The sales numbers have come in for the year’s first quarter, and you are not hitting your sales predictions. Is this a symptom that business is slowing, or is it something else?
You look to other businesses to see if you can reconcile whether this is a broader problem or something exclusive to your business. After all, other factors could be causing the numbers to drop.
As a CEO, when you feel that business is slowing, you need to shift into analytics mode and check to see if this is the beginning of a real problem for the company.
Here are four symptoms your business is slowing down and you need to monitor consistently.
Four Symptoms That Business is Slowing Down
1. Reduced Revenue
This is the most obvious of all symptoms to spot. It is the one that shows up clearly on the financial reports, so it is easy to identify. You can compare your numbers from month to month, quarter to quarter, annual numbers, and trends throughout each year.
A drop in revenue usually affects other causes that occurred weeks or months ago, depending on the length of your sales cycle.
2. Reduced Profitability
Are sales numbers remaining the same, but profitability is suffering? Is the issue related to how the money is managed within the business or the gross margin on sales?
Have your operational costs increased, or is the sales team selling at reduced margins to win the business? Another cause can be the more profitable product lines have slipped in sales numbers giving an immediate hit to the bottom line.
3. Dry Pipeline
When revenue is slowing down, front lines sales need to be reviewed. Are there changes in their deal closing ratios or the average deal size? If these are still holding firm, the sales pipeline is the next place to look.
Has the pipeline slowed down, and are there fewer deals in the pipeline? The closing ratio and deal size will not be a problem, but the pipeline’s lower volume is a direct indicator.
You need to review the productivity of the sales team. Are they spending their time on the right activities? Is sufficient new business activity occurring to drive growth and override account losses?
Has their activity slowly waned over time as deals were coming to the business rather than the sales team going to find the company?
A dry pipeline is typically the most common reason the business is slowing, as the lack of productivity and activity several months ago will show up in the pipeline volume.
To recover from a dry pipeline will require an immediate increase in productivity from the team. Enough to sustain the previous number plus add back in the missed opportunities that have the lower numbers being reported.
4. Reduced Traffic
For B2B businesses, the volume of traffic of potential buyers doing research for your products is a good indicator of whether the business is slowing. For example, has your company had a reduction in traffic on your website? Are people not looking for what you have on offer? Have the number of downloads and activities on your website slowed down?
There could be a general decline in interest in your products as technological innovations or more aggressive competition has entered the market.
Conversations with potential buyers will indicate if their needs have shifted to a new focus in your specific market.
After reviewing these four inputs, you may look closely at the sales team as their performance directly contributes to business performance in three of the four points raised. But, before taking a negative view of their performance, you also need to consider some other simple factors.
Is this a slowing response to an external impact or an internal issue? First, let’s consider some of the external impact points.
Why Business is Slowing Down Right Now?
Holidays – The holiday season is renowned for lowering numbers in a month or quarter report as B2B buyers delay decisions coming into the holiday period and then on their return. The result is slippage in the pipeline, but not lack of volume.
Seasonality – Is your company selling products or services that have seasonal cycles? Do the reporting comparisons show that the business typically experiences slower revenue numbers at that time of year? Are the numbers much lower than previously in this cycle? If the numbers are much lower than in the past, you have a slowing business problem.
Economy – The economy has an impact when there are continual negative media reports on interest rates, potential downturns and job losses. Buyers become more insecure about their purchases. Are they purchasing something that is a luxury and not required? Can they defer the purchase a few months until better forecasts of the economy emerge? This is one of the most difficult barriers to overcome, requiring sales to increase customer interactions.
Disruption – Supply chain disruption is a major cause of slowing numbers. The booked order number is holding firm at the planned levels, but supply chain issues are causing the goods not to be invoiced. It is important to monitor both the booked order number and the invoiced order number when assessing if your business is slowing.
If you review your business through these lenses and the results are that it is definitely slowing and not related to external factors, it is time to take action. First, you need to have the business independently reviewed to find the real causes and evolve it in how it goes to market and operates on the front line. It can be sales-related, marketing-related or a combination of both. It is never just one small factor but a series of multiple factors that cause the decay of your topline.
To have your business independently reviewed, please reach out to us today.
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