Updated: Dec 17, 2019
Pressure to grow margins is increasing
From conversations we’re having with leaders of software and technology businesses, it’s clear that uncertainty in the current economic climate is increasing pressure on many to find ways of accelerating margin growth. So what are the typical barriers to accelerating the growth of margins when you’ve exhausted all of the opportunities to reduce costs, you’ve got very compelling propositions and yet your customers are still reluctant to buy or move forwards? And what can be done to overcome them?
6 barriers to growing margins
In our experience, there are 6 key barriers that software and technology business often face when trying to introduce propositions to customers that will accelerate your margin growth:
1. The relationship with customers (or prospects) is at an early stage; customers lack confidence that the proposition will deliver the projected benefits
2. The financial or time investment that customers (or prospects) will need to make is significant (even though projected returns are often very material)
3. The case for introducing the proposition hasn’t been made adequately, or customers don’t understand the proposition’s relevance to their business and current context
4. There are inadequate advocates or sponsors within customers to introduce the proposition
5. Detailed requirements for introducing the proposition haven’t been specified adequately (and delays are experienced as the proposition is introduced as a result)
6. The proposition isn’t being introduced in a well-managed way.
A lose-lose situation
The consequences of these barriers are that customers don’t experience the benefits of your propositions as much or as fast as they could and you don’t see your margins grow as fast as you would like. It’s a lose-lose situation, where the potential gains for customer and supplier don’t materialise – or don’t materialise as fast as they could.
Two simple strategies to create a virtuous circle
So what can you do to address these barriers? In our experience, there are two simple strategies that you can adopt to grow your margins faster:
1. Make a small ‘Discovery’ offer to reluctant prospects and customers. This should require a small investment of money and time from your prospects and customers – just enough so that they have skin in the game and can’t ignore the outputs that are produced. The ‘Discovery’ engagement will clarify your prospects’ or customers’ business rationale for introducing your proposition; increase their confidence that you deliver what you promise; build a coalition of advocates within their organisation to move forwards; and instigate a behaviour of buying from you
2. Ensure that any initiative to introduce your proposition is managed in a well-structured way. This should include ensuring that the scope of the initiative is adequately defined; that detailed requirements are adequately specified; that work to introduce the proposition is adequately managed; and that benefits realised are adequately monitored and promoted. Often this will involve breaking work to introduce your proposition down into small work packages that are easily managed and where the benefits can be seen quickly, thus building momentum, demand and funding for further investment.
Want to Accelerate Your Margin Growth?
Would you like to accelerate your margin growth and enjoy more profits in your business? If the answer is yes, I have something special for you. For this week only I'm offering a complimentary Business Growth Session to four companies. If you're ready to grow your margin and want to see your sales and profits increase as well get in touch. I've helped many companies in this area, and on the Business Growth Session I'll share with you some steps and strategies you can take to achieve the same.
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