue and profit now while positioning your business accelerated growth once supply chains and labor markets return to normal rhythms. If you need help developing and executing a new growth strategy, I would be honored to help you identify profitable opportunities.