You are 3 months into your fiscal year and your sales are 15% behind plan.What do you do?
Some companies would rationalize the lag with “having a couple of slow months”, “losing a key client”, or “the departure of a key salesperson”. These things happen all the time, so the explanations are logical. Hopefully, we can catch up with the plan in the ensuing month. But what do you do if the second quarter is similarly behind, or at least does not reduce the deficit materially?
Being off budget may not be a big deal for some companies, if the weaker-than-planned performance does not lead to a cash crisis, salaries and suppliers are still being paid and the owners are OK with taking home less at the end of the month.
Public and Private Equity Companies
But how about public and private equity (PE) owned companies? Would they accept such explanations?
Publicly listed businesses will unlikely to put up with lower than forecast performance, as investors are watching and the market is adjusting the share price immediately. In the case of PE owners, the banks are doing the same and jack-up interest rates on buyout debt, or apply other type of pressure to force the company to take remedial steps.
So why should a privately held company be less rigorous about handling budget shortfalls? If anything, it should be more disciplined as it has a smaller coffer to cushion a potential cash flow crisis and has less scope to make up for slow growth with sweeping strategic steps, like acquisitions.
The Entrepreneurial Operating System® fixes these “behind-budget accidents” by using a Scorecard. A Scorecard is a set of 5-15 leading indicators monitored weekly, that allow leadership to stay on top of sales growth and other metrics. These are “windshield” (vs. rear view mirror) metrics that allow you to peek into the future and take action in time to catch up with any shortfall against the plan.
So what can you do upon seeing lagging sales numbers?
Sales are a function of the level of activity in generating leads, qualifying prospects, following up with them and closing sales. Lower-than-budgeted sales numbers can be compensated by raising the activity level to the point where it will generate the number of prospect interactions that are necessary to catch up with your sales goals.
As an example, let’s say a signed sales contract statistically requires the issuing of two proposals, which in turn presupposes 4 discovery meetings and 8 qualified phone conversations to get there. Those 8 qualified phone calls may require up to 400 cold calls as a first action step to generate them. The activity target therefore will be the making of 400 calls a month, which is about 20 calls for each working day. This even a single salesperson can do, if working with discipline.
When your numbers are behind, you can quickly re-calibrate and do enough actions (calls, workshops, direct mailing, etc.) to catch up with your plan and grow your business without relying on outsider disciplinarians, such as equity analysts, or private equity find managers.
Or, you can just hire an EOS® Implementer to keep you focused, accountable, gain traction and get back on track with your growth goals.