As North America begins the process of emerging from the COVID-19 recovery, business will be conducted much differently than before.
Many entrepreneurs and owners of businesses that have been particularly hard hit will be asking: how can we ensure that our business survives this downturn and the next one?
In good times, when the tide comes in, all boats rise. In down markets, assuming you have the luxury of time, you can scrutinize your business model and address its weaknesses. When the market recovers, you can emerge even stronger than before.
We’ve been doing this sort of analysis here at VistaVu Solutions and I’ve seen 7 areas where we can take steps, or have taken steps in recent years, to fortify our business model.
1. Create Solution Stickiness
We want to sell products that matter, to people and to organizations. If it’s easy for clients to use your product one day and not the next, that’s not a great business to be in. We believe that customers that use multiple products of ours have a greater propensity to grow with us than customers that use a single product.
One of our goals is to help customers create single, fully integrated systems. Boomi, our integration platform, ties the digital core of SAP to several third-party products, including some of our own. The more we do that, the greater the value the customer receives and the ‘stickier’ the customer becomes.
Creating solution stickiness in no way suggests you should paint customers into a corner and have no options. When people want to move away from you, they can and will, but they do so with some serious thought.
2. Generate Higher Margins
One way to do this is to build your own Intellectual Property. This will create margins that billable hours alone will not provide. Some years back, VistaVu created FieldVu, an all-in-one business software solution for field services companies that’s built on SAP Business One and SAP Business ByDesign. More recently, we’re doing that with an Internet of Things solution that automates the entire equipment rentals process. When we take a good idea and ‘product-ize’ it, we open the door to higher margins.
3. Improve Cash Flow
It is not uncommon for businesses to suffer from poor cash flow. The question is, are we doing anything to improve cash flow? One way we can do this is by asking for more upfront payment, and incentivizing sales teams to prioritize this kind of deal. Customers can also use financing, but many don’t know it’s an option. Leasing and finance companies will fund entire ERP implementations, under the right conditions. We think it makes sense for the customer to use someone else’s money on this large capital investment and for the vendor to put the burden of risk onto financial institutions with deeper pockets than they have.
4. Increase Recurring Revenue
Today, business valuations are driven through annuities from Software-As-A-Service (SaaS) offerings. The opportunity for businesses like VistaVu is to move large, lumpy deals into a subscription model as much as possible. Sometimes, it is hard for companies to do a big capital project that they need to pay out all at once. It’s a lot easier to spend a small amount every month. SaaS benefits our customers as well with:
- Price certainty as all costs are bundled into one fee
- Low monthly or annual pricing
- Fixed bid pricing which can remove surprises
- Quick time to value as more of the services begin to be automated
- Demonstrable ROI from using the system before they have fully paid for it
Increasing recurring revenue can be a win-win for our customers as it makes it easier to plan and budget, while ultimately improving the overall customer experience.
5. Plan for Scalability
As companies look at technology to automate more of their business, the recovery period following a downturn, historically, is one of our highest-growth periods. If you can’t scale your operations, it’s much harder to grow your business. Here at VistaVu, we’re heavily focused on systems and processes and the people required to implement those items to aid us in our growth. Scalability allows companies to grow inorganically as they are more readily able acquire and integrate other businesses. Whereas in a down market, companies without strong systems and processes often find themselves as the sellers.
6. Reduce Variability of Services
We provide comprehensive products that require technical assistance to implement and support. By focusing on standardizing the delivery of services, we can reduce variability in quality and customer experience.. As you grow, this variability gets higher and higher. Over the past several years we have invested heavily into hiring the right customer service mindset and training them on the technology to standardize the customer experience. We have experienced that this constant focus on reducing variability of service will create longer term customers who will grow with you.
7. Sell Products That Are Mission-Critical
During the previous oil and gas downturn, a service company customer of ours was heading toward bankruptcy. They stopped buying services from us, but they still paid the annual maintenance fee on our product. Why? Because without our product, they couldn’t get bills out the door or get people paid. Product companies can have greater resilience in down markets than service companies, especially if the product is mission-critical.
These are 7 areas we have been looking at to fortify our business model. Some have come from lessons learned in previous downturns. Others are freshly in focus as we begin to navigate the post-COVID environment. Our goal is to emerge even stronger than before, and I hope our examples might help your business do the same.
About the AuthorFollow on Linkedin More Content by Jory Lamb, CEO