My Step-by-step Guide to Strategic Replanning in a Downturn
Most of use have made adjustments, but are they the right ones?
Bill Rice
March 01, 2023
Most of us have adjusted our businesses based on economic and market conditions changes. In the mortgage market, this has largely been triggered by rising interest rates.
The question is:
Are you replanning for the downturn smartly and strategically?
I bumped into this article from a16z, one of the world's most respected venture capital firms, led by Marc Andreessen.
The primary discussion in this article is around replanning your business expectations and specifically sales productivity around inevitable changes in our inputs — KPIs.
Reading this immediately hit me that most mortgage executives are not using this kind of strategic framework.
I encourage you to read the article and develop your own strategic extrapolation, but this is my version. Feel free to test it in your organization.
💡 If you’re a premium subscriber, you will get the tool that I am building to support my clients in using this strategic framework, for free.
Photo by Jason Goodman on Unsplash
1. Reviewing and choosing the right KPIs
Average Revenue per Funded Loan
Opportunity Win Rate
Sales Cycle Time
Expansion & Consumption Rates
2. Setting Operational Targets
Loan Officer Production (Units)
Lead to Application Cycle Time
Application to Close Cycle Time
Average Lead Cost
Sales Team Capacity
3. Sales Capacity & Revenue Plan
How many loan officers do I need to get the forecasted production?
Monitor my capacity and production to stay on revenue target.
Now you have a powerful model, but be careful.
You can’t just plug your happy case into the model and start cracking the whip.
Seed your model with a realistic base case from your current operating data.
Analyze your sales operation data to build a baseline from your KPIs and operational targets.
Use 18+ months of data, grouped by months or quarters depending on how your organization reports production.
Analyze each sales team or branch separately. Outliers will often significantly skew your analysis and impact the accuracy of your model.
Compare the past two quarters to the prior periods to see if there is any seasonality to consider.
You’re going to surprise yourself.
You will either be way over capacity (even with past layoffs), or way under capacity to hit your revenue (growth or survival) targets.
However, this model allows you to quickly and accurately replan and predictably hit your projections.
Your CEO and CFO will love you!
And you’re going to start gobbling up market share. You can take what externally seem like crazy risks (see this article) that aren’t risky at all because your data-informed, internal performance baseline informs them.