“Far too many businesses are operating in a false sense of security as we approach an economic slowdown.” I recently shared this comment in a keynote address for an industry trade conference that resulted in several discussions after I left the stage.
As we speak with business owners, we often hear things like….
We have created some strong sales momentum this year…
Our sales are breaking records…
We have such a big backlog even if the economy slows down, we will not see a decrease in revenues until next October…
We do not need any sales training; we can’t keep up with orders today…
What makes this economic slowdown unique is the supply chain constraints we experienced prior to the economic slowdown.
Based upon our voice of customer research, we identified a current behavior in response to the supply chain issues: Order more than what you need assuming your vendors will allocate products to you and hopefully ship what you really need. (After all you can always reduce the order or push the delivery date out.)
This behavior becomes the norm, (has been the norm for some time) and no one has any problems if the demand continues to be greater than what we can supply. However, what happens if we see an economic slowdown and your clients start reducing orders in response to reduced demand?
You have a Pig in your Pipeline!
We are finding many sales pipelines are artificially inflated in response to previous product allocations and not actual demand.
Our clients in the building and supply industry are just starting to feel a drop in demand now.
When the economic slowdown hits your customers all the 10,000-piece orders you have become 3000-piece orders, or worse the entire order is pushed out 3 months or canceled. If enough of your customers adjust their orders due to market slowdowns, you have a decrease in revenue and an increase in inventory tying up precious cash.
How healthy is your sales pipeline?
What impact would it have on your net income in February 2023 if your orders scheduled to ship dropped 30% chainto 50% or more?
Could you have a Pig in your Pipeline Today?
Teams that stay very close to their customer orders and demand will have time to adjust production and inventory.
If you would like our help as an objective third party to audit your sales pipeline, please contact us.
Could you have a “Pig in your Pipeline?
