Latest / Sales Against the Odds / The Secret to Aligning Sales and Operations for Success
Transcript
- [00:00:00] Tim Van Miegham: What I want to do is just replace judgment with curiosity. It becomes like a Monday that a business owner is saying, where are we today? What could be better and how do I help my team grow, learn to see the true value and then to go get even without the owner involved. [00:00:22] Lee Brumbaugh: There’s no silver bullet in sales, but on Sales Against The Odds, we’re here to give you the best shot at building a sales infrastructure that helps you scale. I’m your host, CEO of Sales Xceleration, Lee Brumbaugh. Thank you everybody for joining Sales Against The Odds. I’m your host, CEO of Sales Xceleration, Lee Brumbaugh. Very excited to have our guest with us today. We’ve got Tim Van Miegham joining, Founding Partner of The ProAction Group, new recent author of international bestseller. That’s right. [00:00:55] Tim Van Miegham: Yes. [00:00:56] Lee Brumbaugh: Congratulations. Shocking Profit. Thank you and I know I’ve got the copy and will be starting this weekend. Congrats on all the— [00:01:02] Tim Van Miegham: Success. Thank you. Very exciting. [00:01:06] Lee Brumbaugh: Very cool. Well, Tim, I know that you and I have worked on a bunch of things and really looking at sales and operations, but for those of the audience that don’t know The ProAction Group, I’ll put you on the spot with your elevator pitch. Talk to us a little bit about what you guys do. I know you’re the Founder, so you can share a little bit there and just give the audience a little flavor on your company’s backdrop. [00:01:29] Tim Van Miegham: With this idea. One of the things that we’ve found, and you find the same thing in sales, we look in operations, how the company runs. There’s a shocking amount of profit in every company that is hidden below the surface. It’s there, it’s available, but for a number of reasons that I’m sure we’ll get to, it simply hasn’t been claimed. Sometimes it’s they’re not aware of it. Sometimes it’s because it seems impossible to achieve. But it is. And our superpower is to see that hidden value and then to help our client build and implement a plan not only to achieve the gains, but I’m going to say even more importantly, it’s going to be to develop the team to keep repeating that process in the future. [00:02:18] Lee Brumbaugh: Can you give us just a real-world example of what that looked like? And I know that there’s so many directions you could go with that, but yeah, give us a little flavor there. [00:02:27] Tim Van Miegham: Yeah, I’ll share this story. It’s a seafood processing plant in Minnesota and they celebrated for about 10 minutes after they learned that they landed both Sam’s and Costco after their broker had a very successful week at a trade show. And after that 10 minutes, they’re like, oh, oh, now we have to deliver. Now I’ve got to execute. They expect results. It’s not just winning the sale. What happened is they started running and they were running their plant 24/7. They were doing everything they could and they were like 40 percent short. And I’m going to say this: thank God they did not have time to build a plant. If they could have built a plant, if they had enough visibility, they would’ve. It would’ve been the simplest thing to do, and to do it, it’s right there, straightforward. So they brought us in to do a review to say, hey, could we fit enough equipment in this plant to get the 40 percent? Because they were two months late from then, and they were going to start risking one or both of their customers. We started on a Monday. On Tuesday, we went back to Lynn, the CEO of the company, and said, forget the study. You don’t need any more equipment. Give us eight weeks. We’ll get you the throughput. And we worked with her team and we laid out the plant, we changed their day-to-day cadence. There’s 20 things we did, but at the end of the day, we were able to not only achieve the 40 percent and eliminate their backlog—they caught up, no more past-due orders—but we went from a seven- to a five-day work week. [00:04:21] Tim Van Miegham: And one of the stories from that that really touches me… They have this one machine that packages once they bring in the salmon, and then they portion it and they make salmon steaks and then they marinate it, put it in plastic packaging, and then put it through, as you would expect, a freezer. They had a conveyor belt going through a freezer so they could ship it to the client. Well, when we were doing the analysis and just walking the floor—just show us what’s going on—Patty, the plant manager, showed us where they were packaging the fish and putting it on the conveyor belt. And this was a bottleneck. It was not going fast enough. But we noticed a similar machine off to the side in the corner of the plant. Like, Patty, tell us about that other machine over there. What’s that there for? [00:05:16] Tim Van Miegham: She goes, well, that’s the old machine. We bought a new one. This one—it’s a really nice machine—but we keep that around. If this one goes down, we have a backup. You might see where this is going. But we said, well, what if we just simply run both of them, and we still have a backup? If one of them goes down, the other one could still be running. So we said, let’s try it. But here’s the big concern: if you double the amount of fish that’s going through the freezer, will it still freeze it, or do we have to slow it down so much that we are not getting any benefit? And so Patty tested it over a weekend. And Greg, my partner who was working day-to-day there, called her Monday morning and said, Patty, how’d it go? She didn’t say a word. Greg, such a kind spirit, goes, now Patty, that’s okay. Well that one didn’t work. We’re going to try something else. We’ll figure it out. There’s more than one way to do this. And she goes, it worked. It worked. And the reason I think she was—one, she was just excited—but the reason she hesitated was because she was realizing it was always there. It was always there. But one of the things that happens—and it’s human nature, and it’s also there for our protection in so many ways—is inertia. You don’t just try something new all the time. There’s an obstacle to change. We’re uncomfortable with it for good reasons. And up until two months before that they had never been challenged on their ability to put out. They’d just throw in some more overtime. It was no big deal. And she had been running that plant for 10 years at that point. She had been working there for at least 20. The person who taught her had been working there for 30 years before that. This is how we run this line. And so it was always there, but it was also hidden. [00:07:09] Lee Brumbaugh: Great example, Tim. And so obviously very specific there on literally the machine and just getting people to think differently, and I’m sure you see that quite a bit—just taking a step back from what we’ve done in the past and doing something differently operationally. Is that one of the biggest challenges you see—just creating a paradigm shift and a mindset shift of how to approach things and look at it from a different angle? And how do you guys work within that scope to make sure we’re going at a pace that the change can be transformational and not create this “oh crap” moment of we can’t do it? [00:07:46] Tim Van Miegham: What we just talked about is kind of first being aware that there’s another option—that there’s another way to run this plant or to fill demand or work with our customers. The next part is acceptance. And the way that we go about that is, first and foremost, we bring ROI as part of every conversation we have. When we modeled it and said, we can do this, we did the math, we did the time studies, we did the reviews in a day that told us we can do this. We could run every operation at the speed we need to with some changes. And then we can show: what’s the financial return? And think about this for a second, Lee. What we did was we literally sped that plant up 70 percent. They were producing 70 percent more per hour, per machine hour, and per labor hour. That allowed us to increase their sales by 40 percent without adding any equipment. And we actually decreased the amount of hours people had to work. We didn’t let anybody go, but they just didn’t have to work seven days a week anymore. What we do first is we help them see: is the juice worth the squeeze? If you’re going to go through this change—and a lot of it is really hard, Lee—it is such a different way of thinking about running a plant or running a healthcare clinic or running a professional services firm, whatever the situation is, that it’s going to be uncomfortable for everybody. You’re walking blind. So we have to start by defining: what is the juice worth? The squeeze. Financial impact. The impact on your people. What will it do to morale, to turnover, to safety, to quality? We have to understand all those. [00:09:42] Lee Brumbaugh: Yeah, it’s a really good point because again, if you look at just from a numbers standpoint, if you’re like, alright, we can be 10 percent more productive, but what does it do to the culture? What does it do to the team? I love that. The juice may not be worth the squeeze, and you’ve got to be able to be laser-focused on where you can have that concentration. Well put. So you’re doing these great things and you’re creating operational efficiency and we’re getting more out, or we’re being more effective in professional services. And then we start to see—how does operations, how do you start to then say, okay, this is going to lead to a potential sales problem? I guess what I’m trying to say is: you increase the way they’re operating from a production standpoint. How do you make sure that you’re then looking at the funnel and the pipeline to make sure that that sales gap is also starting to be identified? [00:10:31] Tim Van Miegham: It brings back one of the best memories I’ve ever had in consulting—that same client, Lynn, the CEO. We did the work in two months to speed up the plant. We then worked with them for another few months to teach. That was sort of a turnaround situation. We didn’t go through the normal change-management approach. We just said, hang on. Buckle up. This is going to be a while. We’ve got two months. Yeah, we’ve got to go. Once we took the pressure off and we were delivering and filling orders, we took a few more months to say, let’s go back and walk through why this worked. And we were able to do that. But then we came back and said, we need to do a sales and operations planning project, because the plant sped up. But now the salespeople had to learn: how do you fill a plant in demand that has this new capability? How do you purchase? They had to purchase not only the salmon—the fish, raw materials, so to speak—and all the ingredients that went into their marinades. They had to buy packaging, all this. They had to be able to secure the right freight. And so we said, we need to do a sales and operations plan to tie all that together so that the entire company is now working at the same pace and we’re working off the same demand signals. And she said, I don’t really understand what you’re telling me, but since you’re telling me I need it, I trust you. Let’s do it. And it worked. But what we talked about before, and actually what we did in the eight weeks—it was a lot of lean manufacturing, some scheduling. The sales and operations planning… getting that right is just as dramatic as lean. You don’t expect that. [00:12:25] Tim Van Miegham: But one of the things I’ve found is how we schedule—how we take a demand plan, turn it into a supply plan, and actually use it then to drive how we schedule and bring in the materials, whatever it is for that company. It’s complicated. And they’re so disjointed today at many companies. We worked at one company—and this has happened a few times—where it felt like it was a big operational change. It wasn’t. We changed how they schedule. A couple companies were scheduling to run all their machines, minimize the unit cost, but weren’t running it to fill orders. And two different companies we did this with—we simply started by understanding the cadence of their top customers. Let’s go with your A customers, and do we see a demand pattern that they’re ordering on? When we did that, we said, you know what? Let’s just put their next logical order in stock, and we’re always replenishing. We’re shipping out of inventory now 80 percent of the time. Changed their world. Dramatic improvement in profitability. Reduction in stress. And it was that link where sales and operations should be each other’s best friend, not at each other’s throats. [00:13:45] Lee Brumbaugh: And I think that’s a common misconception or a mistake that business owners make. You get siloed. You’re building a sales process and a sales playbook and how you execute, and then you’re making operational efficiencies and improvements, and those aren’t linking together. Because now all of a sudden, if we can expedite how that customer orders—the results that they see, the lead times, the ability—that all impacts sales. We’ve got to be able to build that into our sales playbook, into our messaging, into our value proposition. That needs to work hand-in-hand. Because if not, then you’re siloed and you’re not taking advantage of the cool things that you’re doing that can make a change for your top customers. [00:14:25] Tim Van Miegham: Absolutely. I would add to it too that it’s wonderful—we can come back and say, what does it mean? How would it impact your sales cycle or sales approach if your lead time is half what it is today? [00:14:38] Lee Brumbaugh: Most companies don’t have the bandwidth to build a high-functioning sales department to allow them to meet the revenue targets. With Sales Xceleration, they don’t have to. Our experienced fractional sales leaders consult and implement your sales strategy, infrastructure, management, and team development. Discover how we deploy these proven sales solutions to address your sales challenges by going to our website, filling out the contact form. We’d love to hear from you. Look, even mapping to this—letting the sales team know: here’s our process, here’s what we expect to be three months from now. Let’s get ahead of this. Start to look for customers and ask them, if we could cut our lead times in half, what would that do as far as your lead time and ordering from us? And that helps to build out the pipeline, and there’s just so many good things. I mean, Tim, I know that’s why we’ve had some joint customers together and those types of things because that mapping is critically important. You speed operations, then you need to impact sales and vice versa. It really does go hand-in-hand. So let’s take a little pivot. So you’ve built this company, there’s been a lot of change through the years in technology, and now AI—the buzzword, right? Every time I do a podcast we’ve got AI. But there’s a lot of ways that we can use the tools that we have to make an impact, to be more operationally efficient, to be able to use the data. How is The ProAction Group using the data to better support your clients? [00:16:02] Tim Van Miegham: I’m going to answer it a couple ways. First and foremost, every project that we do—there’s three things, it’s always part of it because of the meaning, wisdom, insight that we can pull out of data. The first one is—this won’t be a surprise—the financial model. We get their income statement and their balance sheet and we put it into our model so that we can look at the impact of what the changes that we’re going to make, the recommendations, the things that we can improve—what does it mean to the financial statement? And that does a few things. First, it helps justify: is this worth it or not? But it also requires that we aren’t going to come in and squeeze one end of the balloon and say we had a big improvement. Like in the fish factory, there were ten operations that led to them being able to ship a package of fish to a customer. If someone came in and said, oh, I’ve got a machine that’ll double the speed of one of those operations and look—the cost per fish is going to go down by 50 percent. It doesn’t matter if every other operation doesn’t increase at that same speed. Not only does it help us with justifying the project, but it also creates then that extra expectation that improving one aspect of operations doesn’t get you anything. It has to actually show up on the financials. [00:17:08] Tim Van Miegham: The second piece is segmentation. This is my favorite, Lee. It’s what we do. It’s the old ITW 80/20 analysis but on steroids. We take it another level. And that 80/20 rule is: if you look at your top customers and your top SKUs, your top 80 percent of your SKUs—which would be your A items or services that you sell to your large customers and to small—and then you have small SKUs to large customers and small, and then you look at your profitability, your SKU count… there’s 15 different ways that we profile and look at: where are we making money and where are we giving it back? And it allows us to do a couple things. The first one is that—and one of my favorite questions sometimes after running this model—is I’ll ask the owner: what percentage of your profits come from your A customers? And they’ll say, I don’t know, 80, 70, 80, 90 percent? How about 120? This isn’t always true, but when it happens it’s so helpful to see: where are we making money? Where are we giving it back? Very informative from our standpoint in operations. There’s another aspect that’s so wildly helpful, and it’s to understand when we have different parts—different businesses—that we’re running the same. We were working for a company that manufactured high-end auto parts. So parts that would go into a Lamborghini, a Ferrari—really cool stuff. And when we talked to the CEO as we’re getting started, I asked him: what keeps you up at night? [00:19:29] Tim Van Miegham: And he goes, one thing I’m really tired of is the number of customers that are frustrated because four years ago we had 300 items that we made—300 different parts. We’ve made five acquisitions in four years. We now have 3,000 SKUs. They grew quickly. And he goes, we’re always out of something, and I hate disappointing customers. We looked at their demand, and here’s what we found: 87 percent of their profit—gross margin at the gross-margin level—came from 6 percent of the SKUs. It’s not the 80/20 rule for them. It was the 94/6 rule. And here’s the thing: 180 items drove 87 percent of their profit. And they were managing them the same way that they managed every other item. Their buyers—buyer/planners—would get a list of all their parts, and he had four of his smartest people in the company spending their day going through a list of 3,000 items to think: what should I be making and putting in stock? We said, we’re going to stop that right now. And you’re going to take 180 items and you’re going to do that. You’re going to manage them very close. It’s high-volume, low-mix. And you run a low-volume, high-mix company very different than a high-mix, low-volume company. They had both in the same building. They had two different businesses. But they were managing them the same. Fixing that cleared up—changed—their world. [00:21:04] Lee Brumbaugh: So what do you do when you’ve got these 3,000 SKUs and you take it down to 180? [00:21:09] Tim Van Miegham: It’s way better than that, Lee. I left a part out. So the 180—they managed like that. The other 2,820—we’re going to make three months and put it on the shelf. It doesn’t matter. It’s 13 percent of your dollars. When you sell a month’s worth, we’re going to replenish. So what we did was we basically set up—there was a day a week that we ran the low-volume parts, and we just set them up in order. And I want to be careful—the solutions can be different for every company—but that’s what worked for them. And it was just the first realization: I have two different businesses. It’s like the image that always strikes me on this one… If I’ve got two buckets of water and I’ve got my foot in each one, and one bucket is 32 degrees and the other is 200… on average I’m comfortable. [00:21:58] Lee Brumbaugh: Yeah. Well put. Well, and I like that story so much because it goes back to a common theme that we’re saying: that you’ve got to have alignment between operations and sales. Because again, if you make a shift and a pivot like that—and so much with Sales Xceleration, when we come in and we’re working with somebody, either fully or in that seat of the infrastructure and building the sales roadmap—you’ve got to get alignment from that leadership team. And so often we’ll see that that’s off, with that sales leader operating in silo. Because you’ve got to get buy-in to: here’s the shift that we’re making, here’s why, and here’s how we make sure we message that correctly to the customer in a way that’s beneficial to them. It all has to sync together. When it gets out of rhythm, then you’ve got challenges, and that’s when you get siloed and you’ve got dysfunction within the leadership team. So one quick thing in this area though. So talk to me about—think about what you just described: the analyzation of the SKUs and top customers and those percentages. Just walk me through basics of here’s how we would’ve had to do it 10 years ago, but here’s how we do it today. What are you doing different that 10 years ago we’re out with the calculator and putting stuff in, and I’ve got a pigeon that’s going there, and now I’m just plugging it into something. [00:23:10] Tim Van Miegham: You forgot the smoke signals. [00:23:11] Lee Brumbaugh: Yeah. What’s the difference between the smokestacks and the tools we’re using today? [00:23:17] Tim Van Miegham: There’s a few big changes. When we started doing it, each one of these—we call it our nine-box—but instead of it being the four-box 80/20 segmentation, we’d do nine. And we had to use Excel, and we had to use Access—if you remember that—and it literally took a week. A week to put it together. Today, we have a very clear download: these are the fields we need. And within an hour we have the raw data. And what’s fun now is we are adding in the AI analysis. We’re also going deeper into other—what else we’re learning. So one, we’ve reduced the cycle time—how long it takes us to do this analysis. But today we can do other things like risk. We oftentimes will work with a private equity firm before they buy a company, and we’re looking for risk. [00:24:17] Tim Van Miegham: One aspect of it is looking at risk that they may want to be concerned about or consider. One of those risks is margin compression. Right? Is there something that could happen in the future? And we were looking at—let’s say we look at a company that does injection molding, and resin is a major part of their cost structure. And we can now use our nine-box to do an analysis that compares—it looks at the price we’re charging relative to the cost of materials over time. And one of the things we often find is: your resin prices are going up and down over the years, over the months, and your pricing doesn’t change. Well, this is the beautiful thing about risks on the operation side: it’s always the flip side of a value lever. The risk is: if you buy this company, don’t change anything in what they’re doing, and next year the cost of resin goes up, your margins are going to go down. However, if you teach your sales and your marketing team to incorporate and do price changes or accessorial charges or whatever to address changes like this—you turn that from a negative to a positive. [00:25:37] Lee Brumbaugh: Yeah, well put. And I think all the things that you’re saying around the tools you’re using—it’s obviously efficiency, being faster, being able to pivot quicker—but it still comes down to… It still goes back to what you said at the beginning: is the juice worth the squeeze? And so you take all of that information, and you still need the human touch, your experience to guide. It’s the same thing with us in sales. I’m always asked: is AI going to replace my SDR team and replace sales? I’m like, no. But it’s going to make them more efficient—where they target, how they’re impacting the customer, what value they bring to the customer. If you don’t use that as a tool, you’re left behind. It really just enhances what we’re doing from a sales and operations standpoint, and hopefully bringing those two together. [00:26:20] Tim Van Miegham: Yes, absolutely. [00:26:23] Lee Brumbaugh: So one last question for you, Tim. When you think about all this, and our businesses are shifting—how we interacted with customers is much different five years ago versus where we are today. I know both our companies are trying to be cutting-edge on how we do that. But what keeps you up at night? I know that’s a broad question, but what are you constantly thinking about—what’s on the horizon where you guys… it could be where you’re heading. Adding a second point to that—what’s on the horizon, but also is it something that the business owners can take from this podcast today and really start to think about in their own business? [00:26:56] Tim Van Miegham: Absolutely. What I think about a lot is more on the growth side than the risk side. And it’s this. What I really want to get to is the awareness—the curiosity—to understand the real value of the company. I’ll put it this way. If someone’s going to buy a company, they always do a financial audit to find out if they really make the money that the company says they make. They rarely go in and do the service that we do. It’s not ubiquitous today. It’s not like 95 percent of people buying companies are going in and understanding the hidden value and the hidden risks in the operation. And part of that’s because of that inertia. Right? It’s scary, the change. And they’re simply not aware of it. We don’t solve problems we aren’t aware of. What I want to do is just replace judgment with curiosity. It becomes like a Monday that a business owner is saying: where are we today? What could be better? And how do I help my team grow, learn to see the true value, and then to go get it—even without the owner involved? And that’s the thing I would say to anyone listening is: get curious. Walk the line. Go to where your people do their work—in the field, in a plant, at a customer. And by watching and asking questions—being curious—I guarantee you, you’ll find significant opportunity that you just wouldn’t have thought was possible. [00:28:36] Lee Brumbaugh: Love that. And we’re the same way. Our advisors—that’s the great part of when they come in. You’re taking a fresh approach at it. Why is our sales process built this way? Why do we target these customers? What is the true value we have? I mean, we interview a lot of the customers that we work with, and what we find is the value we think we deliver is much different. And then also, to your point of what’s the company worth and the value there—so much of that, it’s not just the financial numbers of the due diligence. It’s what happens when the founder goes away? What is the strength of the pipeline? How do you map that out? So much of what we do is just structurally building that so that when you go to exit, you’re not losing—your multiplier is not going from an eight to a four because you don’t have a CRM that captures your pipeline properly and you don’t have that 80/20. All those types of things we know. But it’s sales, it’s operations—it all has to be buttoned up. That’s the healthy company that gets that 10 to 12 multiplier. [00:29:30] Tim Van Miegham: Amen. [00:29:31] Lee Brumbaugh: Tim, this has been great. I appreciate it. Everybody needs to get Shocking Profit. It really can help you uncover the profit that’s out there, that’s being missed within your company. Tim, thank you so much for joining. Great perspective not only from an operational standpoint, but tying it to sales. And that’s the goal of Sales Against The Odds. So thank you everyone for joining. Thanks, Tim. Next week we’ll continue to work with business owners and link not only how you grow your company, but tying it to sales, tying it to the leadership of your company, and expanding upon your culture. Thanks everybody for joining us. You’ve been listening to Sales Against The Odds. Be sure to hit that follow button so you never miss an episode. And if you want more resources on scaling sales, check out our website at salesxceleration.com.