The first four thought leadership articles on diversification explored the following key areas: identifying and defining a strategy that suits you and your business; selecting the right products and/or services to align with your company and meet customer needs; and adopting the right sales mindset to drive success.
In this article, I’ll delve into some additional practical considerations and highlight one critical factor that, if overlooked, could stall your progress – or even prevent it from getting out of the starting blocks.
Who knew?
Over the years, having worked with many businesses, one issue always seems to be a major weakness when first getting involved: communication. Often a catch-all term for a multitude of frustrations, it is crucial to understand what communication typically represents. Its importance is magnified when driving change in a business – and diversification, even in its simplest form, represents a significant change.
I’ll start on a positive note. I can’t recall many occasions when I’ve met people from non-sales parts of a business who weren’t interested in what sales were doing. Questions about strategy, sales figures, new customers, the future, etc come up time and again. But a lack of answers is often down to three key elements:
- Why wasn’t I involved or made aware of this sooner?
- Why wasn’t my opinion sought?
- Why am I not considered important enough to be told how we are doing?
No matter the size of your dealership – whether you’re the owner, sales leader or salesperson – you have to engage with every area of the organisation if you are going to stand a fighting chance of successfully driving diversification into your business.
I’d like to take a moment to highlight just a few key areas and pose some questions that are likely (or certain) to impact non-sales functions in your business when diversification is the goal.
Finance
- Will a customer that starts spending more require an increase in their credit limit?
- Has the customer’s finance team been informed that they’ll see higher invoice values from you?
- Do the customer’s payment terms align with the (new) supplier terms you’re about to introduce?
- How might this impact cash flow?
- Is the new customer you’re targeting creditworthy? (You could be wasting your time!)
- Will you need to increase stock levels to support this growth?
Purchasing
- Do they know how to ‘sell’ your vision to the new suppliers?
- What (additional) support might they need?
- Will they support a specific customer for larger opportunities? How will that be measured? What growth incentives are achievable?
- How does this get attributed back to the customer margin? (more on this in ‘Commercial’).
- Do the sales targets align with purchasing targets? (This is one of my favourites: the sales team’s goal is to grow sales – and therefore purchase values – while the purchasing team’s objective is to reduce expenditure values!)
- Are your credit terms good enough to support success? (see ‘Finance’, above).
ESG
- What impact will new supplier solutions have on your ESG objectives – and those of your customers?
- Do their values, metrics and objectives align with yours?
- Could they potentially enhance your ESG performance?
IT
- Does your e-procurement system support the additional products and services you plan to sell?
- Does your reporting system capture the necessary information for performance reviews – and, more importantly, customer reviews?
- Can you seamlessly onboard new customers, departments/users and suppliers?
Operations/logistics
- Will you be sending out more parcels?
- Will you need to stock additional items?
- Are the items heavy? (Catering solutions often pose this challenge).
- Will products be shipped directly from the supplier and does your own logistics team know this? (They’re often the first to be asked, “Where is my…?” by the customer).
Customer services
- Are they aware of the service variables the customer might now experience?
- Have they received manufacturer/supplier product awareness training?
- If an issue arises, do they know who to contact and when?
Commercial
- What will happen to gross margins? Will net margins increase even if gross margins decline? (Here’s a great example: an increase in direct deliveries may lead to lower margins but could also reduce operating costs, making reduced gross margins acceptable).
- Does this align with bonus and commission schemes across all departments, not just sales?
- How will this impact internal sales and performance reporting?
- How will it affect customer reporting and reviews?
Marketing
- What’s your sales proposition? How does it differ for existing customers versus potential new customers?
- Do you have the appropriate sales collateral?
- Does your supplier have resources you can utilise?
- How will you raise awareness, and who is your target audience?
- Is your customer and prospecting data accurate and up to date?
- What’s the next step for an interested customer –where do they go and what should they do?
These are just a few considerations – there will undoubtedly be many more as your diversification journey progresses. The message here is that it shouldn’t be solely driven by sales; you need to stimulate and maintain non-sales participation across all areas of your business. Everyone must be engaged.
In order to do this, you’ll need to focus on effective communication. Get it right – and keep it going – and any bump in the road can be smoothed over.
Get it wrong, however, and your diversification dream may hit dead-ends at every turn, possibly before it has even got going.
Getting started
Let’s simplify the start of the communication journey. The main thing people really want to know is: how does it affect me? In fact, it’s twofold: how will it affect me and how is it affecting me?
So, how might it impact them at a department, team or individual level? Let employees know what you’re aiming to achieve. Explain what you see as the opportunity (or need) and outline the potential challenges, both for the business and for their department or role. Then, ask for their honest views and opinions.
By taking this approach, I’ve regularly been delighted by different viewpoints, ideas or suggestions that hadn’t been considered – along with potential problems that hadn’t been thought through. More importantly, and more often than you think, you will see a positive buy-in to the goals and objectives. People feel a part of the journey. They become invested. They believe they are important to the future – and it’s crucial to make them feel that way.
This isn’t just a managerial responsibility. It’s a salesperson’s responsibility too. Good salespeople know that internal sales are just as important as external ones. If you are a salesperson reading this, make the internal sale a regular part of your week.
Keeping it going
Your diversification journey may well launch like a rocket, and you can do no wrong. Or it may take longer than expected, frustrating the life out of everyone when it doesn’t catch fire as quickly as hoped – or planned. When frustrations arise, ‘communication’ is often blamed, especially when there’s no consistent effort to keep people informed about progress (or the lack of it).
Whatever the pace, those non-sales departments need to be kept in the loop – especially when things aren’t going so well. The communication process is a discipline that, once started, must remain consistent. It’s not something to be switched on and off.
Whether through weekly, monthly, or quarterly updates, a quick coffee catch-up, detailed reports, or a simple email, maintaining a steady flow of communication is invaluable. It keeps everyone aligned and informed as the business transitions from exploring ‘new horizons’ to establishing ‘business as usual’. Take your team and colleagues on the journey with you.
The threat of success
As a sales-biased leader of many types and sizes of businesses, I’ve always preferred to judge sales performance as simply as possible. For me, it boils down to two key questions:
- What is the current success (or otherwise) of my team/individual?
- What does the threat (or potential) of future success look like?
If, as is often the case, a salesperson is not experiencing current success, anxiety about subsequent achievements takes on a greater importance. Sales life is inherently inconsistent, with typical peaks and troughs. During a trough, maintaining a positive outlook on the future is essential. Likewise, if a salesperson is enjoying success but isn’t showing signs of building for future accomplishments, I’m equally concerned. After all, the next dip may be just around the corner.
The journey to achieving diversification nirvana will likely be a learning curve for many salespeople and businesses. It will involve trial and error, unexpected wins and more than a few “what the heck?!” moments.
The discipline of cross-company and departmental communication relies on the same fundamental principles: are we enjoying good fortune and are we showing the threat of future success? In simple terms, it’s about understanding the results and evaluating the pipeline of opportunity and potential.
In the absence of immediate or present-day triumphs, the ability to highlight the threat of future success becomes essential. It’s this forward-looking perspective that will sustain buy-in, support and contributions from those all-important non-sales functions. Without this support, the speed and attainment of your new diversified future will, I promise you, take significantly longer to reach.
Take a closer look at your reports, KPIs and metrics. Consider your primary measurements (results), secondary metrics (pipeline), and even tertiary ones (activities). Do they show not only current performance but also the threat of future success? If not, they should.
One last thing… for now
You will enjoy diversification breakthrough. Maybe not immediately – although hopefully this is the case – but you will. A healthy solution focused on an expanded single-source offering will resonate with the right customers – those that benefit from it, appreciate it and even value it highly.
When you do enjoy sales success… please share it. Recognise and appreciate those non-sales functions that helped make it happen. Remember, it’s good to communicate!
Gary Naphtali is a Director at TSP
