“When others are greedy, be fearful. When others are fearful, be greedy.” Warren Buffet is the third richest guy on the planet, and he is known for taking a long view on wealth creation. According to Buffet, when the good times are rolling, that is the best time to prepare for the crap to hit the fan. The crap hit the fan in 2020, so are you prepared to be greedy and grow at the expense of your competition?
Let’s set the stage for greedy growth by examining what happens in an economic downturn.
First, capital flows and payments slow. Good customers that formerly paid in 30 days now pay in 60. Marginal customers that paid in 60 days now pay in 120. Bad customers don’t pay at all. And repair and retrofit projects grind to a halt.
Second, unemployment grows because some can’t make payroll. Businesses dependent on capital will divest human capital assets to reduce liabilities and lower payroll.
The third thing that happens is that marginal businesses become distressed and many will fail. They are over leveraged and dependent upon capital or they depend upon customers that are dependent upon capital. In either or both cases they sell assets, divest of liabilities, or they fail.
So what’s the point? The point is that playing a football game against the Dolphins in Miami in September is totally different than playing the Packers in January at Lambeau Field. The past several years have been like playing in Miami. In Miami, everyone is scoring lots of points because the weather is warm, the offense is loose, the defense is getting gassed from the heat, and the ball carries forever. At -20º in Green Bay with a blizzard raging and the wind howling at 30 mph and the ball feeling like a brick, running up the score requires a different set of Xs and Os. So, let’s talk about the playbook for an economic downturn.
Defensive Plays: Customer Consolidation
Customer Consolidation is a set of defensive plays to create an unbreakable bond with your most valuable customers. The plays are Review, Reject, and Renew.
Review. Review and grade your customers for their vulnerability during a downturn. Their vulnerability is typically a function of two things:
- Does the customer pay my company from an operating budget or a capital budget? Am I assisting their operational productivity, or doing capital projects?
- Will the customer be severely impacted because they rely upon capital to operate? Do they sell a large durable good to their customers, who pay them from a capital budget? Or both, which is really bad.
Sort your customers by their revenue value to your company. Then grade the quality of that revenue by judging the percentage that comes from capital-oriented budgets (theirs or their customers) or from operating-type budgets (this is the best money in a downturn). Place the highest value on maintenance and inspection revenue at low vulnerability customers.
Reject. The warm weather environment of Miami in September is the best time to run the defensive play I call “Reject.” Get rid of the customers that graded poorly in the above exercise along with the smaller ones with low revenue and high scores for being a PITA (pain in the a**). If you find yourself already in the game at Lambeau Field in January (i.e. in the midst of a pandemic and a recession), it is likely that the customer that you would reject in Miami will become more obvious candidates in Green Bay. They won’t be paying their bills, so they are easy to spot.
However, you may want to keep some customers that will be negatively impacted in the downturn but are safe long-term bets as good customers overall. Just make certain you can afford to extend them some credit when they need to slow pay your invoices. Quickly resolve equipment deficiencies at risky customers with upgrades and repairs, or move them out of your portfolio. The last thing you want during the downturn is unplanned work that you might not get paid to deliver.
Renew. The “Renew” play is the opposite of the “Reject” play. Identify high-value customers that pay from an operating budget. Rank and renew them with favorable terms, subscription payments, and all-inclusive pricing. What does this look like? Offer to clean up outstanding deficiencies for your lowest-risk accounts and lock in their loyalty with a new multi-year agreement. Give them a good reason like lower rates on service calls if they repair or upgrade all risky equipment. Offer a subscription payment plan.
When you have your cash flow locked in with a good defense, you can focus on the second part of the strategy – how to go on offense.
Offensive Plays: Competitor Asset Appropriation
Competitor Asset Appropriation is the offensive strategy to take the best technicians and best customers from the rival team and suit them up to play for your company. The plays are Connect, Convince, and Convert.
Connect. Start by connecting with those assets you covet. How are you going to do that? How are they going to remember you in the chill of the downturn in the moment they have decided to make a change? And who are “they,” anyway?
Keep a list of target customer accounts. Just like the customer list exercise you completed above for a Reject and Renew strategy, rank prospective customers based upon their potential annual revenue value to you plus the stress they are likely to feel during an economic downturn. You’ll also need to know which competitor currently has the account to know what defense you will be facing.
Do the same type of play with technicians. Compile a list of skilled players you can identify in the market. Rank them based upon what you can find publicly about their certifications, expertise, and years of experience, plus what you know about the competitor. Some will be easier to pry away than others.
So, now you have a ranked list of valuable connections you want to make. Now, what plays do you run to connect? There is no substitute for sales reps calling customer prospects and recruiters calling technicians. But how will you be memorable after the call?
My favorite scalable tool in this realm is LinkedIn. LinkedIn is specifically designed to run a connection strategy to the assets you want to have in your network. So go make it happen. Being blunt and uninteresting, however, will not work. Set up the connection request with interesting activity from you and your company on the platform. LinkedIn makes it easy to share the activities in your business to build a positive impression. When you have a positive reputation, connecting is easier.
Convince. You have connected with valuable assets of the competitor, but you still need to convince them to change teams. Google reviews will probably be the best approach to stand out to the prospects that are looking for a change. There are a number of products that can help you build those reviews.
Beyond the Internet, there are also real world tactics that will help you convince technicians and customers to jump teams. Consider inviting technicians and customer prospects to your training and customer events. I know the idea of training your competitors’ technicians might sound crazy, but the impression you make is more valuable than the risk. Also, If you are not doing ongoing employee development or community service work, you should. It is invaluable in convincing employees that they want to work for you.
We have now put in place a strategy for Connecting and Convincing target prospects and technicians. They know who you are, and they believe you are doing good things. Now, how do you get them to take action and say “I want to be on your team?”
Convert. Converting technicians means getting their job application. Your website’s careers page should be front and center to show what openings you have and what it’s like to work at the company. Give visitors clear qualifications, a button to apply, and ways to share their contact information.
Customer prospects have now seen your brand all over the Internet so they know how to find you online. The moment the other guy has made it too difficult to continue in a relationship, it has to be really easy for them to see what you’re selling and get started with you. Offer something like a free first inspection to give them the experience of your superior customer service. Make the conversion easy with simple web forms and by repeating phone numbers and email addresses all over your website.
These plays for defense (Review, Reject, Renew) and offense (Connect, Convince, Convert) represent a super simple formula for growth, right? Defend what you have against any competitor and have an offense that runs up the score by taking technicians and customers away from the competition.
The blizzard bowl in Green Bay in January is very different than airing it out in Miami in September. The tactics change dramatically. A greedy growth strategy will create more wins than losses on the hostile playing field of a pandemic and a recession.
If you’d like to see how ServiceTrade helps you execute these offensive and defensive plays request a demo from one of our application specialists.