When revenue begins to head south what is usually the first response? Cut expenses! Why, will this fix the problem? No, falling revenue is a result of fewer sales or reduced revenue collected per sale.
To make matters worse, often the cuts come in the form of a reduced marketing budget. 60% of the American Marketing Association (AMA) members report that this is the biggest mistake that can be made in an economic downturn. With leads on the decline you need more leads not fewer. It would be interesting to see how many of you have seen or experienced this yourself.
This mistake won’t show up right away. It may take weeks or even months, depending on the length of your sales cycle, for it to rear its ugly head.
Combat this mistake by consistently monitoring your lead volume and your leads to proposal/quote ratio. If these numbers begin decreasing it’s time to ask why. What has changed? Is it internal, which will allow you to do something about it. Or, is it external, the economy, a supplier, your industry etc. which you cannot control. The solution may be different depending on the circumstances. The Revenue Engine Performance Analyzer can help you determine and monitor these marketing and sales metrics.
The key things to recognize here is cutting costs when revenue is in decline does not fix the cause. It only addresses a symptom – declining profits. Cutting cost has no positive impact on the top line (your revenue). In fact, if you cut the wrong thing, like marketing, it may have a negative impact on the top line, as shown here.
Have you had to cut your marketing budget in the current economy? What has been the result for you? Could monitoring the items mentioned here help you make better business decision? Share your opinions and experiences with us. We look forward to the dialog.
Copyright ©2009 Dino Eliadis
[…] to assure that they are in line. Don’t begin cutting haphazardly (see our previous posting, Are Your Sales Down Because of Poor Decisions Made Months Ago?). If you feel expenses are in line, look to your pricing. Far too many small business improperly […]