Volume 10, Issue 1 - January 2009

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Growing Revenues in a Challenging Market—It is Possible
by Michael Collins

In this second part of our three-part series on how to respond to the challenges of the current market, we will focus on ways to increase revenues. When a company has operated profitably in the past, it is easy to slip into unprofitability during a period of revenue decreases as a result of fixed overhead. One way to achieve increased volume is to merge or form a joint venture with a similarly positioned company. Two unprofitable entities can merge all or part of their operations and become profitable by the elimination of their duplicative overhead. Companies that wish to engage in a far less formal arrangement may decide to trade referrals with a related non-competitor. For example, an entry door manufacturer and an overhead door manufacturer might team up at the dealer level to refer business to one another.

Cross-selling is a great way to increase the sales revenues of any organization by selling additional products to a current customer who has not purchased them previously. For example, if a manufacturer has a dealer customer who buys only windows, there may be a surmountable reason that the dealer hasn’t also purchased, say, entry doors in the past. Inquiring about the reasons may lead to immediate new business. The key is making it easier to buy both products from the manufacturer, rather than just one. If the customer seeks products the manufacturer doesn’t carry, it may be worth distributing those products at lower margins in order to capture the primary business being lost.

While the generation of leads has become tougher and more expensive, every company has a potentially rich source of business at its immediate disposal. These leads are free and the work has already been done to generate them because they are the past requests for bids that did not result in a sale. If a manufacturer is proactive and offers to help its dealers follow up on past leads, the manufacturer is likely to capture the business generated by that follow-up. On a related note, business would also likely be won by contacting each dealer who visited a company’s trade show booth in the past without subsequently becoming a customer.

We recently had the chance to ask a number of manufacturers whether they pursue the multi-family market. Most of them gritted their teeth and said they did a small amount of multifamily business. Clearly, there are builders that were slow payers even before the current downturn. However, there are reasons that the multi-family segment deserves a second look. First, most people who have lost their homes to foreclosure will again become renters of multi-family units, increasing demand in this sector. Also, with so many manufacturers grudgingly supplying these multi-family builders, it seems that it would be fairly easy to win their business with quick delivery and customer service, such as reviewing plans to ensure the correct windows have been chosen at the outset. If companies perform careful due diligence on a builder’s ability to pay and monitor accounts receivable very closely, the multifamily area might be an important contributor to profitability. Who else is buying a hundred doors or windows at a time in this market?

Another possible way to increase revenues, which should be undertaken with great care, is to determine whether certain outsourced activities could be performed in-house profitably. An example of this would include installation. With the number of door and window dealers that are closing, could a smaller manufacturer build an installation team and capture the additional revenue stream associated with installation? An experienced installer being given enough business might even be willing to work on projects piecemeal, helping keep fixed overhead down.

A final set of changes involves a company’s sales professionals. In a tough market, it is easy for sales teams to generate a bunker mentality where cooperation disappears. However, a company’s veteran sales staff members are the ones most uniquely capable of helping newer sales professionals win new business. Companies should create teams and give experienced sellers incentives to help increase the sales in territories covered by newer staff. Also, the structure of sales territories should be reviewed. If sales territories could be redrawn to allow sales staff to call on areas closer to their homes; for example, they would be more likely to push for an extra meeting or two, rather than trying to beat the traffic home. Also, if there is a veteran seller with a large and potentially lucrative territory, it would be rare for him not to be resting on his laurels somewhat. It’s likely that by splitting the territory with a newer salesperson, additional sales would be generated. The veteran may also be grateful for the smaller area to cover, particularly if they are given financial incentives to participate in the successful hand-off. 

By implementing these types of changes, being creative and generally operating under the belief that there is business to be won in this market, companies will emerge from this downturn in much better shape. 

Michael Collins
is with Jordan, Knauff & Company, an investment banking firm that specializes in the door and window industry. He may be reached at mcollins@jordanknauff.com. Mr. Collins’ opinions are solely his own and do not necessarily reflect the views of this magazine.

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