In every company’s history there comes a time (or two or three or four times!) when your momentum slows, and the sales curve begins to flatten. This can be one of the most trying and frustrating times for software and technology companies. It’s certainly not as difficult as the startup phase, when “crib death” is an ever present fear. And a no growth, flat revenue scenario is much preferable to declining sales combined with negative profitability that follows, which leads to a “death spiral” if no effective action is taken.
I do find this situation is often more confusing to company management than either the start up or death spiral scenarios. This is because it often occurs just after a period of fast growth and prosperity, where it seems that the company can do no wrong. As a result, senior managers are often in denial about what is happening—whereas in the startup or death spiral situations, the situation is much more obvious, usually motivating folks to take fast, decisive action.
Search for the Culprits, Blame for the Innocent
With flattening growth, it’s easy to blame things that may not be the true cause. I often here excuses and tactics such as the following:
“The marketing department just needs to put out better promotions. Fire the VP Marketing and bring in someone who will get the job done”.
“The sales force isn’t selling hard enough, they just need to close more deals. Get the VP Sales off the golf course and tell him to kick some butt, or he’ll be the next to go”.
“The channel is useless; they’re taking 30% but they aren’t pushing the products—take more deals direct”.
“We just need to charge more for our products; we’re leaving money on the table”.
“Cut the price to stimulate demand.”
“The UK distributor is fat, dumb and happy—sign two more of his competitors to motivate him and maximize sales in that country.”
Now some of these reasons may even be accurate, and some of the proposed tactics could be possibly be useful. But I have found, quite often, that things of this nature aren’t the fundamental issue, and beating up the sales force, cutting or raising prices, or messing with your channel balance may exacerbate the situation and make things worse—not better.
The Real Problem
Sometimes the answer is as simple as “All good things must come to an end.”
Growth cycles don’t last for ever, as much as every software & technology company CEO, VP marketing and VP Sales wishes it would. There is almost a natural cycle that occurs with revenue that often coincides with the life cycle of your products. Also, the economy changes, competition heats up, novel marketing programs age and are copied—which reduces their effectiveness, market segments get saturated, and customer budgets are re-targeted to the “next new thing.” Stuff happens—always. The only real question is when.
So what’s a befuddled and perplexed tech company CEO to do?
Finding a Solution
Well, the first thing I recommend is to really spend some time getting to the bottom of things. Instead of shot-gunning blame that may be misplaced, or impetuously blowing up established pillars of the business—conduct a real, objective analysis of the nature of the slowdown. I don’t suggest paralysis by analysis by any means, but do take the time to gather some data, so that your actions will be based on more than knee-jerk reactions.
Past that, it’s hard to generalize on a course of action, because the proper action will depend upon what you find in your analysis. But for the sake of discussion, let’s say that while there are a few factors that you find which could be leading to slower growth, there isn’t a “silver bullet” reason that can be “fixed” to get the revenue curve again pointed up and to the right. Below are some general steps that I’ve found may enable you to “restart growth”. I might add that many of them are most effective if you begin them prior to actual revenue flattening:
Try marketing programs you haven’t used before
Usually when you get in a period of high growth, there is a workhorse program or two that has worked well for you, and there is a tendency to “keep doing what works”. Unfortunately, even the best conceived marketing programs eventually run out of steam. One of the keys to having consistently good outbound marketing, is too be constantly testing new ideas, placing small bets, and fine-tuning them if there is enough success to continue. As I’ve said before, product marketing is part art, and part science—with the art portion unfortunately upfront. You need to do a little trial and error to find a good program, and then the science kicks in, using data you’ve gathered to optimize it. But the key is to be constantly testing new ideas, in good times and bad. If you wait until your growth has already slowed, you may scramble for quite a while, trying to find a new answer.
Have an internal “growth” brainstorming session
Ideally you are doing this before you fall into a revenue rut. But regardless, do bring together people in your organization to bring out the ideas they may have to give the top line a kick start. Do hold these sessions in an open, non-threatening and non-political environment. It’s important that people are able to speak freely, and not be ridiculed, if they come up with an idea that’s “too far out of the box”. That is often where strategic breakthroughs are made. And don’t just limit these sessions to executive managers. Remember, the people at the bottom of the org chart are often the ones closest to the business, and are sometimes able to more easily spot a big opportunity that the company could capitalize on.
Hire some outside help
Consultants have a very bad name in some areas—unfortunately, sometimes with good reason. But bringing in someone with deep marketing or management expertise, with a different viewpoint than the internal management team, can sometimes be the quickest way to new approaches that will turn the ship quickly. I’d recommend staying away from folks that that have a cookbook formula, have only been consultants and not operating executives, or take too much of an academic approach. Every company, market and point in time is different and needs to be analyzed as such. But hiring the right outside consultant or firm who is creative, analytic and “been there and done that” can have a big impact. PJM Consulting has often worked as a change agent in these situations, and increasing or restarting traction is an area of specialty.
Look at entering an adjacent market
If it’s determined that your current market space is getting saturated, one of the first things to do is to look at adjacent spaces. Preferably, look somewhere that you can leverage your current marketing, distribution and brand, but also possibly where you can apply existing company technology to a different customer’s problem. The key here is don’t go to a complete green field that looks attractive because it’s large or growing fast, but where you have no real possibility of competing. Again, it’s best to be taking this step in anticipation of slowing growth in your current business—rather than waiting until it happens. Getting traction in new areas can take some time.
Consider M&A to fill out your product line or distribution system
If you’ve been caught by a surprise slowdown and you need to do something quickly, a strategic acquisition can sometimes be the answer. I warn you to proceed with caution here. M&A is fraught with danger—statistics show that most acquisitions don’t work out well. You need to think it through, proceed carefully, and don’t get overly excited by the thrill of the deal chase. If done well, however, a strategic acquisition can be a real shortcut to entering an adjacent space, filling out your product line for an existing strong distribution system, or adding sales channels to your strong product offerings. This is another area where PJM Consulting has strong experience, and can offer assistance.
Think it through before you start shooting
There are obviously endless other potential ways to explore when attempting to jump out of a revenue rut. I wanted to suggest a few to stimulate your thinking—and more importantly, steer you away from some “knee-jerk” reactions, that often make your situation even worse.
What have you done in the past when you need to restart growth? Post a comment below and fill us all in on your strategies.