Doug Davidoff
Back when I was a financial advisor, I was warned about “dead cat bounces” and “bear market rallies.” Simply put, both of these terms meant that even when things were deteriorating, a stock or a market could suddenly start performing well, luring unsuspecting investors into making a huge mistake. This is why, I was told, understanding and paying attention to the fundamentals was critical.
I’m reminded of this as I look at the business market and even more at the psychology of the market today. For a lot of companies, things feel as though they are getting much better. Margins have stopped their rapid deterioration (and in some cases they’re even expanding), budgets are beginning to be freed up (at least in terms of beginning the investigation of potential purchases), and the dread and fear of late 2008 and 2009 seems to be dissipating.
The danger here is that there is a BIG difference between things feeling better and things actually being better. This can lead to a deadly form of complacency. Don’t get me wrong, I am not being a pessimist here – I’ve been a proponent that one can grow throughout this entire recession. My concern is that many business executives and salespeople are attributing a supply side adjustment with the return of demand. Just last week, I had a client’s salesperson say to me, “I don’t understand why we’re spending so much time trying to create demand.”
I was having this conversation with one of my clients that is heavily involved in trading. Their business has rebounded because the result of the last three years economy has lead to a significant decrease in supply. Prices and margins are great, but demand is about the same. They realize that supply and demand imbalances are not sustainable, and they are intelligently focused on improving both sides of the equation.
As I pondered the conversation, I realized that this issue is impacting growth oriented businesses just the same, albeit in a slightly less obvious way.
There are only two ways to increase revenue:
- Get people to buy more
- Increase what people are paying
Readers of this blog know I’m a fan of both of these. It’s important to keep in mind, though, that the only way to sustain growth – fast or otherwise – in the long-term (more than a couple of years) is by increasing the demand for you offerings.
That means that you must find ways to get people to pay more for your offerings and get more people to buy from you. Don’t let success in one area creates complacency in the other.