Lessons from the Trenches
Tom Stimson
October 21, 2022
A man is at his desk working on a tablet-computer analyzing sales data to be successful in the coming fiscal year.

At this point in the year, you’re already selling into 2023. Consequently, it’s important to start planning for 2023 now.

By planning ahead, you’re setting bumpers along the lane of 2023: who you want to sell to, what you want to sell them, and what you’ll need to deliver the jobs effectively.

These guidelines are, not coincidentally, also the basis for developing your 2023 fiscal budget: who, what, and how much delivery will cost you. This gives you the tools to measure the effectiveness of your team in each of these areas.

2022 Was Unique

Planning for 2023 is particularly important because it will be the first full year of a post-pandemic event economy.

In 2022, we had a huge surge of events that I call revenge meetings. There was a big bump in business from March through June because of pent-up demand and spending. Buyers, companies, and attendees were taking revenge on the pandemic by getting out there and having a good time.

We saw the same thing this summer with revenge travel. Families spent ridiculous amounts of money to take vacations they’d had to wait two years for. People were paying $1,500 for a single airline ticket to take their six-year-old to Disneyworld. That was unheard of before the pandemic.

In the fall of 2022, however, we’re seeing things settle down into a more normal buying pattern. It’s still pretty huge, but more discerning. Buyers are paying a little more attention to their budgets. They’re paying a little more attention to value. They can’t afford to be quite as frivolous, or revenge-y.

But there’s still a huge amount of demand, and there’s still a limited supply chain. So it’s still a great time to be selling, which will remain the case throughout 2023 and probably into 2024.

But 2023 will be the first full year of seeing how all of this manifests together under fairly normal demand and supply chain challenges.

With that in mind, it’s a good time to reflect on what we’ve learned this year.

Top 7 Lessons From 2022

Infographic: ISL - 10/24

1. Say “No” Sooner

This year, we learned that saying no sooner is important because you need to turn away some business. Not all revenue is healthy revenue, and by learning to say no with confidence, you preserve healthy revenue — and your own sanity.

Revenue is not the goal. Profit is the goal. Turn away unhealthy revenue and say yes to healthy profit. Don’t worry about getting bigger in 2023; worry about being more profitable.

2. Love Cash

Isn’t it great to have cash again?

All this cash gives owners a lot of choice and flexibility.

Before the pandemic, they would have taken that cash and immediately bought new equipment — that they didn’t necessarily need.

Today, I’m working with owners to make sure they’re funding their retirement and thinking about their exit strategy and succession planning. Cash is a great tool for that. It gives you the ability to make contributions to your retirement. And that’s always been the ultimate goal.

3. Keep Overhead Down

Again, the goal is to create profit, not revenue.

You can create a lot more revenue with the overhead you have if you know how to run your business — and that means running a scalable operation. In large part, scaling depends on keeping overhead down. If you can do that, then when you sell more work, you make more money.

This was not the case pre-pandemic. The busier people got pre-pandemic, the smaller their margins. We want your margins to increase. Keeping your overhead down is going to do that.

4. Keep CapEx Down

Do everything you can to avoid capital expenditures. And yes, this is related to loving cash, but it’s important enough to call out on its own.

Sure, you do need some new gear. You do have some equipment turnover. And there might be a little new technology out there that’s relevant to your business.

You can use some cost of goods sold to get the toys and widgets you need without having to use your capital, which basically comes right out of your retirement. But the fact of the matter is your supply chain can provide all the equipment you need without you having to own it.

And you get to hang on to your cash.

5. Don’t Conflate Job Costs With Cost of Goods Sold

There are a couple elements to this one.

  • A job cost report on your project is NOT a Profit and Loss statement.
  • You have COGS that aren’t directly tied to any one job.

There’s no financial tool that reconciles these two things.

Your warehouse crew, for example, is a cost of goods sold. They’re not a job cost because you aren’t going to allocate and track their time to a particular job. It would be pointless and inefficient to try to do that.

It’s not overhead, either. The only reason you have a warehouse crew is because you’ve sold something. You don’t need a warehouse crew to sell something, so the cost doesn’t fall under overhead.

(If you need some help unraveling this, give me a call.)

6. Outsource

For operations to be successful and scalable today, owners need to be intentional about how they structure and use their teams. Most have smaller in-house teams than before the pandemic (or they should) and hire freelancers to handle everything outside of planning and acquiring business.

Review my post on the post-pandemic operations model for a refresher on keeping your internal team working at their highest level of contribution, and outsourcing the rest.

7. Reserve Capacity

Just because you have room for one more show doesn’t mean you have to sell it to a non-ideal customer. Instead, hold on to some capacity for best-fit customers and prospects.

When you avoid filling up your schedule with empty revenue calories (by learning to say no — see above), you protect your people, your profits, and your perceived value.

Continue to Practice Caution

Why are these lessons so important? Because they’re all about caution.

The pandemic through 2022 taught us not to take unnecessary risks. In 2023, we’re redefining what an unnecessary risk is. Experimenting with increasing CapEx or overhead might qualify.

Hanging on to cash, outsourcing, and keeping overhead down to protect those margins are all protective measures that allow you to maintain flexibility and nimbleness. They enable you to be ready to tap the brakes when recession causes a dip.

Here’s to a cautious and prosperous 2023!

About Tom Stimson
Tom Stimson MBA, CTS is an authority on business and strategy for small- to medium-sized companies. He is an expert on project-based selling and a thought leader for innovative business processes.
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