revenue planning

Revenue Planning for the Next Recession. Start Today.

Revenue planning for the next recession is usually the last thing business managers think of during periods of economic growth. Yet, as managers we don’t have the luxury of basking in the glow of robust sales. Our job is to look into the future and prepare our organization for what’s coming next – the inevitable economic slowdown and recession.

In this post I talk about the pending economic slowdown and what business owners must do on the marketing front right now to be prepared for battle. I included good resource links at the end.

What Goes Up Must Come Down

As I write this the U.S. economy is experiencing accelerated growth following the 2008 recession and eight years of slow recovery.

However, what goes up must come down, especially in the world of economics. You don’t need to have a doctorate in economics to know that the U.S. economy is cyclical.

The really smart folks at ITR Economics have studied these cycles and dozens of leading indicators since the 1980s. They divide the economy’s bell curve into four stages: Recession, Recovery, Accelerated Growth and Slowing Growth. The duration of each stage varies, as does the severity, but the economy moves through the four stages over and over again. ITR is amazingly accurate when forecasting swings in the economy 6-18 months in advance.

On Top of the World (for now)

Yes, at the present time we’re experiencing accelerated growth, but ITR predicts that growth will begin to slow in 2018 and enter a mild recession in 2019. Therefore, we’re looking at a change well within the focal point of our usual 24-month planning runway.

A word to the wise. Enjoy your revenue and profits today, but get the ship ready for rough weather ahead.

Recession Planning – What to do Now

ITR Economics advises their clients that in 2017 companies should remove all bottlenecks to the production process in order to take advantage of the rising economy into 2018. They stress that production efficiency is particularly important so higher workloads are possible without additional capital or labor cost.

The great thing about improving productivity throughout the organization is you become leaner and more agile. It’s easier to adjust to a slowdown in sales when you’re not bloated with excessive labor and machinery.

Where does Marketing Fit?

Frankly, this is the perfect time to become more productive in your revenue-generation area, too. The budget available for Marketing and Sales will decline ahead as revenue dips in the face of recessionary pressure. It’s imperative they these two departments become as productive and efficient as the rest of the organization.

Start with Tough Questions About Your Revenue Planning Process

Take a look at your marketing plan and your sales plan. Ask yourself the following questions. If you get more “no’s” than “yes’s” your plan is not able to prepare you for a slowing economy. Re-do the plan fast with a different planning process than what you’ve been using. Your planning process is letting you down and making it difficult to gain productivity and efficiency in Marketing.

1.  Are the plans clear enough that you and your management team can judge whether or not the strategy is well focused? Can you tell if the target markets are defined precisely enough that decisions can be made on whether or not to continue pursuing them? Is the rationale for the target market strong? How will the target market’s potential stand up to a recession? Could lack of focus be spreading resources too thinly? Are you so uncertain of your focus that you want to dip nets into every possible market “just to be sure”?

a.  Good focus example:  55% of our focus will be aimed at VP of Engineering within $20M-$100M manufacturers of custom injected molded plastic products used in non-military applications.

b. Bad focus example: plastic parts manufacturers.

2.  Is the plan focused on the buyer and a precisely defined buyer problem your company can solve? Or, is the plan inwardly focused on your products and sales processes? This matters because research shows that companies with an aligned sales and marketing planning process centered on the buyer, actually outperform their competitors.

a.  Good focus example: The buyer’s problem that offers the most potential revenue for us and we are best at solving is: The target buyer doesn’t have the right grade of plastic feed stock on hand in time for manufacturing their order.

b.   Bad focus example: Sell our Platinum Plastic Formula to companies who need quality.

Confused by the concept of “buyer’s problem to solve”? This short video explains.

3.  Does the plan use metrics and models to show mathematically how the revenue is going to be generated in each period? Does your funnel include all stages of the buyer’s journey so you have a good idea of the raw number of leads and necessary conversion metrics required at each stage to generate the revenue? Are the same assumptions and ratios used for a period of growth being used in a model for declining growth?

a. Good funnel example:

revenue planning model and metrics

Good example of revenue planning model and metrics.

b. Bad funnel example: We will convert 30% of leads to opportunities and close 55% of the opportunities.

4. Does the tactical plan make it clear what is going to be done, and the purpose of each tactic? Are the tactics measurable? How will each tactic contribute to bringing buyers into the funnel or progressing buyers to a decision point as efficiently as possible? Is it possible to know after a period what to do more of and what to do less of because of how you are measuring?

a. Good tactic example:

b. Bad tactic example: Display advertising will be used to build awareness. Email blasts will be used to generate leads.

Sales and Marketing Must Plan Together

A global survey in 2014 sponsored by Marketo and Align.me revealed that B2B companies in which Sales and Marketing work together on a common, buyer-centric planning process out-perform their competitors.

sales and marketing planning

I shiver every time I think of the ways that marketing and sales planning is done in companies. Marketing does their thing. Sales does there’s. Seldom do the two camps unite to pull together a cohesive plan. I feel sorry for the CEO, COO and CFO who, at the end of the day, are stuck trying to make business decisions based on these two disparate plans.

Imagine if the power of your Marketing and Sales resources could be harnessed together. Each with a common focus on the buyer, a common worldview, a common terminology. The potential for productivity and efficiency gain when the plan is implemented is huge. You’ll actually be putting the right wood behind the arrowhead.

A word of warning. Don’t expect good results by simply locking Marketing and Sales in a room together to hash out the plan. They must have a proven planning process to follow. In most cases they’ll need a tough, objective facilitator to keep them on track, too.

Outsource What isn’t Core to Marketing Success

We are fortunate to live in a time when any level of skill and expertise is available for rent. The Marketing field is no different. Look very hard at the Marketing skills and expertise that are mission critical, and what can be readily acquired from contractors and vendors on-demand.

Keep your Marketing overhead in check. Stay flexible.

Does the company lack senior marketing talent or strategic thinking? Look for a fractional, part-time CMO before taking on a full-time, six-figure executive.

If you’ve done the revenue planning correctly, you’ll know exactly what marketing skills are most critical to the plan’s success. For example, you might see that SEO, video marketing, email and PR will be the cornerstones of success in the next 12-24 months. Do you have those skills internally? They are easily outsourced, but because of the sheer volume of work or the deep product knowledge required a case can be made for hiring the necessary talent. But don’t call the recruiter yet.

Frankly, before adding to the FTE overhead in advance of a dipping economy, I encourage my clients to contract the work. Sign up a contractor for 3-4 days a week if necessary. Negotiate a volume of work at discount from a vendor. Stay agile. Float like a butterfly; sting like a bee.

You Can’t Manage What You Don’t Measure

If your company is in the habit of doing Marketing by “throwing it against the wall to see if it sticks” I pity your chances in the pending downturn. Now’s the time to invest in tools and systems that can track and measure. It’s also a time to invest in people who can analyze the oceans of data and recommend action. How else do you expect to be efficient and productive?

What to measure? The answer depends on the priority of tactics. In short, you want to know how the market is responding to your marketing messages, and what tactics/campaigns are contributing the most to funnel volume and velocity.

For example, if website traffic is critical to success, then someone needs to know what to look for in Google Analytics. If email campaigns are central to success, the company must adopt an email platform that reports on deliveries, opens, clicks, and handles A/B testing.

There’s a danger here. One can get wrapped up measuring the flapping of wings rather than the impact and speed. A smart marketer working from a metrics-based marketing plan and aided by statistics can always point to what worked, what didn’t, and what they’re going to do next to improve results. This is how we get more efficient, productive and effective in Marketing, not by trying the latest tactic fad.

There’s Just Enough Time

I’m posting this in May 2017. The economic slowdown, according to ITR Economics, will begin in 2018 and worsen to a mild recession in 2019. The good news is, depending on when you actually read this and take action, there is time to tune the revenue engine (aka Marketing and Sales) for the trip ahead.

1.  Re-read your Marketing and Sales Plan(s) to see if the focus and measure-ability enable you to adjust for efficiency and productivity.

2.  Adopt a buyer-focused, metric-based revenue planning process like the Funnel Plan.

3.  Outsource non-core, low-volume Marketing duties. Plus, if you’re lacking senior marketing leadership, seriously consider retaining a part-time CMO for six months or so, to help put Marketing and your strategy into shape.

4.  Invest in tools, systems and talent necessary to give you actionable insight into how marketing is performing and contributing to revenue.

5.  Subscribe to a ITR Economics, or other trustworthy economic consultant that can give you advance notice of shifting winds in the economy.