As 2004 winds to a close, many sales managers and business owners are scratching their heads and wondering why sales didn’t grow this year. Somewhere in the pipeline, something kept deals from developing and closing.
It’s just constraints.
“What in the world is a constraint?” you might ask.
Sales is a process. Since a process is a series of steps, it stands to reason that sometimes problems prevent the steps from happening. These are called constraints. Constraints are specific problems that stop or impair processes in your business.
Businesses become most aware of their processes when things aren’t working. Eliyahu M. Goldratt, an Israeli physicist contends systems behave like chains: one weakest link determines how well the entire chain can perform. Goldratt calls this link the system constraint. There might be many weak links in a chain - the definition of "weak" always depends on some arbitrary standard. But there is only one weakest link: the one that will break first when excessive demand is placed upon it.
Types of Constraints
Here's a rule of thumb, developed by Dr. Van Gray, of the Hankamer School of Business at Baylor University. For most organizations, constraints can be classified into one of six categories: market, resource, material, supplier/vendor, financial, or policy.
1. Market. Is market demand the constraint? A market constraint is external. Are competitors changing strategies and competing in new ways? Is the market demand for our products decreasing? These could be external constraints.
2. Resource. A resource constraint is internal. Machinery, manpower and skills are some resources with constraints. Are lead times not being met? Are we moving too slow to get products out on time? These are internal constraints.
3. Material. Material constraints involve physical materials that are part of the process equation. Are we buying the right materials from the right vendors? Are using quality parts to make a quality product? Material constraints are largely external.
4. Supplier/Vendor. Vendors or suppliers can constrain your product flow. Unreliable vendors that miss delivery dates or deliver wrong items slow your customer deliveries. Supplier / Vendor constraints are largely external.
5. Financial. Cash flow and working capital are common constraints to sales systems. The back wheel building and delivering the product has to keep up with the front wheel that’s driving sales. The bike doesn’t ride if the wheels don’t spin at the same time. The financial constraint is usually internal.
6. Knowledge/Competence. Managing change is a common constraint. Markets are dynamic and ever changing. Organizations work to stay ahead of markets and competitiors. A narrow focus of competence or knowledge could be an internal constraint to success, which could become critical, if survival is at stake.
Sales Opportunity Constraints
A sales opportunity is the end-to-end process of a buyer and seller relationship that exists for reasons of buying products or services. It’s common for a sales team to not understand the steps or stages of the end-to-end process. Many constraints form in the relationship to impede its progress. Here are common sales opportunity constraints.
1. Target Markets. Focusing marketing and sales efforts on a specific target market helps focus resources, improve effectiveness and speed the learning process. A common constraint is an unresponsive market.
2. Lead Generation. Lead generation is a common constraint in marketing. Many companies fail to generate enough prequalified prospects through their lead generation to sustain the revenue requirements of the company.
3. Buyer Motivation. Companies often fail to provide incentives to motivate buyers to purchase. Buyer motivation constrains the sales process and sales don’t mature to closing.
4. Closing Tools. Closing a deal is moving it towards commitment to a transaction. Often sales people lack good closing tools. These include clear terms, conditions and paperwork. It also includes buyer incentives such as last minute discounts or add-ons.
5. Follow-Up after the Sale. Once the customer has purchased, it’s often important to follow up. Did the product get delivered on time? Was it the right product? Is everything being installed correctly? Ultimate, the sales person wants to know if the customer is happy? Whatever is making the customer unhappy is the constraint.
Treat these as constraints. Identify the constraint, decide how to fix it and then fix it. You free up your sales process to grow.