We just got in some bad news. A major contract has been cancelled. The first 5 minutes, all I could think about was that we’d just lost 25% of our revenue for the year – through no fault of our own, it’s a government program that’s going away because of all of the cost cutting. Then I took a step back and started breathing again, and decided I need to figure out how to turn this lemon into lemonade.
Here’s one more sign of the continuing uncertainty in our economy, and the challenges many businesses are going through. This company was looking forward to a great year, that now might be mediocre at best. This owner is also smart to quickly re-focus on how to move past the loss. In times like these, flexibility, speed of response and attention to detail will all contribute to success.
Start by pulling out the contract. What fees are at risk. Establish an invoice for all efforts expended to date. Check on outstanding amounts due and put lots of effort into collecting outstanding monies now. If additional work is due, use that as leverage to collect what’s owed.
Identify cost cuts that will have to be made if the revenue cannot be replaced. Check if vendor cancellation penalties come into play. Send out cancellation notices immediately.
Stack rank staff, based on skill, essential fit to the company, fit to projects other than this contract. Notify staff immediately of what’s happened, and that everything possible is being done to find alternate work, but that at the moment, it looks as if certain jobs will be terminated by a specific date.
Then focus on sales. The private sector is picking up. This may be a bad news / good news opportunity to pick up other work. Often government contracts come in big lumps, but with much lower profit margins, so it may be possible to go out and sell smaller private sector contracts and make up the margin with less volume.
Decide if there are enough sales resources on board to sell what is needed to close the gap. If not, immediately start a sales personnel search. Consider hiring a search firm to quickly cover more ground.
In the meantime bring existing sales and marketing people together. Brainstorm what to do to bring on more business. Look for opportunities within existing clients. Reach out to new client sectors as well.
Consider the possibility of acquisition to make up the volume. After the couple years we’ve all been through, more than one business owner is ready to throw in the towel. Put together a list of what you’d like to acquire: types of business, personnel, sales volume, types of contracts, additional clients to sell your products or services to, other products or services to sell to your current clients, etc.
It may be possible to pick up one or more companies that have been operating at or below breakeven for too long – the smaller the company the more likely it has struggled to make money. Consider purchasing their customer list, acquiring contracts, picking up sales and service related personnel. Be careful about assuming liability for their losses and outstanding obligations.
Reach out everywhere. Make sure everyone knows that you’re looking to buy another company, or two. Use the yellow pages, or trade association membership rosters to build target acquisition lists. Send out confidential introduction letters to the owners. Follow letters up with a phone call. This is just like any other type of sales: you’ll probably get a lot of rejection, and some interest that needs to be developed.
Whatever else happens, use this wake up call as an opportunity to move your company forward. Accept the challenge for what it is: time to get moving on expanding your customer list and reducing reliance on a big volume client. Create a picture of what your business will look like when it gets over this hump, and then work like the dickens to get there.
Looking for a good book? Fast Growth: How to Attain it, How to Sustain It, by Laurence G. Weinzimmer.
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Andi Gray is president of Strategy Leaders Inc., www.StrategyLeaders.com, a business consulting firm that specializes in helping entrepreneurial firms grow. She can be reached by phone at 877-238-3535. Do you have a question for Andi? Please send it to her, via e-mail at AskAndi@StrategyLeaders.com or by mail to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514.
