Week after week, I tell my readers how to grow their sales. A lot of you read my newsletter or hire me to get expert advice on how to expand your customer base or increase your sales from existing customers.
I want to take a moment and talk about the other side of that coin: when should building material companies stop growing?
Slowing down your growth probably sounds like a strange suggestion, but for a lot of companies, it’s the right thing to do. In this post, I’ll tell you when your company should take a break from growing and how to slow your growth the right way.
Not Everyone Is Trying to Grow
Recently, the Executive Vice President of a large building materials company told me, “You know, Mark, the last thing I need is your help. I don’t need to grow my sales at this time. Things are good right now; maybe they are too good. Because of the economy and the construction boom, we’re growing faster than we can keep up.”
Now, he’s a smart guy, so he regularly checks in with his customers and asks them how he’s doing. And, well, what he was hearing wasn’t that great. As it turns out, the more his company grew, the less satisfied his customers were. The company had grown so quickly that their customer service stopped being adequate. It took his staff longer to get back to customers; order processing slowed down, lead times were starting to stretch out. It became harder for their customers to get the information they needed and to get it quickly. They grew so quickly; they couldn’t catch up with themselves.
What Is Your Growth Costing You?
Growing a company is important, but you shouldn’t just grow for growth’s sake. You need to do it to achieve a goal, like becoming more successful or becoming the leader in your product category. And it’s important to recognize when growing your sales will get in the way of that goal.
Growth comes with costs. And it’s important to recognize those costs and consider whether they’re worth taking on. The cost of growing might be underpricing your product. When you pursue growth above all else, you tend to use lower pricing too often.
Or you could be investing too little in customer service. You’re growing, but your customers have a bad experience dealing with you, and your reputation starts taking a hit. Even if you turn things around and improve your customer service, it will be hard to repair that reputation (it’s easy to lose a customer’s trust but hard to gain it back).
The most dangerous problem that can be caused by growing too fast is when your product quality starts to drop off.
And here’s a paradox: growth can raise your cost per sale. That’s because growing quickly and taking on more business than you can handle will lead to dissatisfied customers. And as those customers start dropping off you have to work harder and harder to stay ahead of the business you are losing
Why Some Companies Struggle With Growth
Silos
Too much growth is a problem in companies that operate like silos. Every department works almost in isolation from the others, and they’re all measured by different metrics instead of working together toward a single goal.
When the sales department is siloed, it’s told to grow sales at all costs. It doesn’t matter if the customer service department can’t keep up or they keep fielding calls from unhappy customers – that’s not what the salespeople are told to care about. When it comes to their evaluation, the salespeople know they’ll be judged on how much quickly the sales climbed, not how well they worked with other departments.
Lack of Support for Salespeople
The salespeople at some building material companies are starting to feel frustrated with their narrow role of growing sales. Lately, more of them are telling me that they feel their company isn’t supporting them. All the leadership cares about is how many units they moved. All their concerns are either dismissed or ignored.
So now they’re growing sales but finding that the internal resources to support this growth just aren’t there. Loyal customers are no longer treated as well as they should, which makes it easier for competitors to grab them away. New customers come on board and almost immediately start experiencing delays in getting the product or difficulties getting accurate information.
Salespeople at these companies also feel less confident in the commitments they make to their customers. They feel pressured to keep making the same kinds of promises, but they know the internal teams responsible for honoring those commitments are starting to fall behind.
No Accountability
Companies also grow too much when they shift the blame away from themselves. When their sales grow, and they start dealing with more dissatisfied customers or have a more difficult time convincing customers to buy their products, they won’t admit it’s their fault.
Instead of admitting that they might be pushing sales too aggressively or haven’t invested enough in operational support, they’ll say things like:
· “Customers are too demanding these days.”
· “Customers are difficult to deal with because all they care about is price.”
· “Our customers are jumping ship because they’re not loyal or the competition is using underhanded tactics and lowballing us on price.”
I can’t even think of a single time when someone working for one of my building material clients has stood up and just plainly admitted, “We lost our customer’s business, and it’s our fault.”
How to Grow the Right Way
Every company wants to grow, but it’s important not to stretch yourself out too thin. Here are some things you can do to make sure that you’re growing the right way and not taking on more business than you can handle.
Grow Your Company, Not Your Sales
Instead of growing sales, you should focus on growing your company. That means having a plan in place to grow your operations in proportion to your sales. If sales grow by a certain amount, then you need to increase your customer service, order processing department and so on by a certain percentage.
And if you’re not ready to grow your customer service department or invest in better processing, then you need to pump the brakes on increasing your sales.
You also need to consider the lead time it takes to get a new employee up to speed. You cant hire a new customer service person and expect them to perform on the first day. It can take weeks or even months to prepare a new employee to deal with your customers.
Empower Your Staff to Say No
When the capacity isn’t there to take on new customers without sacrificing quality support and service, your salespeople should feel safe to say no. They should be comfortable saying no to aggressively pursuing new customers and saying no to unreasonable new targets.
Trust your sales staff to tell you when they’ve hit that ceiling where more growth will come at too high a cost.
Until you can support more growth, let your salespeople focus on managing relationships with existing customers, fostering customer loyalty and laying the groundwork for future sales.
Listen to Your Staff
Create a company culture where your staff feels comfortable approaching you and speaking to you honestly and candidly. Your customer service staff know when they’re dropping the ball and can’t handle the volume of customer inquiries they’re receiving. Your sales staff know what kind of doubts your customers have about your company. If your staff doesn’t feel it can talk to you about this (and only whisper it among themselves), you’re missing out on critical feedback.
Find ways to send the message to your staff that you don’t just want to hear good news; you want to hear the plain truth.
Listen to Your Customers
Your customer is in the best position to tell you when you’re not giving them enough support. But too many senior leaders at building material companies only keep a direct line of communication with their biggest customers (or with the guys they go on fishing trips with). That’s not enough.
I’ve seen a few companies in recent years lose big customers that have been with them for more than a decade, and it came as a total shock to them. Those customers didn’t leave abruptly; these decisions were a long time coming, but because there wasn’t enough communication, it came as a complete surprise to the company.
You need to keep communicating with every single customer, no matter how small they are. Ideally, if you’re a company leader, you would take 15 minutes out of every single day to pick up the phone and call one of your customers at random. Introduce yourself and start asking questions. Get to know them, what they need and what they think about your performance.
Yes, when you open up communication like this, you won’t just hear customers sing your praises. You’ll hear some grumbling, some critiques and some people who are on the fence about some of what you do. Don’t dismiss their complaints. If it’s just one person, it might be a crank with a very specific and unreasonable grudge. But if you’re hearing the same tune from a few customers, you’ll learn where your company needs to improve before scaling up your sales.
Set a Benchmark
There are lots of reasons to keep an eye on your competition. One of them is to keep yourself in check.
Look at how well your top three competitors are doing in various areas and set this as your benchmark. This benchmark is the one you want to beat and the one you don’t want to fall below.
And this needs to go beyond sales. Don’t just look at how big or how profitable your competitors are. Take a more holistic view that includes customer satisfaction and retention, as well as communication (see how active their salespeople are on LinkedIn, for instance). This will let you know when it’s time to halt sales growth so you can focus on catching up in these other areas.
Take an Attitude of Responsibility
You need to hold yourself accountable. When there’s a problem, start by asking what you’re doing wrong and what you could be doing better. Don’t just assume that the customers are sharks looking to gouge you for the lowest price or fussy folk who are just too difficult or demanding.
Your long-term success depends on keeping customers satisfied. If you can’t do that, you need to take an honest look at where you might be falling short, not shift the blame on the people you’re supposed to be serving.
Know When to Go Slow
If you’re growing your sales but struggling with customer service and support, it’s time to put a pause on your growth.
Think about where you will be five years from now. Think about how you’ll do when another recession hits. Can you sustain yourself in the long term?
Growing aggressively will look great on your next quarterly report. But those sales may be short-lived if you can’t hold onto your customers.
So, take a moment and look at your growth strategy. If it amounts to growing your sales at all costs, you need a smarter approach. And if you’re struggling to meet your existing customers’ needs, now is not the time to look for new ones.
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