Maximum Wood Behind the Arrow: Increasing Sales Through Vertical Marketing

The straighter you shoot your arrow, the deeper penetration you get. That is the same philosophy behind growth strategies and increasing sales through vertical marketing. If you provide the exact product/service that your target market wants and needs, in a way they want it, you will get deeper penetration in that market resulting in increased sales and margins.

Sounds simple enough, but in reality few companies succeed in really serving their customers’ needs. Most companies find themselves with a set of products or services that they take to market and focus on a wide range of target markets, which results in a fragmented approach and less than optimum results.

A vertical marketing approach allows you to take your current products and services to a set of similar businesses in a way that allows you to “customize” the solution for that target market. You need to step into the shoes of your prospects in the target market and understand what problems they have and design a solution around solving their issues. It does not need to be an entirely new product design, but rather looking at the problem and understanding it from the client’s point of view, and addressing all areas needed to solve the problem.


Examples of Vertical Markets
A vertical market is more than just a group of businesses from the same SIC (Standard Industry Classification), but that is a good place to start. SIC codes will allow you to identify your target market through the leasing of lists to be used in your marketing and sales activities. The general SIC categories are too broad and need to be segmented further, since you are looking for a near homogeneous target market.

In one business that I ran, we focused our growth efforts on the United States Department of Defense (DoD). While that is a fairly narrow market classification in the federal government, it did not provide enough segmentation to be successful. We further segmented the market to the individual branches in the DoD (for example: Air Force, Air National Guard, Army, and Defense Logistics Agency), because they each had a uniqueness in how they operated and how they purchased. Our solution was focused on each branch of the military with minor changes that supported these unique needs.

Taking this approach we grew the business over 100% year over year during the time we were running these programs. Focus your efforts on a narrow vertical market, learn all you can about their needs and deliver the product/service in a way they want to buy.


Learning the Needs
Learning the needs of a target market takes research, time and effort. Secondary research, information already published, will allow you to learn the basics about your target market. This information can provide background on some historical facts of the market, structure of the industry, identification of key industry players, competition, and some overriding issues. It will not provide you with the information you need to thoroughly understand the needs of individual company’s and the best go-to-market strategy.

Primary research, unpublished information, is necessary to learn the dynamics for your go-to-market strategy, which includes the definition of the whole product solution. Primary research can include an outside agency or business consultants that performs interviews, surveys, and focus groups; but it can be much simpler to get started.

Pull together some key personnel in your business and assign tasks to speak with owners/executives at companies in the industry you are researching to learn about their businesses and understand what keeps them awake at night. This gives you and your team firsthand knowledge of the pain in the industry, and will help you understand key issues in the industry. Once you understand the buying dynamics of your target market along with key industry information, you are now ready to start developing the solutions.


The Solution
This whole product solution approach looks at all aspects of your target markets’ needs, which could include your standard product set. The key is to understand the need and design a solution around it. Look at all areas of your business when developing the solution… not just the product itself:

• Training and support – Are there special needs that this target market has that could position you favorably against your competition? It might be customized training on implementation of your solution into their environment or it could include a dedicated support line to service remote offices.

• Consulting Services – You are the expert in your field, and as such you have knowledge that is valuable. Can you pull together a consulting or outsource service that provides extra value to your target market?

• Interfaces – Are there special requirements in this market that you could add into your product or service. An example might include user interface modification to customize it to the terminology of your target market. Not a difficult thing to do in most cases, but it would make a huge impact during your sales cycle.

• Billing cycles – Can you change your terms or billing processes to better meet the needs of your target market? Customization comes in more forms than just the product or service.


Look at your company to determine if the target market will find you easy to do business with, identify any deficiencies, and then fix them. In most cases, you will find that minor changes in your internal organization will make it much easier for all your customers to work with you.

The solution also includes your go-to-market personnel and materials. In early stages you can use your existing sales personnel to sell to your new market, but they will require training on the new vertical market. As you grow, I found it works best to have sales people that have sold into that vertical market before, or were working in the vertical market. This helps your prospects identify with your firm more closely and in the end provides you with additional knowledge on industry dynamics.

Each vertical market should have sales collateral developed specifically for that market. The material speaks their language and presents your technical product/service in a way that will be easier for them to understand. While the technical product may not be much different from what you sell in other markets, the material and sales approach will most likely be much different.

Getting Started
If you look at this as a huge project, you may never get started. Spending the time to define your current customer base is a great starting point. Segment your customer base by major SIC and start profiling… this will give you a better understanding of the buying triggers of your current customer base and usually results in some changes in approach.

Once you get the feel for the process in your current customer base, move onto a market that is adjacent to one where you are already successful. This provides an easier transition for your sales people and also allows you to use your current accounts as references.

Shoot straight and focus your efforts to maximize penetration in your selected vertical market. This will provide increased sales, higher margins, and better customer service ratings.

Tough Times Mean Tough Decisions

Drastic measures are sometimes needed during these times of volatile economy just to have your company survive. It is tempting to make across the board cuts in what is probably your largest expense category… human resources. Be careful with across the board the headcount reductions. A wrong move may mean a steeper drop in sales or an inability to invest in areas once the economy bounces back.

Tribal Knowledge

Tribal knowledge is that historical and company specific intellectual property that is key to maintain and growing your business. This can be specialized product development talent that has knowledge specific to your company and industry that once lost would be very difficult to replace, or it may be that special person in customer service that knows all past issues and has a great relationship with key clients or distribution channel partners. In any event, identify these key individuals and do what is necessary to retain them.

Retaining Key Employees

Retaining key employees can come in many forms including retention bonus program, increased communication and soliciting input from these key employees. A retention bonus that is tied to their performance along with the company emerging from this difficult economic position (probably late 2009 or early 2010) is a good way to preserving talent without adding additional cash flow burden on your company. Increased communication to all employees is important, but even more important to those key people with the tribal knowledge to move you forward. Utilize the knowledge by soliciting input from these key employees and bring them into the fold as a part of the solution to the current economic environment.

An Example

I was appointed CEO of a company in August 2001… that’s right, one month before 9/11. Not only did I need to maneuver in a difficult economic environment, but it was also a turnaround situation. The best strategy and tactics used during the turn-around revolved around retention of key employees and using the talent in this group to help with company performance improvement. The key employees came from all disciplines of the company and at all levels including senior management team to front line employees.

Communication to the entire employee base on a regular basis was key to keeping everyone engaged, but additional focused communication to the key employee group allowed me to utilize their skills and knowledge to manage small cross-functional teams to tackle the many tasks that needed to be addressed. This got the employees involved with key turn-around activities, and kept morale up even with reducing the total employee headcount by 40% during the first 90 days.

The end result of the turnaround was an increase in net profits from a negative $6 million to positive $800,000 in the first full year on sales of $38 million, and an increase in EBITDA from 15% of sales to over 35% of sales. I could not have done this on my own and enlisting the employees allowed us to accomplish this in a very short time frame.


Managing in a tough economy is not easy, but can be rewarding. Emerging from difficult economic times stronger than when you entered allows you to grow the business. As business owners and leaders, it is your responsibility to look out for the viability of your company. Take that responsibility seriously and manage expense reductions diligently to focus on the near term while keeping an eye to the horizon.


Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a business consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com

Managing in Uncertain Economic Times

Turnaround… Tough Times… Terrible Economy. Call it what you will, in any case it takes a special focus to manage in a down turn and be able to emerge positioned to grow. I have managed organizations that required turnaround skills as well as hyper-growth, and there are challenges associated with both. Turnaround management skills require you to improve or stabilize financial results without putting the company in a death spiral.

The best turnaround management includes not only cost cutting, but more importantly increasing or stabilizing revenues. Any cost cutting effort without an eye to the revenues will only result in continued cuts in an attempt to improve bottom line, which in the end could destroy your company. A focus on the following areas is necessary when managing in uncertain economic times and/or a turnaround situation.

1.) Employees – Employees are your most important asset. Any headcount reductions need to be made swiftly and humanely, while reassuring those that remain of their importance to the turnaround effort. Try to orchestrate all near term headcount reductions at one time, this reduces the concern by the remaining employees of future reductions in force. When making decisions on employee reductions work to retain customer facing positions and any “tribal knowledge” workers. You will need the customer facing employees to help maintain and develop revenues, and the historical company knowledge (referred to as “tribal knowledge”) will be necessary to run your business in the short term and then again after emerging from the crisis.
A key area of managing your employee base during these times is communication. In fact, there is no such thing as over communication during difficult times. In the absence of information your employees will fill the void with what they think is happening, and most times it is untrue and detrimental to moving the company forward. Refer to the November 17, 2008 post in this blog for a complete discussion of employee communication.

2.) Suppliers – Communicate with your key suppliers to update them on your situation and status. Treat these relationships as key partnerships. During the discussion focus on your goals, timing and action plan. Use this as an opportunity to consolidate suppliers and leverage the increased volume with key partners to assist you with your turnaround effort.

3.) Customers – Customers are the lifeblood of your business, and you cannot risk your top customer’s hearing about any turnaround effort through the grapevine. They can and most likely will hear about any difficult time you are managing from your employees or through the internet. Be proactive and discuss your situation with key customers. Visit them in person when possible and reassure them that you are focused on emerging a healthier company prepared to serve them well into the future.

This is also the time to review profitability by customer and make the difficult decision of firing those unprofitable or marginally profitable customers. The client meeting is a good opportunity to discuss a price adjustment that brings them in line with your objectives or terminating the relationship. It will not be a comfortable discussion for you, but it is something that needs to be done and done quickly.

4.) Partners – Partners may be a dealer or VAR sales channel, joint venture partners, or banking/finance partner. It is necessary that you communicate openly and honestly about your situation along with the recovery plan in place. If you have not heard from your banking/finance partner yet, you will, so be proactive and present your plan of recovery along with time lines. It is good with this constituency to be very conservative in your recovery plan, so you feel comfortable the company can achieve the results even with any unforeseen issues that will arise.

5.) Focus on Cash Flow – Now is the time to focus on your cash flow. Have your finance group develop a rolling 13 week cash projection. Have a key management meeting revolving around cash flow to review progress and plan steps to improve the projection. P&L reviews are nice, but they are inherently poor for this activity, due to all the non-cash accruals embedded in the document. Focus on cash generation and cash preservation activities.

6.) Leadership – This is the time your company needs you most. Demonstrate confidence in front of your workforce, even if behind closed doors you and your management team are having violent discussions on the turnaround plan. Your employees need to see a common front from the management team, so they can confidently follow your leadership and the direction to improve company results. Once again, communication is key to building this confidence and providing regular feedback on the progress the team is making.


Turnaround management is not fun, but administered correctly you can emerge from difficult times poised to take advantage of opportunities. Take advantage of your advisory board as input to your plan, and hire an outside consultant to help with your efforts.


Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a business consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com .

Tough Times Require Greater Employee Communication

Even the best leaders hear their employees complain about the lack of communication in a company. I have heard this complaint even in companies where I had some communication effort reaching out to the work force on a weekly basis. This is an indication that the employees need regular communication to help them feel engaged in the company and move the company forward.

The employees will fill any void of information with their own assessment of the situation, and in most cases this information does not operate in reality. This informal communication channel then provides the wrong message for a broader employee base, which in many cases demotivates and disrupts the direction of the business.

A lack of internal communication is a problem in good times, and is detrimental in difficult financial times. Instead of focusing on the daily work at hand, employees get caught up in the rumor mill resulting in an atmosphere of fear and concern. The end result is a loss of productivity and more importantly a reduced level of customer service by those employees responsible for dealing directly with your client base.

The senior leadership of a company can prevent this from happening by implementing a proactive communication program. The tactics may be uncomfortable for those senior leaders that spend most of their day sitting behind a desk, because it requires them to get out of the office and spend time with their teams. A few tactics that I have used successfully with teams as large as 1,600 people include:

1.) All Employee Meetings -- I have found that a monthly meeting of all employees provides an opportunity to cover information ranging from progress on initiatives to financial results from the previous month. Even in privately held companies, where there is a need to keep financial results confidential, I have shared how the company had done compared to key financial targets. For example, "last month revenue was better than planned, but profit was short due to unexpected expenses related to..." This provides even the front-line employees with a feel on how the company is performing, and it also gives the senior leaders an opportunity to explain how the different departments contribute to the financial results of the company. I have never had an employee tell me they would rather not know how the company is performing.

2.) Employee Emails -- Take advantage of email to communicate with all the employees that have access to provide updates through the month. The information may be a new sale that just closed, progress on hiring a key position, customer feedback, or the company being highlighted in the press. Communicate the good and bad! Your employees will hear and see the bad, so take a proactive approach and communicate it up front with an explanation they can understand. Emails should be relatively short, and anything that takes more than a 4 sentence paragraph probably deserves an additional all company meeting to explain.

3.) Bulletin Board Posts -- Bulletin board posts allow all employees to share in the information outlined in the employee emails. Post everything that goes out in email as well as any company related articles in the press that did not get communicated in an email.

4.) Walking Around -- I cannot emphasis enough the need to get out of your office and "walk" around the company. It may be walking through the assembly or manufacturing area, spending time in engineering, calling a customer, or making a sales call with your sales and marketing teams. This gives you first hand knowledge on what is happening in your company and allows you to talk to those employees closest to the process and closest to the customer. One of my favorite activities is dropping in to observe a meeting that is taking place (My management team in one business referred to this practice as a "drive by" -- if I was walking by a meeting and it looked interesting I would stop in to observe), which allowed me to hear the issues and observe how my teams were handling with topic.

Increasing communication with your employees will yield a more engaged and effective work place. This could be in the number of widgets produced, but more importantly improved customer interactions and workplace team dynamics. Improving the level of communication with your employees will position you to emerge from these tough economic times a stronger company. Hopefully the economy improves sooner, rather than later.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com

Managing Through Tough Economic Times

Many say we are in for another 12 - 18 months of difficult economic times. Things were tough enough earlier this summer and it looks like it just keeps on getting worse. There are a number of things you should focus on in your business in order to work through the tough times. In this blog we will discuss spending associated with customer facing activities.

Customer Facing Activities
Evaluate your spending and start cutting back on those that are not customer facing. Any customer facing activity needs to continue until you absolutely have to cut back further. A natural reaction is to cut back on marketing expenses… I have to admit that I have taken this approach in difficult times only to regret it during difficult times and then again when better economic times started to arrive.

Marketing is cumulative and any drastic cuts in marketing communications will take at least twice as long to get back any momentum that you have created. If you have ever started a marketing program, in many cases early months do not yield much in results but as the program continues it seems to snowball. This cumulative effect is lost if you take the tack to going “dark” for a few or many months, so be prepared that it will take a good 6 months to get any momentum back once you start your programs again.

Cutting back on marketing activity also limits your business development efforts. Sales are generated by your sales people, but marketing softens the market and helps drive demand. Cutting back in sales and/or marketing only hurts your ability to stay with your current market.

An Alternative
An alternative to cutting back completely on marketing communications is a good PR program. In my experience, it is the best bang for the buck. It costs a fraction of what advertising costs, and it allows you to craft the message that you want the market to hear. PR provides a great vehicle to offset some higher advertising dollars without going “dark”.

Be prepared, just as advertising takes time to build momentum so does PR. Give it some time and it will help you drive your brand and sales. I recommend using a good outside agency to handle your PR activity. This is what they do and they can help you craft your message and still be a variable cost.

Just because you are going to an “agency” does not mean that you will need to spend big dollars at a large firm. There are a large number of independent contractors that specialize in PR that do a great job and cost a fraction of the big integrated marketing firms.


Spend wisely, focus your efforts and expenses on customer facing activity and it will help you work through the tough economic times.


Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com