Taking control of your future
By PC Romano
There is a single, primary reason that system integrators under invest in their businesses. Here's how to solve it.
Manufacturers are keeping record levels of cash on their balance sheets, mainly because of uncertainty around the future of health insurance, taxes, and environmental regulations. Many system integrators chronically under invest in their businesses, but for an entirely different reason.
Most of us are project-based system integrators, with very little guaranteed, recurring revenue. If our average project duration is, say, four months, it is unlikely our backlog will significantly exceed 60 days. And we all know what happens to profitability when our people are idle. What makes matters worse is most of our best "salespeople" are tasked with being billable, so they might not even begin to sell until our backlog runs out.
How can we escape this hand-to-mouth cycle and begin to invest in our businesses, with strategic, long-term initiatives like infrastructure, hiring high-potential people, and expanding into new markets?
There is no single solution to this problem. But, a comprehensive approach, using a variety of tools, will significantly improve your ability to control your own future.
When demands of a current project compete with long-term initiatives, the project usually wins. Relying solely upon engineers and project managers is unlikely to result in continuous sales efforts. Instead, a few dedicated sales professionals should ensure the right activities continue, even when our companies are busiest.
That said, we know there is no substitute for our technical people for certain sales activities. A well-engineered and documented sales process should ensure they are consistently fulfilling their sales roles, even as they are engaged in projects.
It is also important to have a comprehensive, continuously executed marketing program. The primary objective is brand awareness, which requires a series of touches. This form of marketing yields results, but mostly in the long term, which is why it is continuously applied. Once again, there are some activities (e.g., content creation) that your technical folks will need to do. To make this an ongoing priority, it should be spearheaded and supported by individuals who are not executing projects.
As engineers, we know that in order to control a process, we need to measure it. This requires a clear and accurate sales forecast that extends far enough into the future to allow for the delayed results of any additional sales efforts. This forecast is the process variable that provides the feedback to our closed loop control system. At Avid Solutions, we use a model that incorporates future revenue over a 15-month, rolling timeframe:
- Hard Backlog (from our project accounting system)
- Soft Backlog (opportunities from our CRM system, weighted by their probabilities)
- Flow (expected stream of projects from repeat clients)
- Unknown Opportunities (revenue from opportunities not yet identified)
With this preview of what is coming down the pipe, we have time to react with the following tools to minimize upcoming peaks and valleys.
The first and most effective way to increase future sales is to step up the time each team member dedicates to sales efforts. With the sales forecast in place, we can strategically undertake those efforts that are most likely to address the specific, upcoming valley, whether it is three months or 12 months out. For example, calling dormant clients might uncover near-term projects, while helping a client identify, justify, and gain funding for a new project would be a longer sales cycle.
Another control to consider is increasing your investment in third-party, lead-generating activities. Some examples of these would be increased pay-per-click advertising or cold calls by a lead-generation service.
A steady ramp
The goal is to maximize demand for our services, right? Not exactly. Just as the controls listed above minimize the valleys, we should also avoid peaks. Slow, steady growth has advantages over step functions. To accomplish this, your sales and marketing processes should be designed to generate slightly more sales than you intend to execute with your resources. This way you can take advantage of two techniques to reduce the demand to a manageable level so your growth looks more like a ramp than stairs.
The first technique is to learn to say "no." It is hard to do this after all of the effort to generate the opportunities. And, it is a complicated problem, affected by backlogs, schedules, resources, aspects of the opportunity, and aspects of the client. But you need to learn how to do it.
The second technique is to use external resources, such as independent contractors, or better yet, partner with a Control System Integrators Association (CSIA) Certified system integrator. Develop and nurture these relationships before you need them. In addition to providing resources, a relationship with another system integrator is likely to go both ways, allowing your resources to flow to their projects when you are in the valley.
Managing a smooth pipeline of projects is no easy feat, but some of these tools should provide you with more control. And then you will be ready to invest in your future.
ABOUT THE AUTHOR
PC Romano (firstname.lastname@example.org) is president of Avid Solutions, a system integrator with two offices in North Carolina. He is also on the CSIA board and chairs its Statistics Committee.