Using internal data to make important business development decisions.
Industry: Healthcare Technology products and services
Size: $1M, <10 employees
Years in business: 13
If you’ve already read my post about ‘Understanding Operating Costs’ you’ll recognize some of the similarities in these two cases. The same way entrepreneurs launch successful companies and operate for months or years, or decades without having any idea of true operating costs decision-making can be a similar process.
My client here is a small but very well-established business that is successful by all measures but doesn’t have the resources or processes in place to make data-informed decisions.
In the business development game, creating strategies for growth is key. If you’re running a small business and don’t have a dedicated BD director but you’re looking to increase net new sales or increase revenue with same-store sales, you need to have your eye on expansion and make decisions that are aligned with those goals. When opportunities present themselves or you need to identify where to focus your energy to create partner relationships or bring on new products or services, what information are you using to inform your decisions? Are you making strategic decisions and pursuing leads that have the maximum return for your organization or have you found yourself reselling or white-labeling solutions that you pour energy and hours into with marginal ROI?
In my client’s case, they had partnered with a vendor who provided a great product that seemed like a logical expansion of their services to existing customers but after we drilled down into license fees, configuration costs, and the cost of sales and implementation hours they were lucky to break even and were losing money in the long run once server maintenance fees and tier-2 support costs were factored in. As much as it pains us to terminate business relationships and undo all the work that’s been done to create those relationships, market new services, and onboard customers – sometimes you need to cut your losses. Fortunately, in my client’s case, we were able to preserve 80% of the customers on that platform and migrate them to a new solution, but that’s not always the case. And before you go all the way down that road, you should run the numbers on the worst-case scenario and determine your total losses if you can’t preserve those customer accounts. For help with those formulas, get in touch with me. Even if you don’t have that gut feeling that you may be losing money, it’s worth completing the exercise at least annually with all of your vendor partners, products, and services.
If your existing partner agreements aren’t in question or aren’t a factor you may be considering new partner relationships or product expansion. Let’s consider some of the variables that should inform your decisions.
What does your existing client base look like? This is important if you’re focused on inside or same-store sales. What are they looking for? What are they paying for now, and what is the next step up from that?
What is their timeline? Are these purchasing decisions they are making in the next 30 days, 3 months, 6 months, or 12 months? Their timeline should inform your timeline.
If it’s difficult to answer the questions above, it may be easier to start with any rescission data you have available. If you’ve lost customers, where are they going? In the case of my client, the customers were advancing their technology solutions beyond what was available. That’s an easy answer, if the next-level solution, the more advanced technology isn’t in your catalog, it’s time to add it.
Look at the customers you’ve lost in the last 12 months and categorize the reason they’ve left. I hope you have a CRM system in place that tracks that information, if not – it’s time to create one – even if it’s a rudimentary solution that doesn’t involve a software purchase. If you don’t have a simple CRM extract of lost customers available an easy place to start is with your operations or account management team who can anecdotally tell you who you’ve lost and why.