Manufacturers: What You Need to Know About Growth

US manufacturers of all sizes have seen their businesses changed dramatically since 2000.  Some of the external events that have driven these changes and undoubtedly affected your business include:

•   Recessions impacting much of the country since 1999

•   Impacts of out-sourcing to low cost countries, principally China

•   Results of September 11, 2001 on our economy & collective psyche

Internal issues have also driven significant change, these include some of the following:

•   Impacts of changing customer buying processes on sales,marketing and margins

•   Transitions with senior management to a new generation of leaders

•   Impact of changing customer needs and desires on products and services companies have historically provided

•   Opportunities & pitfalls with doing business via the Internet

•   Inability to make Lean efforts payoff on the bottom-line

All of these have conspired to make Growth one of the hottest topics at most companies.  But what does Growth mean?  How do you translate for yourself best practices in business growth from the many Growth “Pundits” publishing management books, conducting training seminars, sponsoring webinars, doing Podcasts and more?  I hope this weekly column will appeal to those of you who want to answer these questions for yourselves and for your businesses.

The primary goal of any strategy should be Profitable Growth.  Forget about all of the other adjectives around growth, like Top-Line, Organic, Innovation Driven, etc. and concentrate on what you can do to accomplish the following:

•   Make your Core Business as profitable and stable as possible, while simultaneously

•   Continually seeking out new growth opportunities with new and existing customers in markets, products and services

The first order of business is to Confront the Facts about your core business.  Does your sales and profitability over the last 10 years resemble something like the following table?  

If this table looks familiar, you’re not alone.  Many manufacturers of all sizes have seen flat sales growth and profitability over the last few years.  In fact, many companies have really seen declining sales and profits over the last 5-10 years and some have taken action to remedy the situation, but generating results is difficult.  Do this exercise: Plot your actual Current State as honestly as you can using the same table.

What can you do now to stabilize sales and profitability in your core business?  Start with the following analysis focusing on Customer Knowledge:

1.      Print a list of all your major customers over the last 3-5 years ranked by total sales

2.      Draw three columns beside your customer list marked:  Margin, Hassle Potential

3.      Gather your sales team and discuss each customer

4.      Rank each customer using 1-3 (1 = best, 3 = worst) for Margin and Hassle (how much care & feeding the customer requires)

5.      Ask your team to rate the Potential for each customer using , , or -, --, --

Here’s what to do with your analysis:

1.      List all the customers ranking both a #1 in Margin and Hassle, meaning these customers are profitable and reasonably easy to do business with, these represent possible Most Valuable Customers (MVCs)

2.      List all the customers rating a , or to pare down your MVC list

3.      Think about what these customers have in common:  size, industry, markets, products and services that you sell them, management type (family-owned, professionally managed, etc)

4.      Do the same for the customers ranked #3 in Margin and Hassle and for those with -, -- or --- potential.  What do they have in common?

5.      Now ask yourself what you could do to generate more business with your MVCs?  What are you willing to do for these customers that you wouldn’t do for others?

You and your company now have the beginnings for developing an Integrated Sales & Marketing Plan to grow profitable ales in your Core Business.  Next week we’ll look at the Big Picture of Growth while continuing to play small-ball on core business profitability with more steps using this customer analysis.

Charlie Alter owns Bentbrook Advisors LLC based in Sylvania, OH - he specializes in Growth Strategy Consulting & Executive Coaching, Charlie can be reached at calter@me.com