Randy MacLean, President — WayPoint Analytics
•WayPoint Analytics •sales management •Randy MacLean •strategy for CEO •strategy for CFO •cost cutting •management techniques •business strategy •cost reduction strategies •cost reduction analysis •optimizing operations •account strategy •losing an account •WayPoint Demo •WP demo •WayPoint presentation
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.
Audio file: profit-tips_21.mp3