Buying Business Buys Trouble

Here is a simple way assess the health,
vitality and potential of a company.

As an outsider, it is often difficult to determine just how well a company is performing, especially for the long term. Sure, we can examine the sales, revenues, expenses and bottom line of a company, but these are merely snapshots in time. They provide no real view of the current health and future prospects of the company.

Over the years I have come across a simple test that smart business managers can use that offers an uncomplicated, yet effective way to determine how well a company is performing. It comes down to this: A company is healthy when the customer buys its products and services. A company is sick when it tries to buy the business of the customer.

Attempting to buy business is a classic sign of a sick company run by a management team devoid of the ability to develop, implement and stick with a healthy, long-term strategic vision. There are examples galore to prove this point.

When the American auto industry was healthy and flying high, customers would flock to the showroom and even accept a waiting list to buy a new car. Sure, there were “negotiations” with the local dealer, but that was part of the fun. As competition increased and the appeal of its products declined, instead of trying to improve the product by offering better value and being more competitive, the auto industry introduced gimmicky “incentives” in an effort buy the business of the customer. Thus began the still continuing downward spiral of the American auto industry.

Unfortunately, this same, sick approach to buying business is now invading many companies in the American life insurance industry. While many companies have fallen into this trap, I am familiar with one insurance company in particular that has spent the past two years desperately trying to reverse a significant downturn in its top line sales results. Rather than seek to identify a sound strategic focus, expand to new markets or improve the fundamental value and competitiveness of its products, this company has adopted a strategy of attempting to buy new business.

Increased and non-sustainable “bells and whistles” have been added to existing products in order to attract consumer interest. At the same time, the company has increased commissions and other incentives it pays to the distribution system in order to “motivate” the agents to push the company’s products. This is pure and simple an attempt to buy business.

This is a clear sign of weak and incompetent management that has no vision or concept of how to offer products that are competitive and are attractive to the consumer due to the value they offer. Rather than achieving the desired results of increased top line sales, this approach is likely to only buy more problems as sales continue to decline.

The fundamental problem is that a strategy based on buying business builds no basis for either customer or distribution loyalty. In addition, it puts the company in a deepening spiral of having to offer more and more to buy its business. Without a core belief in its value as a company and the value its products deliver the company is buffeted and forced to react to the vagaries of a volatile, unstable market where more and more is required to do less and less business.

Certainly the “deal” or “limited time offer” is part of the lexicon of sales practices, but those are only effective when they are part of the process and not the sole strategy for driving sales. When you see a company that is attempting to buy business with a single-minded focus on top-line growth (or recovery of lost sales), you can know that company’s future is dark.

What’s more, it’s a company that you should avoid buying from, let alone working for.

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One response to “Buying Business Buys Trouble

  1. Shawn Hurley

    Mac: I coudn’t agree with you more about “buying business.” I know which insurance company you are referring to. And I no longer work for them. Keep up the great comments!

    Shawn

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