Business & Market Report - May 2024

The Big Mistake Companies Make During Economic Downturns

Well, it is quite clear that our industry is truly in a real slowdown. As we stated in August of 2023, the dire influences cast upon the construction market segments by the Federal Reserve policies, and the unprecedented interest rate hikes will send the concrete market into another downturn. As the brisk pace of construction activity in 2021-2022 decelerated very quickly we can now see “economic skid marks” throughout North America.             

During economic downturns, especially in the concrete industry, it is often assumed that businesses experience the same challenges, but in reality, the impact can be a stark contrast. It is important to note recessions can and do have a profound impact on your sales team’s performance. The Aberdeen Group performed a study that indicated a 13% decline in sales team performance during a recession, attributed to factors like a decrease in the number of sales reps, a decrease in lead quality, and an increase in customer price sensitivity. Conversely, other companies rose to the occasion and chose a different way to do business. As explained in the Harvard Review, “Research indicates that some companies lose sales, others not only survive but also thrive. For instance, during past recessions, a subset of companies outperformed their competitors by at least 10% in sales and profit growth.” 2010 Harvard Business Review: Walter Frick.

Another analysis performed by Bain and Company also analyzing the Great Recession reinforced that finding. Stating that the top 10% of companies in their analysis experienced an earnings ascent that rose steadily throughout this period and continued to elevate after the recession. An additional study performed by McKinsey discovered similar results.

The difference maker was preparation. Among the companies that stagnated in the aftermath of the Great Recession, it was found that “few made contingency plans or thought through alternative scenarios,” according to the Bain report. “When the downturn hit, they switched to survival mode, making deep cuts and reacting defensively.” Many of the companies that merely limp through a recession are slower to recover and never really catch up.

It has been my experience as the leader of various concrete product businesses during the past 5 construction market recessions since 1980, that sales can in fact grow with the correct planning and focus. And more importantly must be driven by a solid market and sales strategy combined with a disciplined approach to both sales execution and sales management. One of these recessions that I experienced was the Great Oil and Real Estate bust in Texas during the mid-80s. In the aftermath the construction and commercial development industry leaders later described this period as a “construction depression.” Yes, it was a challenging time, but I witnessed first-hand that a well-planned market approach combined with an aggressive sales approach actually increased our profitability during the downturn years, but more importantly set the stage for continued growth long after the recession.  

Unfortunately, within our segment of the concrete market I rarely see Mobile Mix producers field an experienced sales team that incorporate a clear understanding of their market and what their role is within the market. As a result, most companies not only are under duress in challenging times, but in fact are giving up opportunities and profit margins even during the good times. I must admit, it frustrates and disappoints me to witness our industry’s lack of business and sales acumen. The Mobile Mix industry should be on the forefront of nimbleness and effectiveness in a recession through a Market-Driven/Value-Added battle cry. Instead, I have witnessed the opposite which included laying off sales reps and cutting prices in the name of gaining volume; the same approach that the Ready-Mix producers execute, which typically ends badly.  

Market & Sales Tips 

 Market Understanding: Know Thy Market! That is your first step to understanding where you fit, how you fit, and what your market strategy should be. This gives you the ability to adapt your strategies to the changing economic landscape. This involves owners/management earlier rather than later; if you don’t understand the battlefield then things can get messy when the war starts, and the bullets are snapping overhead.

Sales Closure Rate: Do you know it or even keep track of the Sales Calls/Closure Ratio? Here’s an eye-opener; According to a report by SPOTIO, nearly half of all calls end without the sales rep asking for the sale. This suggests that up to 50% of sales reps may not be asking for the close during their calls. It is a critical part of the sales process and improving the close rate can significantly impact overall sales success. Does your sales rep and your company have a disciplined process of selling? We at CBS refer to this process as The Sales Cycle which includes Pre-Call Objectives, Sales Call Objectives, Sales Solution, Customer Commitment, and Customer Care Objectives. The sales process is as disciplined as a product production process! Again, do you know what your close ratio is? If not, then you are losing sales.

 Sales Management Disciplines: Most of the Mobile Mix sales management execution I have witnessed has typically been based on giving the sales rep a list of “suspects” and telling them to “get out there and bring us big one.” Without a sound sales management system that relies upon sales disciplines executed throughout the Sales Cycle the resulting sales performance will be sparse to non-existent and usually ends up relying on the old tried and true method of dropping the price. A disciplined sales management process will help to break out of the price-driven sales cycles, and refocus sales management on strategic planning, training, and development, setting and managing performance expectations.   

In summary, while recessions pose challenges, they also present opportunities for growth and innovation of sales revenues, especially for Mobile Mix companies that are prepared strategically by understanding their market, possess a disciplined and professional sales team that executes, and a management team that follows through on performance expectations via a sales process system. 

 As you know, we have deeply espoused the importance of building your business around the proper “End-User Market Segmentation” that is weighted toward the Infrastructure/Public Works segment. Especially now in light of the housing and commercial segment(s) slowdown. Infrastructure/Public Works segment is filled with concrete applications that fit Repair, Remodel, and Retrofit (“3-Rs”) all of which support the strengths and the attributes of the Mobile Mixer platform. Again, such a mix of customers and business within this segment will help your company to “Play Thru the Cycle” counteracting the downturn in private funding for commercial projects while creating insulative and competitive barriers.

Are you prepared to fend off these challenges? As we have stated in the past maybe you need an objective “look under the hood” to make sure your team is maximizing the opportunities. Give us a call to see how we can help you.