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Thursday, May 07, 2009

Changing course: When to pull the plug on a construction marketing initiative or business

Today, we are preparing to change course on a significant construction industry marketing project that has consumed close to $10,000, many hours of effort, and many assumptions.

Just two weeks ago, I thought we were on track. In fact, it looked much more likely that other projects and initiatives would fail while this one would proceed with incredible vitality. But, as we approach our bi-annual planning meeting and review on Monday, I knew something had gone really wrong with the original idea, which could not be corrected by pouring more resources into the existing model.

I decided to pull the plug. (I'll wait a little while before telling readers who cannot guess which plug I'm pulling.)

These developments raise some important questions. With your business plan in place, your budgets set, and your commitments made, when do you stop calling, prospecting, trying, selling, even running the business?

The questioning process itself is the key to decision-making here. You need to ask yourself several questions, and assess your observations in a thought matrix, before making your decisions.

Here are some questions and answers that shaped my most recent decision and could be appropriate in your situation, especially if you are determining your course of action during the recession.

Is the initiative following the budget and expectations of your plan?
Obviously, you have reason to smile if things are working out better than you had planned. But if your expenses are running much higher and/or revenue much lower, then you know something isn't quite right.

Are you missing or likely to miss key benchmark deadlines where measurable results should be apparent?
Say your projected sales are $10,000 and you only have $2,000 in sales three weeks before deadline, and you know from experience that you should normally receive a certain number of calls and inquiries to reach the goal, but you haven't gotten there yet. Do you continue?

Have you extend your deadlines once; taken remedial actions to bring things back on track,but are still not achieving results?
In other words, have you provided a second chance already? You are now entering the world of diminishing returns. Sure, the project may be saved by a third chance, but your chances of success have dropped by now from your initial expectations of 75 per cent to perhaps 10 per cent. How much more money will you pour into the initiative?

Do you have the resources to continue?
This is one of the most challenging qualifications for continuing or pulling the plug. The reason is that if your business is thriving elsewhere, your temptation is to continue the effort -- just a little (or lot) more "perseverance" will get you there, you rationalize. I've seen how little projects continue, on and on, by businesses flush with cash. Of course they should have been killed long ago, but the expense and risk seemed so small. Do you remember the heady pre-recession days?

Do you have alternative plans or strategies?
Can you do something else that will retrieve some if not all of the value of your original initiative -- a spin-off concept or idea that actually looks better than the original concept, for example? In other words, do you have a "Plan B"?

Does your failing project underpin other key business activities?
This is a really tough one. Say you have a project under way that isn't working, but it provides key resources and capacities for urgent and important initiatives, or may reflect your underlying business structure. Changes here may seem very risky -- and they can be -- but you still need to recognize the real problems and solve them, fast, or your overall business could be in real and imminent danger.

Do you have legal or contractual obligations?
You may have set your original project in motion with contractual or legal commitments. You need to consider the costs of breaking these commitments before stopping. Your onward costs may be just as great if you stop rather than proceed. (If this is the case, you should at least attempt to renegotiate your agreements or redeploy your resources more effectively within the contractual guidelines.)

In asking and answering these questions, you'll draw on your experience, resources, and often the counsel of your colleagues and employees. The power of Open Book Management cannot be understated here. It helps everyone, including the participants and proponents of the project you may need to cancel, access and participation in real-time and historical facts and figures backing the decision, and removes mystery or doubt from the process.

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