You've Lost Your Biggest Account – Now What?Tuesday, February 20, 2018—OK, you've got the bad news – your biggest account is leaving. Your business plan is out the window, and things are certainly going to be different. Depending on the situation, how you handle it will determine whether it's an unpleasant blip, or a near-death emergency. As companies progress from small to moderate size, they often enter periods where a single account represents a large percentage of their total business. This increases risk, because the loss of the account can severely impact cash-flow, and may cause a cascade of financial issues that may be difficult or impossible to overcome. Most companies can survive a 20% drop in sales. Few can weather 40% or more. So, let's look at your situation. Unpleasant choices are ahead, but that's the price of leadership, and how you handle it will be a mark of your capability, and be one of the most important educational experiences in your career. So, what to do? First, avoid both panic and paralysis. Move quickly to assess the cause of the defection and the true impact of the loss, and don't let fear of unpleasant choices slow your actions. Ask the customer why the change is occurring, and for advice on how your company could better serve companies like themselves. It's vital to know if changes in the market, or changes customer needs, are causing a disconnect between your company and your whole customer base. You also need to check in with your other important accounts to ensure you're not facing a cascade of defections, and what you learn from them can be very helpful. Gather information from enough sources, including your own people, to recognize possible early warning signs of changes in the market, or in customer needs. If there's a widening gap between what you're providing and what the market wants, it'll lead to more defections. If you find a gap, get to work on closing it – fast. Your objective is to protect the balance of your revenue base. Secondly, you must accurately quantify the true costs associated with the account. Hopefully, you have WayPoint, or something like it, to show the proportion of your personnel and infrastructure costs that support the account. This will give you some certainty about how to quantify the rationalizations that may be necessary to protect the company's finances. With some precision in your cost analysis, you'll know exactly how much needs to be cut, and where you can likely back-fill by re-assigning people. Sometimes the account's actual contribution is negligible – they may have very low pricing but their costs are also low, so they don't really impact either cash flow or profits. If so, you've dodged a bullet. Otherwise, you'll need to take action, and accurately quantifying costs and resources will be crucial. Why does this Matter? If you don't do this well, you can compound the problem. If you're facing a significant drop in operating cash, you obviously need to scale down costs accordingly. The goal is to manage it in a way that doesn't unnecessarily impact customers, but is sufficient to address the situation. The scale of the drop in operating cash will dictate whether you're just acting responsibly, or for the survival of the company, or both. Timing is everything. Your cash position will never be any better than the day you get the news, and will dwindle every day after that. Time will close off options you could have pursued earlier, and choices will be progressively more unpleasant, so don't delay. If you need to cut staff, do it all at once. It's much better to announce the cuts and be in a position to say it's done and over, then to repeatedly demoralize the team with new rounds of cuts. You'll also get to the cash-flow benefits that much sooner. If you're watching this video because you're interested in what executives do in difficult situations, there's something you should be doing now – planning out what you'd do if your biggest customer left tomorrow. What would your company be facing? What would you wish you'd already done? Gaming out the scenario with key people will not only prepare you, it'll also reveal important truths about the way you do business. These insights often lead to changes that increase both profits, and the security of your important revenue sources. It's much more than an academic exercise. The takeaway is: nothing is forever. You need to plan for the inevitable loss of your most important account. When it happens, act fast to rationalize, and do it with the benefits of good analytics, and a solid plan developed when you had time to think. To learn more about the sophisticated cost and profit analytics in WayPoint, visit our website at www.waypointanalytics.net. |
Profit-Driven Customer ServiceThere's a direct link between high profits and second-tier customer service. This is how you use it to make more money. Customer Service – How Companies Get It So WrongMathematically, half of all companies have below-average customer service. There's a fifty-fifty chance yours is one of them. Here's why most companies don't The Customer Benefits Budget: Engineering Customer RelationshipsBalancing the internals of a customer relationship is the gateway to aggressive pricing and great customer service. Accounts That Eat Your LunchAlmost every company is quite profitable, or would be if it wasn't for a handful profit-killing accounts. Why Counter Sales are Killing Your Profits & What to Do About ItCounter Sales are perpetually amongst the biggest money-losers in distribution. It's a bigger issue than companies without advanced analytics realize, and repr The Customer Service TrapCompanies hurt themselves when they go for "great customer service". Here's why. How to Make (a Lot) More Money: Profit-Driven Business StrategyA numbers-driven strategy to focus strategically on profit production takes companies to the top. Adopt their strategy and win. Mix & Balance: How to Get Big Profit GainsRapid and permanent profit gains come from focusing on mix and balance. Driving these elements produces great cash-flow & record profits. Fast Track to Permanent Profit Gains: Trading CustomersThe most powerful profit-producing strategy for sales is trading customers. This video reveals why this is. Money-Making vs Money-Losing Sales: Finding Hidden ProfitsIf you want to put your company on track to high profits, extraordinary cash flow, fast growth, and market leadership, this is what you need to know. Where to Focus Your Efforts for Fast Profit GainsEvery sale has three dimensions that determine its profitability: volume (or size of the sale); margin (amount of operating cash generated above the cost of the High-Leverage Accounts: The Gateway to High Profit RatesPart of a series on profit-value segmentation, the High-Leverage Accounts are vital the fast profit gains. Fast Track to Profits: Eliminating DuplicationA relentless focus on avoiding and eliminating duplication guarantees higher profit rates. How to Have a Profit Rate Above 20% - Four StepsSome distribution companies deliver profit rates of 20%, 25% and more. Here's how they do it. |