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Developing Consistent Revenue Streams

Automation Concepts designs and installs integrated material handling and control systems. Our sales cycle is very long and sometimes unpredictable. Because of this cycle, we experience peaks and valleys. Do you have any creative suggestions on products and services that will allow us to have a more consistent revenue stream?
                                             — Ed Schuler, President, Automation Concepts, Inc. (Lowell, MA)

Jim Bowes: Managing the peaks and valleys as a systems integrator is clearly one of our biggest operational challenges. Systems integrators are primarily in the project business as opposed to a business that creates a consistent recurring revenue stream. So it is vitally important to generate a consistent amount of qualified projects while at the same time finding ways to create more consistent revenue to cover your monthly operating costs.

If you are selling a significant amount of conveyor systems or automation, concentrate on the spare parts business. There are quite a few distributors and systems integrators in MHEDA who pull significant revenue and higher margin in their spare parts business.

Consider building a service and maintenance capability for customers in your area. You can become a very reliable, trusted resource partner for these existing and new customers, and service can become a reliable recurring revenue stream. It can also be a source of new business opportunities.

Selling “static” material handling equipment products such as rack, mezzanines, shelving systems, bins, in-plant offices and the like can provide a steady, regular source of revenue. Typically these types of purchases can be made lower in the organization and can be assigned to the client’s operating budget as opposed to the creation of “capital spending requests,” which can be lengthy in sales cycle and are usually the first purchase suspended during tough economic times.

To achieve a higher close ratio, read “The New Strategic Selling” by Stephen Heiman. Selling large capital projects requires a certain approach and methodology, and Heiman’s methodology works well.

Hire more great salespeople to spread your playing field. In any given year, you will have a couple of salespeople who exceed their plans and a few who don’t meet their plans. Increase your consistency and success by going out and finding the best salespeople you can. Train them, set the expectations, then provide them with the operational support necessary for success.

Take a fresh look at your business and determine if there are any fixed costs that you can convert to variable costs. While this is more bottom-line focused, it can help immensely in those times when you have a “bubble” of projects coming through. “Running lean” is also convenient in slow times when you don’t have to continue to carry the fixed overhead.

Create a process and expectations for business development and networking. Require all salespeople and executives to network in your area with real estate brokers, general contractors, packaging system companies, vendors, etc. Fill your pipeline with great prospects and avoid the valleys.

Develop an e-commerce strategy. Some MHEDA companies have built online engines that make it easy for their customers to buy standard and maintenance type equipment. Find out who is doing it and find out if they are realizing any success.

In the end, it will require many of the “little things” done well in aggregate to create true differentiation and consistent, predictable success for your business.

John Cosgrove: As a result of the recent economic environment, the cycle times of larger engineered systems is even more unpredictable. Although our first priority as a systems integrator is to pursue large automated projects, we are broadening our horizons by selling more engineered storage systems. Cycle times are traditionally shorter and provide a more consistent flow of work and revenue.

Another area to generate business is to develop preventive maintenance contracts and perform service work on existing systems. We have found that by paying close attention to engineered storage systems and our service clientele, we can easily sell larger automated systems to these customers.

Bob Weeks: The peaks and valleys of the integration business is a part of the business. Most contractors experience this problem. Some integrators try to balance their sales by selling commodity type products, i.e. rack, shelving, casters, extruded aluminum components, etc. Others separate sales from jobs-in-progress so the order pipeline remains full or sales projections can be analyzed and slow sales planned for.

Material Handling Equipment Distributors Association

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