What To Do When Revenue & Margin Aren’t Going In The Right Direction

November

24

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It can be frustrating and defeating when revenue and margin aren’t growing in the right direction. It can also be challenging to identify what your next steps should be. Fear not, I’ve got a business scaling expert, Herb Cogliano from Aspire Growth Advisors with me today to tackle this topic and learn from his experience.

Join Tim Fitzpatrick and Herb Cogliano for this week’s episode of The Rialto Marketing Podcast!

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What To Do When Revenue & Margin Aren’t Going In The Right Direction

Tim Fitzpatrick
It can be frustrating and defeating when revenue and margin aren't growing in the right direction. It can also be challenging to identify what your next step should be. Fear not, I've got a business scaling expert with me today to tackle this topic and learn from his experience. Hi, I am Tim Fitzpatrick with Rialto Marketing, where we believe you must remove your revenue roadblocks if you want to accelerate growth, and marketing shouldn't be difficult. Thank you so much for taking the time to tune in. I am super excited to have Herb Cogliano from Aspire Growth Advisors with me today. Herb, welcome. Thanks for joining me.

Herb Cogliano
Yeah. Hey, Tim, it's great to be here with you and your listeners. And yes, it can be very challenging when the revenue and margin are not going in the right direction. Look forward to a great conversation around that.

Tim Fitzpatrick
Yeah, me too. I think this is a super relevant topic for most business owners. No matter how great we are, there are times where neither of those are moving in the right direction. So being able to troubleshoot that and figure out what's going on, I think, is a fantastic topic, and I am excited to dig into it with you. Before we do that, I want to ask you a few rapid-fire questions to help us get to know you.

Herb Cogliano
Sure.

Tim Fitzpatrick
Are you ready to rock?

Herb Cogliano
Ready to rock. And also Tim, I think the topic comes in really nicely with Halloween because sometimes you don't know if you're getting tricked or treated. So let's go today for everybody.

Tim Fitzpatrick
Yeah. Those that are watching live, it is Halloween. If you're watching this down the road, Herb and I are filming this on Halloween. So yeah, we'll try and take the fear out of this topic. So when you're not working, how do you like to spend your time?

Herb Cogliano
You know what? I'm very simple. Family, friends, and travel. We love to travel. We're outdoor people, love to hike, but really spend a lot of time with friends and family.

Tim Fitzpatrick
What's your hidden talent?

Herb Cogliano
I had a client this morning say that my superpower was understanding where they are at and simplifying how to apply scaling up methods to their particular situation without being overwhelming and yet providing tremendous impact.

Tim Fitzpatrick
That's a good talent, right? Making the complex simple to understand. One of my mentors said, complexity is the enemy of results, and it's always stuck with me because it is so easy for us to overcomplicate things in business. But, man, if we can boil it down to the simple, we can execute much, much more effectively. What's the best piece of advice you've ever been given?

Herb Cogliano
And I know this is going to be self-promoting, but honestly...

Tim Fitzpatrick
It's okay.

Herb Cogliano
2003, somebody handed me a copy of Scaling Up and the book by Verne Harnish, As a Business Owner Entrepreneur, that maybe wasn't achieving the success that we knew was within us as a leadership team. This book was simply a game changer and helping us do that. The second bit of advice that was given to me was the two most important days in your life is the day you're born and the day you figure out what you were born to do. And when you identify your purpose and you can live that, you'll never feel like you worked a day in your life. And when I came across scaling up, which was really about helping leaders and their senior team identify their purpose and scale their purpose for impact and opportunity for them and their communities, I've never looked back. It's been a 23-year journey that has been amazing, and I found what I was born to do.

Tim Fitzpatrick
Yeah. I love that thought because there are some of us that never find that thing that we were born to do, unfortunately. Well, there's plenty of people that actually aren't actively looking for it, are they?

Herb Cogliano
Not always. No.

Tim Fitzpatrick
No. What's one thing about you that surprises people?

Herb Cogliano
Oh, interesting question. I think sometimes people see me as maybe... How do I say this? Overly kind and humble and they can mistake that for being weak.

Tim Fitzpatrick
Yeah.

Herb Cogliano
But that is not part of my DNA. I'm just respectful, but I understand when things need to be done, we get them done.

Tim Fitzpatrick
Yeah. Don't mistake my kindness for weakness.

Herb Cogliano
You said it perfect, Tim. Thank you.

Tim Fitzpatrick
Yeah. I love that. What does success mean to you?

Herb Cogliano
Well, if you ever saw Jerry Maguire, the movie, I love that movie. I'm really about significance over success. And in our scaling up days, one of the things I'm very proud about, Tim, is that we were recognized as a multiple year INC 5000, fastest growing company, and multiple times as the best place to work. What did that tell me? That we could do well financially but we could also do good by all the people we served. And that, to me, is significance.

Tim Fitzpatrick
Where's your happy place?

Herb Cogliano
Believe it or not, being at home in my backyard, around my family and my kids, doing backyard barbecuing, backyard games, Donut Hole, Badminton, you name it. And we occasionally like to golf with our children, which is fun.

Tim Fitzpatrick
Cool. What qualities do you value in the people you spend time with?

Herb Cogliano
Oh, boy. Hardworking, humble, wise, grateful, and generous.

Tim Fitzpatrick
That's a pretty dang good list. I like it. So, Herb, tell us a little bit more about what you guys are doing at Aspire Growth Advisors. Obviously, you follow the scaling up model. Yes. Tell us a little bit more.

Herb Cogliano
So we provide executive coaching to entrepreneurial business owners and their senior leadership team implementing the scaling up methods. They typically want to scale their business with more impact and less drama. They're either at a point where their business has plateaued, sometimes shrunk, or they're growing so quickly like they're drinking from a firehose and they're not sure how to control that explosive growth. Those are normally three other situations. Sometimes we'll have a senior leader that is looking to do a succession plan and they really want to spend more time preparing the next level leadership to take over without worrying about the legacy of their business not continuing.

What To Do When Revenue & Margin Aren’t Going In The Right Direction

Tim Fitzpatrick
Got it. So, Herb, let's dig into this topic. I mean, how do we, as a CEO or the owner of a company, what do I do when top line revenue and gross margin are not growing in the right direction? I know there's three core concepts you're going to share with us to break this down. So man, let's dig into it. You got the floor.

Herb Cogliano
Okay. So we have four major decisions that we need to get right in scaling up, and one of them is around strategy. So if your top line and your margins are not minimally meeting market growth rate, then somebody else is eating your market share, which is not good. In scaling up, we like to have strategy that enables us to at least double industry growth rate or better. So if your business has not been doing that, then we have to really uncover what's the challenge around your strategy. We have a couple of tools that we do to help develop that in a senior leadership team. And the first one is called the SWEAT tool. Some of you may also think of a SWOT from school, business school, strengths, weaknesses, opportunities, and threats. And the sweat tool is looking at the company's strengths, weaknesses, and the trends that could be impacting you. We look at that and we see what, if any, pivots need to be considered. And unfortunately, you remember during COVID, many company leaders did not pivot, had a tremendous time, but there were great leaders that did pivot that went from retail to virtual, that went from manufacturing windows to manufacturing masks and window shades. So that's the type of interpretation and pivot that you have to be open to considering. The second important piece, Tim, is deals with the three things that we want to cover today. Does your business know its core customer? What is the customer that you value the most that is loyal, that allows you they buy for optimal profit, they're a pleasure to work with. They pay you on time, and they gladly refer you to family and friends.

Tim Fitzpatrick
So let me make sure I didn't miss this because I think this is a super important concept. And core customer, you guys call it core, I call it ideal. When we work with clients on the marketing side, that's what we're looking for, right? I call it the three power questions. Who do you love working with? Who's profitable? Who are you getting great results for? You guys are adding, there's a lot of similarities there. It's, who do we value? Who's loyal? Optimal profit? Are they paying on time? And are they referring? Did I miss any of those key elements?

Herb Cogliano
No, I think that's a good way to start.

The Core Customer Concept

Tim Fitzpatrick
So when you guys start to work with clients and you start this core customer concept, are there some simple steps that you take to work through this process?

Herb Cogliano
Yeah. A lot of times people were guessing it was anecdotal leadership conversation, and I said, We need data. We're not a startup. We've been in business more than one year. We had been around for 20. So I said, Let the data speak for itself. So we ran a report over the last 12 months by customer ranked by sales or gross profit, if you have it. And then we looked at those customers in the top quartile, and we asked the question, We know they're a profitable customer based upon their volume and gross profit. Do we like working with them? Do they pay on time? Do they provide referrals? And are they truly the core customer that we want to develop? And by the way, not every top customer made that list. There were some that did a lot of money, but they were not fun to work with. They beat up the staff and they paid in 120 days. Here's why the concept, Tim, is so important for a business owner. You have limited bandwidth for your proactive sales and marketing activities. So we didn't turn other clients away in the beginning. We couldn't afford to in the beginning. But what it did do for us, it put laser focus on the proactive sales and marketing activities exclusively to those core customer types. We were all over the map prior, selling to anybody and anything, putting up all these different market segment messages and it wasn't efficient. And obviously, our top line showed it wasn't efficient.

Tim Fitzpatrick
Yeah. I love this concept because, gosh, it is so simple, it's fundamental, but most of us completely overlook it. When we go back to these core customers, if we target our sales and our marketing efforts towards that group of people, how much better is our business going to be when we're working with those people day in, day out, and the other 80 percent-plus of clients that aren't really doing anything for us? And then our business… Herb this is the one thing that they do from this conversation, it will transform their business.

Herb Cogliano
It will greatly help. Now, I don't know if you've ever read the book by Marshall Goldsmith, another famous executive coach, What got you here won't get you there.

Tim Fitzpatrick
I have not read it, but I've heard the term, yes.

Herb Cogliano
So when your business is younger, you don't have a lot of choice. You accept clients that you probably shouldn't accept. You accept pricing and in terms that you probably don't find ideal. You hire employees in the beginning that maybe are not your A player that you know today. But in order to get to the next level of scaling up, you need to be willing to say no to certain things. And the core customer helps you define what we say yes to, and it also helps you learn where you will say no in terms of putting your proactive efforts. Therefore, focus, discipline around the few things helps you get through breakthrough to the next level.

Tim Fitzpatrick
So identifying this core customer then gives us this ability to create these check boxes or this guide that says, these are the people that are good for us. These are the people that are not.

Herb Cogliano
Yeah. Now, this is a process, so it will not happen overnight. I want your listeners to be comfortable that this will be a iterative process that may take months to play out. But once you have the core customer identified, we want to know more about them. By the way, a core customer is not a company. It's not American Express. It's an individual in that company with a title and a responsibility. So do not make that first mistake. My core customer is American Express or whoever. You then want to know some demographic information, which is standard, their title, years in business, gender, age, whatever these things are that are important. I then want you to think of psychographic data. What is that? Why do they buy? What's their mindset? They're buying out of fear, scarcity, convenience, confidence. You need to interview these clients and help understand. Then you need to understand behavior wise, how do they buy direct sales, indirect sales, online, omnichannel, retail, and then transactional data around what they buy, what products, what frequency, what volume, what time of year. And when you start to put these pieces together, then go to your marketing team and say, What messaging could we create around that? What database should we be leaning into with our sales activity? You'll start to get a lot better focused return for your time.

Tim Fitzpatrick
When we understand who the ideal or the core customer, as you call them, are, it directs all our marketing efforts and it makes sure that they're going to be targeted where we need to be. Rather than taking a shotgun approach, it's a sniper approach when we have the right data. And you touched on this, this is super easy for people to overlook. I think the best way to do this, which you mentioned, is to interview our core customers. We need to hear it straight from the horse's mouth because as business owners, even people on our team, I think we can gather a lot of good data from those people. But sometimes we're a little too close to the fire. We can't think as objectively as we think we might. And when we talk to those core customers, man, things, messages come to the surface where we're like, Gosh, why didn't I think of that? So I love that.

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Brand Promises

Tim Fitzpatrick

Do you have other tools that you guys use outside of interviews to gather this data as well?

Herb Cogliano
Well, let me talk about the next step because that's brand promises. And I think that will lead into a tool. So we use a tool called the Sandbox tool, which is really helping you clarify the core customer identification. In the simplest form, Tim, it's who, what, where. Who is my core customer? What service or product are we providing the core? And where do I provide it? Geographically? Through what channel? And that gives me a nice short, sweet executive summary of that profile. The second thing, which is very important, it's call your brand promises. And here's where a lot of businesses don't get it right. Two things. A brand promise is what your core customer values and what they find distinctive by your company over the competition. Where most companies do great, they understand what a core customer values. If they didn't, nobody would be buying anything from them today. What we don't do a great job is we don't understand what is distinctive from us and the main competitors. When we don't get that right, we get commoditized. I could buy from Tim, I could buy from Herb, I could buy from Sally. Now it's a question of you all say the same thing, and now I want you to drop your price so you don't get the deal. When you can understand the distinctive thing that also they value, then you're going to have a really strong competitive position. You're going to be able to defend a luxury or premium-type brand, and you're going to have fewer companies leave and you'll have higher long-term customer value.

Tim Fitzpatrick
Your brand promises create a clear competitive advantage.

Herb Cogliano
Yes.

Tim Fitzpatrick
With the scaling up model, do you have multiple brand promises? Do you have one? What are your recommendations there?

Herb Cogliano
So most companies have up to three. And see if you can finish my sentence here. Fifteen minutes or less saves you...

Tim Fitzpatrick
It's 15 % or more on car insurance. That's Geico.

Herb Cogliano
Geico's brand promise. Low fares, lots of flights, lots of...

Tim Fitzpatrick
Oh, man, I don't remember the end of that, but I think that one's Southwest.

Herb Cogliano
Southwest!

Tim Fitzpatrick
Yeah.

Herb Cogliano
So hold the onions, hold the lettuce, special orders, don't upset us. Do you remember that one?

Tim Fitzpatrick
No.

Herb Cogliano
Burger King, have it your way.

Tim Fitzpatrick
Okay. Yeah, have it your way.

Herb Cogliano
And then another one you may all be aware of, 30 minutes or less delivered to your door, or it's free.

Tim Fitzpatrick
Yeah, that's Domino's.

Herb Cogliano
Yeah. So we have these brand promises all around us. We may not call them that. You may have a different name. But the point is, selling pizza wasn't new.

Tim Fitzpatrick
No.

Herb Cogliano
But everybody valued a good pizza. But what was distinctive? Thirty minutes or less to your door, or it's free. Nobody at the time was doing that.

Tim Fitzpatrick
Yeah.

Herb Cogliano
So how do we figure this out, Tim? I now have the core customer segment. I did my report. I know who they are. I simply have my clients get on the phone. And Tim, if you were my client, I would say, Tim, I'm so grateful for the work that we do together. Can I ask you one simple question? Out of all the choices you have for executive coaching, why did you choose Aspire Growth Advisors? Now, I'm going to tell you whatever their first answer is, it's never the ultimate answer. I chose you because you have quality programs, and now I got to get ready to probe. Tim, what do you mean by quality programs? And once I unpeel the layers of that onion, layer by layer, I'm going to come to the ultimate essence of what one of those brand promises could be. And if you do that with 5, 10, 12, 20 core clients, you're going to hear recurring themes. Oh, you're responsive, four hours or less. Oh, you have broad selection. Nobody else has broad selection and nobody has constant inventory availability. They're always out of stock. You're always available. So what we look for, Tim, is the top three, and then there's normally the one leading brand promise that makes a distinctive difference. Do you know what the leading brand promise is for Southwest Airlines?

Tim Fitzpatrick
I don't, but I think you're going to tell me.

Herb Cogliano
It's their first one, Low Fares. Lots of fun, lots of flights is very supportive, but the thing that drives their business model, Low Fair. Yeah. Yeah. So getting clear on that for your company is really important.

The Core Customer Sandbox

Tim Fitzpatrick
Got it. So we've got core customer, identifying who that ideal customer is, then we've got this concept of the core customer sandbox, which really helps us paint that picture of what boxes does this core customer check off, right? Am I getting that correct?

Herb Cogliano
Yeah. So this helps with our focus. I had one customer been around 20 something years, amazing company. I said, What's your sandbox? He told me the core, he told me the who, He told me the who. He told me the what. But the where, he said, We're a national provider. I said, wow, really? I said, you're not regional? No, we're national. So he was putting his effort all over the place. I said, Do you mind if I take a look at the data? 90 % of his business the year before was in one state. Was he national?

Tim Fitzpatrick
Not really.

Herb Cogliano
Not really. I don't mind if that's an important part of a marketing slogan, but the reality was they needed to build from local to regional and focus their efforts regionally over the next year to build that up to ultimately have enough team and bandwidth and marketing dollars to do more of a national launch in 24-36 months.

Tim Fitzpatrick
Okay. So that core customer sandbox is where we're identifying that who, what, where.

Herb Cogliano
Yeah. And it gives you focus, and it allows you to be proactive with that limited bandwidth that so many companies have today with marketing and sales.

Tim Fitzpatrick
Yeah. And then from there, we've got this concept of your brand promises and what your core customer values that they find distinctive with your business compared to your competitors.

Herb Cogliano
Yes.

Tim Fitzpatrick
So these three fundamentals are really laying that foundation to grow revenue and increase margin..

Herb Cogliano
And there's been some amazing developments, Tim, in the last year or two with this work. At least I've seen it in my practice. But the first thing is for the client to uncover the brand promise. The second thing is to start tracking it, responsiveness, availability, whatever that would be. The third thing is to start reporting it out to the team so that they can now have a KPI of excelling even further in that. The fourth thing is then promoting it. How do we use that in the marketing message in our promise? And then the fifth thing is guaranteeing it. If you don't deliver because you told me you would, what are you going to do about it? And sometimes you're not promising money back. Sometimes you're promising delivery same day or callback, four-hour callback. And you need to track initially so you'll know what you're currently truly delivering. And then we report it, promote it, and guarantee it. What the new developments are, I've had some clients that have been doing customer surveys for years, and they have all this data of customer surveys. So we've been scraping off the customer names, and we're using. Chatgpt-

Tim Fitzpatrick
Yeah, to identify the.

Herb Cogliano
Oh, my God. It will give you great analysis of years of data and help you simplify what are the top three sentiments coming from your customer feedback. We then ask it to give us KPIs that will help track and leverage that sentiment. And then we ask it to develop some sales messaging and social media posting based upon a person who would want that type of differentiated offering. So it's becoming very integrated with our marketing advisors, with our sales and internal marketing teams, and it's producing results extremely quick. It can even do sales scripting if you wanted for your team once you identify it.

Conclusion

Tim Fitzpatrick
Yeah. Very cool. I love it. This has been a fantastic conversation, Herb. I love how simple you've broken this down. Any last minute thoughts you want to leave us with?

Herb Cogliano
Sometimes when things aren't going well in your company, you feel like the company is running you. But I think every entrepreneur deserves to have a company that works for them. Some people start a company and their company is like their love story. They fall out of love with their company when there's a lot of drama. They're overworked, underpaid, taking 100 % of the risk. But with scaling up, you have the ability to fall back in love with your business, create a compelling purpose, and truly make a difference for you and your team and your community. And that's the journey I wish everyone that's listening to your podcast, Tim.

Tim Fitzpatrick
Awesome. This has been fantastic. Herb, where can people learn more about you?

Herb Cogliano
Well, you've been wonderful because I can see right up on the screen, it's my website, AspireGrowthAdvisors.com. Feel free to reach out. I have some assessments there. If people want to see what their current scaling up readiness is for their company, it will give you a score and tell you where your gaps are to getting your company to the next level. And I'd be happy to follow up and answer any questions your people may have.

Tim Fitzpatrick
Cool. I love it. So if you've enjoyed this conversation like I have, go check out aspiregrowthadvisors.com. We will make sure that is in the show notes. Herb, thank you so much for taking the time. It's been great to reconnect with you. Those of you that are watching, listening, I appreciate you as well. We spent a lot of time really talking about two revenue roadblocks that we help clients remove today. One was target market and who your ideal clients are and what that message is to that market. If you want to know which of the nine revenue roadblocks are slowing down your growth, you can do that over at RevenueRoadblockScorecard.com. You can also always connect with us over at rialtomarketing.com. Thank you so much. Until next time. Take care.

Herb Cogliano
Thank you. Happy Halloween, everybody.

Tim Fitzpatrick
Yes, happy Halloween.


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