COMMON SENSE THAT'S GOLDEN
Aug 1, 2001 12:00 PM, Daniel Ari
DRIVE SALES AND GROW PROFITS. THIS ADVICE FOR building a successful business is obvious, but actually doing it isn't so simple. A method that enables a business to increase both sales and profit margins is like gold: rare and very valuable. Someone just starting a business would not be likely to stumble onto the perfect sales plan. Nor are textbooks likely to contain the key — academics can often leave out the improvisations of real-world business practices.
Alan Kruglak, however, seems to be handing out golden eggs with Sales Compensation: The “Hunter-Farmer” Way. Here's an encapsulation of the sales compensation plan that Alan and his brother Glen developed and used to grow their company into one of the most profitable systems integration firms in the country. The hunter-farmer sales compensation plan has proven successful and seems applicable to any business. I'd imagine that any dot-coms that adopted it back in the boom years would now be among those few online companies that are still kicking.
DOING THE WORK
Calling this book a “golden egg” is inaccurate, actually. Kruglak emphasizes throughout that this road isn't easy, that it takes serious work — first to implement the changes and then to fine-tune them to best apply to each company. Chapter One, “If It Isn't Broke, Don't Fix It,” offers some interesting perspective in this vein. Like most chapters in this book, it begins anecdotally: The Kruglaks had just taken a failing business out of debt and into the black. Kruglak describes his sense of invulnerability at having accomplished this turnaround. But then Ed, the high-powered financial consultant (who appears throughout this book), opened Kruglak's eyes to the fact that in spite of its recent revival, the business wasn't going to survive. Only half of the work had been done: Sales had been ramped up in the short term, but the long-term was as shaky as ever.
“If it isn't broke, don't fix it,” is as sound advice as any as it applies to business; but Kruglak explains that before one takes this advice, he or she better make sure that the business really isn't broken. If it only looks fixed, it could very easily fall apart if it's left as is. Doing the work to turn a business around means more than just covering it with a coat of pretty paint. The Kruglaks needed to rebuild the foundation of their business.
COMMON SENSE THAT'S NOT SO COMMON
In Kruglak's case, there were several factors that would have made his success short-lived. First, the business was unorganized: Sales people were doing whatever they could to close deals even if it meant alienating existing clients. Second, the company had no concept of “life-cycle revenue,” a key piece of knowledge that has changed the way business works. Finally, the compensation plan for the sales reps fostered internal competition, undercut team play, lowered company morale and was, therefore, unsustainable. Ed predicted that without changing these basic business structures, the office would get destroyed by the competition within three years.
Kruglak's book spells out specific steps that any business manager can take to do three basic and essential things: 1) make the company self-sustaining; 2) sustain and grow the client base; and 3) make the company more competitive in its market. The primary means to these ends is making changes to the sales compensation plan, which motivates the sales staff and the entire company to seek out clients with high life-time value.
SALES COMPENSATION PLAN
The “hunter-farmer way” partners experienced sales reps with new sales reps as a way to share responsibility while training the younger crew. It's like the rookie cop going with the weathered officer. The senior partner “hunts” out the new clients, aiming at winning their life-time loyalty. The junior partner “farms” the relationships with the existing clients so that they feel well cared for and continue to send new jobs to the company. These clients bring in the high margins and sustain the company over the long term. After a few years of farming, the junior partner will have learned the business, formed relationships, and become as skilled and capable as his or her mentor. The farmer will become a hunter and work with a new farmer. Ask any sociologist: It's an ancient system, and it works because it is self-sustaining.
CONTAGIOUS ENTHUSIASM
Kruglak's examples are straightforward as he leads the reader, step by step, through planning and implementation. He is clear that this is hard work, but the tools he offers do have the ring of truth. He backs up many chapters with a section called “What We Did, What We Learned,” which reminds the reader that all of this is tried and tested. The common-sense practicality of the hunter-farmer way is refreshing, and the detail of the directions makes the benefits seem attainable. In all, you cannot argue with success: Kruglak has proven his techniques using his own business.
Daniel Ari is the senior associate editor of S&VC. He also reviews videos online at www.bigempire.com/gooden.
Alan Kruglak,
Sales Compensation: The “Hunter-Farmer” Way, ARK Solutions, paper, 2001, 155 pp., $149.
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