Good products, a full warehouse, busy production lines and growing revenue. In a management meeting, these can sound like four pieces of good news. But when you look at new customers, cash flow, margins and delivery deadlines, the picture is much less clear. The problem is rarely isolated in a single department. Sales promises a delivery date, purchasing secures the materials, production changes the order schedule, and only later do finance figures show how much the company actually made. In our new ‘You Ask, We Answer’ series, we address the questions that help companies decide what needs to change.
Why are we struggling to win new customers even though we offer high-quality products and services?
Because customers do not buy quality products. They buy solutions to their problems. That may sound harsh, but we repeatedly see companies with products that are technically better than those of their competitors and yet grow more slowly. When we look more closely, we often find that the customer does not understand why they should switch suppliers. Salespeople mainly talk about the product rather than its economic value. Marketing creates materials but does not generate new sales opportunities. And company management often does not know exactly which market segments offer the greatest growth potential.
We worked with an engineering company with annual revenue in the billions of Czech crowns that was convinced it needed to develop a new product. In the end, we found that the main problem was not the product itself, but the fact that the sales team used the same approach with every customer. After changing the customer segmentation and sales approach, the company began to grow without making a single technical change to the product. That is why, when sales stagnate, we do not look at the product first. We look at the customer, the business model, and the way the company creates and captures demand.
There is also one pattern we see particularly often in Czech companies. They employ people with the title ‘Sales Manager’, but in practice those people spend most of their time administering orders and looking after existing customers. No one systematically looks for new business. Many owners believe they have a sales department. In reality, they have an order-processing department. And that is a fundamental difference.
If a customer leaves a sales meeting knowing everything about your product but still does not know why they should change suppliers, the salesperson has lost the opportunity.
How can you tell that the problem is not the product, but the business model?
The simplest question is:
If the product is so good, why are more customers not buying it?
Many companies automatically assume that the problem is price, competition or product features. But when we analyse individual deals, we very often find something completely different.
For example, a company may sell mainly through a small number of long-standing intermediaries. Those intermediaries also work for competitors and keep a significant share of the margin. The company therefore gives up a direct sales channel and gradually loses contact with its end customers. Often, it does not even recognise this dependence for what it is.
Just as often, we find that the company has no systematic business development. It does not work deliberately with new market segments. It cannot prioritise sales opportunities. Or it is too dependent on a few key people.
Before we started working with one of our clients, three private-label customers generated more than 70% of its revenue. At first glance, that looked stable. In reality, the company was operating at a margin of around 6-8%. If just one of those customers had changed suppliers, the company would have lost a significant share of its revenue virtually overnight.
Over eighteen months, we helped the company change its business model, strengthen its own brand and make use of an international sales network. It gradually moved into products with margins of 30-45%, while EBITDA increased by approximately fifteen times.
The problem was not the product. The product had been good from the start. The problem was the business model.
A good business model should still be capable of supporting growth five years from now. A poor business model usually does not destroy a company in a single year. But over several years, it can significantly reduce the company’s value.
Why do some companies grow even when their market is stagnating?
Because most companies look at the market. The best ones also look at their competitors. When we hear, ‘The market is not growing,’ we ask, ‘Is that really true for everyone?’
In most industries, we can find companies that are growing much faster than their competitors. So we do not start by looking for reasons why something cannot be done. We look for the reasons why others are succeeding. Surprisingly, the difference is rarely the product itself. More often, it lies in sales management, pricing strategy, customer segmentation, speed of decision-making, or the ability to systematically create new opportunities.
We recently analysed a company that had been saying for several years that its market was stagnating. It turned out that its main competitor had grown by tens of percent over the same period. The market was not the problem.
The problem was inside the company. When your competitors are growing and you are not, the cause is much more often inside the company than outside in the market. That is why we often tell business owners one thing:
A stagnating market does not necessarily mean a stagnating company. But a stagnating business model very often does.
And one more thing: the market usually produces both winners and losers. The key question is which group your company will belong to five years from now.