For most building materials companies, it’s that time of year when they start budgeting for next year. This is the one time of year when you can and should pause a moment to seriously assess where you are and where you are going. Too often it is simply another task that has to get done rather than done right.
It’s like a school assignment that has to be turned in on time; the deadline and the bottom line become the focus. Annual budgets are often revised within tight schedules and based on what the marketing team thinks the boss wants to see or will approve. It is not what the marketing department really thinks the company needs in order to grow.
Of course, there will be some small insignificant and unimportant detail to make it look like the marketing department is creative, current and innovative. New ideas like, “And this year we’re really going to get into social media. Wait till you see how many Likes we have a Facebook.”
The basic plan is just a polished up version of last year’s plan and the year before that. Solid marketing plans need time and support for informed review and revamping where needed.
This brings up a chicken and egg question. The marketing plan should be developed, and then the budget needed to support it. Many times, the budget is developed, and that becomes the plan. A plan that is based on the budget has no strategy, other than to stay on budget. It has little to do with growing sales or meeting challenges and opportunities. It is based on accepting the level of sales; the market gives you or competition allows you to have versus going after more.
Blame It On The CEO!
It’s not the marketing department’s fault if they are spending a lot of time, just going through the motions in preparing the budget. It’s the CEO’s fault. The marketing department’s efforts in developing the plan and budget are based on the expectations of the CEO.
The CEO assumes that the marketing budget is based on what the marketing department really thinks the company should do to be more successful. There is an assumption that the marketing department will recommend what they really believe in.
The reality is that marketing departments often present what they think the CEO is expecting and will get approved. Why should they go to all the extra work and effort to present a plan they feel probably won’t get approved? In addition to a lot of extra work, it may also hurt their career if they are viewed as not fitting in with, “How things are done around here.”
The CEO gets what they ask for. If they want what the marketing team really feels what would be best for the company, they need to directly ask for it. The marketing people can’t read your mind.
The CEO may disagree or be uncomfortable with the recommendations. The important thing is that the CEO is exposed to what the marketing department really thinks.
Does The CEO Really Want to Grow?
CEOs are in a tough position. They have a tremendous amount of responsibility for the future of the company. They have to balance prudence with boldness.
During the budgeting process, the CEO is presented with many options for how to improve their company’s position. One deciding factor when considering the options is the confidence level that the option will produce the desired outcome.
Operational improvements are usually greeted with a high confidence level in their ability to deliver on their promises and frequently to lower costs. The problem, however, is that the vast majority 0f these investments do little to grow the sales of the company’s products.
Investing more in sales and marketing is riskier as the result is less certain than an investment in lowering costs. When you aren’t willing to invest more in sales and marketing, it’s like you are ceding control of your sales to the marketplace and your competitors instead of taking charge of your own destiny.
Sales and marketing people are great at presenting and selling the benefits of your products to your customers. When it’s time to sell the CEO however, they become different people as they tentatively present their recommendations. It’s amazing to watch the heads of HR, finance, production, IT and others be better salespeople and presenters than your sales and marketing people during the budgeting process.
One of the reasons these non-salespeople, suddenly become great salespeople is that their recommendation involves a lot of money that goes to a supplier. Much like a Washington lobbyist, suppliers are very good at helping your people create very impressive presentations with all sorts of impressive facts and figures based on what they have accomplished for other companies. They are also good at building a relationship with the CEO, after all there’s a big sale to be made.
Your sales and marketing people are practically naked in front of this. They don’t have anyone behind them to help them make their case, other than someone like SalesForce. They don’t have anyone to entertain the CEO, other than a fancy dinner with the head of the ad agency.
The CEO needs to recognize this and ask the sales and marketing people if they really believe in their recommendations.
Your sales may be growing simply because the market is growing and not because of anything you are doing. If you are not growing faster than the market, you are losing market share. When the next recession comes, the lower your market share, the more the recession will hurt you. If there ever was a time to fight for market share, it is when the market is growing.
Investing in your sales and marketing people’s recommendation takes a degree of faith and the willingness to take some risk.
How to Give Sales Growth a Chance
- Make it clear to your sales and marketing leaders that you expect to see recommendations based on what they really believe you need to do to grow.
- View the slick presentations from the other department with a degree of skepticism; nothing is ever as good as it sounds.
Use this year’s planning and budgeting to really make a difference with your company. Of course, I vote for intentionally growing your sales over cutting costs, but I am biased that way.
As usual, I have probably offended a few people. I would be disappointed if didn’t offend someone. My purpose is always to make you stop and think about what you are doing in order to be more successful. You may very well be one of the few building materials companies who is doing a great job, but no matter how well you are doing, you can always do better.