Monday, July 9, 2012

When Times are Tough, Don’t Cut Your Business Development Budget

The market is up; the market is down. Business is expanding; business is steady; business is shrinking. We all need a dose of seasickness medicine to hold steady these days. But the essential fact is, unlike the stock market, professional service firms react in very predictable ways. When times get tough, this is what most firms do:

• Cut the business development budget.
• Cut discretionary travel to conferences.
• Cut upgrades to IT and infrastructure items.
• Cut…well, you get the idea… cut hiring, cut salary increases, cut promotions, cut office expansions, etc.  

Cutting the business development budget seems like a no-brainer. After all, the BD folks spend a lot of money courting clients. They play golf, sponsor expensive lunches and dinners, stay in hotels and run up the company overhead. So, it makes the most sense to cut this expense first.

WRONG! If you cut the BD program, you are stifling the future growth, health, and vitality of your firm. Here’s why:

• Your BD budget should focus significant resources and attention on the furthering of existing client relationships. Those clients typically give you 75 to 85% of your revenue and profit! Your BD budget must reflect the emphasis and value you put on keeping your existing clients happy and coming back for more.

• You must focus on developing new clients. It’s a fact of life at you need to develop new clients because you will occasionally lose an existing client due to no fault of your own… someone retires, corporate agreements expire, your client gets bought by a larger firm with pre-qualified in-house consultants, etc.

• If you’re not growing, you are shrinking. And if you do not develop new business and new challenges, your best employees will go elsewhere, in search of new challenges.

• You should be fostering all relationships, regardless of immediate payback. Visit your existing and former clients who don’t currently have money to spend. You will solidify your position with them in the future when their fortunes improve. You can be seen as a real friend who does not come and go as funding ebbs and flows.

• Finally, realize that your competition does just what we have been excoriating here. They cut BD funding when the going gets tough. So, do the opposite!  

We’re on a mission to help firms like yours navigate their way back to prosperity. Attend PSMJ’s Successful Financial Management for A/E/C Firms to ensure your firm is among them! Click here for upcoming dates and to register for one of our upcoming seminars!

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