Post by Patricia Hewitt, contributing Women On Business writer
What doesn’t kill us makes us stronger. Now that we know we are in for a long period of economic challenges, it’s time to gather the wagons and to regroup, reassess, and reclaim our best markets. Public companies undertake this kind of analysis on a continual basis, since their businesses are under the microscope of investors and analysts, who ask hard questions. Not to say the answers are always correct, but examining their market challenges and opportunities is more finely tuned in the public sector than it is in the private sector.
This type of organizational examination is especially important for companies today who may be operating within the boundaries of constricted cash flow while facing an uncertain future. It may seem the path of least resistance to simply “hunker down” and wait it out, yet I would argue that there is no better time to carefully examine the markets you operate in, define your most profitable products, and determine who your best customers are.
In other words, take a hard look at your overall business model. Business models need to change over time and often companies make the mistake of waiting too long to make required changes. This is one reason why downturns serve to spur new growth – because businesses have to look at new ways to go to market or they may not survive. So, let’s take these one at a time.
You should understand your markets down to their most granular level. That means starting at the highest point, such as business-to-business, and working your way down to at least the sector level. Within this scope ask the following questions and add a lot more of your own:
- What business cycle is this sector in? Ascending, maturing, descending?
- What is your total share in this market? What level of market share would be considered large, medium or small based on the number of companies operating in this market?
- Does your product or service meet a long term or short term need for this market?
- How are your competitors faring in this sector? List your competitors and estimate their market share, long-term viability, and go to market strategy.
- What is your ROI for at the market level?
- The most important question you are going to ask is this – Is this a market I should continue to invest in?
The next step is to review all of the products and services you offer. Group them into two broad categories first – those dependent upon net new sales for growth and those dependent upon long term contracts for growth. This is very important, since you are trying to determine where to put your limited investments to work for you. Once you’ve categorized them, take a 360-degree view as follows:
- How mature are these products/services? Are you fully invested in them?
- What does it cost to maintain and service them?
- Are you retaining more clients than you are creating new clients?
- Does your commission structure support your economic model?
- Can you create new services out of previously bundled offerings?
- What is the ROI at the product or service level?
- The most important question you are going to ask is this – Is this a product I should continue to invest in?
Finally, examine your existing customer base in order to determine who your best customers are by asking questions such as these:
- Over the length of my relationship with this customer, have I achieved a minimally acceptable level of revenue?
- Has this customer participated in product beta testing, case studies or other active participation in my product strategy?
- Does this customer use my products exclusively? If not, what share does my product have in their line mix?
- What is the maintenance/service time vs. revenue for this customer?
- What is the ROI at the customer level?
- The most important question you are going to ask is this – Is this a customer I should continue to invest in?
Once you have all of this analysis completed, you should have a pretty good picture of the best markets, products/services, and customers for your company. The final, and most important question then becomes – does my business model support this profile. Am I organized around the markets, products, and customers that are most profitable over the longest period of time, for my company?
Now you are ready to make investments with some level of certainty, in a downward trending market. I think of this business period as one that creates an environment that supports and encourages innovation and change. Your innovation and change strategies may be large or may be small, but you cannot afford to stop moving altogether. Just make sure you understand what direction makes the most sense and then start walking.