Before I tell you about the wrong business development strategy at the wrong time, let me first say that you’ve always got to be thinking in terms of growth. How can you expand the business, in good times and in bad? You must look for growth opportunities, absolutely. But…
…there are times when your pursuit of growth isn’t prudent. You’ll find that out very quickly when you take a careful look at your finances, and understand exactly what kind of shape your company is in. It will help you understand what’s the right business development strategy, and by that I mean what’s feasible.
Let me give you an example: A client’s cash-flow analysis indicates that things are in horrible shape. The bottom line is the individual is losing money hand-over-fist. This is a grave situation, not only because it means the owner might have trouble meeting payroll, but also because the bank pulling the purse strings is getting itchy. Real itchy.
The client sees that he needs to improve the cash flow, so he does what he’s always done. He goes out and buys a new printing press. This is a great move, right? More capacity, more business, more cash flow. Problem solved.
Uh, not so fast. As we all know, that printing press is only as good as the work going through it. And to think that a “buy it and they will come” attitude will help you through the day is reckless at best.
Next, the customer doesn’t understand that even if he does start to get some more business, he’s actually exacerbated the situation by increasing his debt load. The bank, already nervous about his debt ratio at the moment, will positively freak out when they see there’s more big iron added to the bottom line.
What would I have done? Three things:
• Move into expense-cutting mode. Banks analyze ratios, and the best way to move the dial is to substantially cut back on the fat.
• Develop business growth strategies that utilize what you’ve got. The printer had a great book of business and an incredible staff. Why not focus on generating more profits from existing clients.
• Enlist the team. The printer made the purchase without consulting anyone – not even his own internal staff. It’s time to circle the wagons and seek out new solutions. Get everyone involved in coming up with a new plan.
Buying a new press was the wrong thing for the client to do at the wrong time. Base your strategy on your financials and you can avoid a similar jam.
Photo by: Alan Cleaver
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