Everything looked good except the actual sales numbers.As I mentioned in Tuesday's post, I keep track of a bunch of metrics in order to see how our sales process is working. Beyond the most important number (monthly sales), I look at Web site traffic; the number of inquiries coming in each day, week, and month; the number of proposals written; and how much each salesman contributes to these totals.
My records are kept on various spreadsheets, which are on Google Docs and are shared with my salesmen. The Web stats are done through the AdWords campaign management screens, which I access by logging into my AdWords account. (These screens are so complex that I can't des cribe them - and Google doesn't even have a help page explaining them, or at least I couldn't find it.) At any rate, I keep track of enough information that I can form a statistical picture of what is happening. And I do this for many other aspects of our operation besides sales.
The business generates a huge amount of data. We have all of the basic financial information that we track with QuickBooks. I keep another set of spreadsheets that I use specifically to track cash flow. We have a database program that tracks manufacturing data, including: the number of hours and materials used per project, the difference between these totals and our cost estimates, and whether we are ahead of or behind schedule. I have payroll data.
I also have information that isn't quantitative but is important, like the mood in the shop, the state of the machines, the number and nature of mistakes made by workers, and the amount of waste in the trash cans. And, like everyone else, I a m subject to the ebb and flow of news from the outside world, particularly stories about the economy and business. It all adds up to something like Niagara Falls landing on my head. The challenge, of course, is to pick meaning out of all of that falling data and come up with a plan of action that makes sense.
As winter turned to spring this year, many of my statistics were looking good. But there was a worrisome trend to sales - the monthly total was falling. I wrote about this in April, but these sales numbers say it all:
January: $193,154.
February: $213,669.
March: $135,732.
April: $146,677.
Of course I was worried, but the vast majority of the metrics I was tracking looked good. The shop was operating efficiently. The number of incoming inquiries in the first quarter was steady with recent months and 20 percent ahead of 2011. The sales force was churning out proposals fast enough to keep up with the inquir ies. We had sold more jobs than during the same period in 2011. Everything looked good except the actual sales numbers.
My business has been through a lot since 1986, including booms, recessions, and stagnation. Our clientele over the years has been a pretty good snapshot of the segments of the economy that are doing well. In 2007 and 2008 we did a lot of work for financial titans in New York. After the crash, that work disappeared, but health care companies took up some of the slack. The military and defense contractors have been steady for the last five years. Same with lawyers and accountants.
We also get a lot of inquiries from a grab bag of smaller companies - these calls tend to come directly from the bosses, owners who are looking for a table that they can be proud of for their own office. I call these “boss-driven transactions,†and they are our bread and butter. These clients aren't as price sensitive as others, and they tend to make buying decisions quickly. We close a higher percentage of these sales than any other type. They vanished in 2009, but we saw them reappear in 2010 and stay strong in 2011 and the beginning of 2012.
Then, in the spring, I noticed a change in our mix of inquiries. Driven by our successful product roll out, we were seeing more calls for low-priced modular tables. These were coming from schools, municipal governments, and nonprofits. But there was a noticeable slow down in both large corporate clients and boss-driven clients. And the total number of calls per week began to swing wildly, with the average dropping almost 25 percent (from 16 in the first quarter to 12 in April and May.)
Maybe I'm unusual, but I like to have a story to tell myself about what's happening in my business at any given moment. It doesn't matter what the subject is, I will come up with a theory. Of course my business has dominated my thoughts for most of my adult life, and I'm adept at spinning a narrative to fit whatever is happening at the moment. Every day I tell myself a story about what is going on, and I draft future chapters that help me decide what to do next.
As sales fell in the spring of 2012, I put together one of these fables in my mind. What was happening? The sky was falling again, I concluded, just as it had in 2008 - bosses and corporations everywhere were scaling back on spending, hunkering down for another bad period. I was about to be victimized by vast forces that were beyond my control. Having convinced myself that this was the case, I now needed to decide how to respond.
Thursday: Waiting for a Miracle.
Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.
