Ep. 489 — Kim Clark: The Profit War Room. Inflation Is Coming. Do You Have a Battle Plan?

5 min read

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Episode Summary

My protein powder went from $62 to $122 in a single month with no warning, no communication plan, and a mass apology email nobody asked for. That is exactly how most businesses handle price increases. No plan. No segmentation. Just a surprise and an apology nobody asked for. Kim Clark and I sat down to talk about pricing. Not theory. The real conversation that happens when your input costs are moving and you have to decide what to do about it. We got into why pricing is an ownership decision that runs through valuation, cash flow, and distributions. I walked through the income statement to balance sheet to ownership decision chain the way I do it in a quarterly board meeting. Kim broke down rates of change analysis on your input costs as the early warning system, the customer segmentation framework for who gets a phone call, who gets a personal email, and who gets the mass communication, and how to give your sales team the “why” and the training to hold the line. We also talked about what is happening right now with the Strait of Hormuz, what that means for supply chains, and why this is different from every other inflationary cycle most of us have lived through.

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Top 10 Takeaways

  1. Pricing is an ownership decision. The math runs through valuation, distributions, and cash flow. That conversation belongs in the boardroom, not with your VP of Sales.
  2. The Strait of Hormuz is closed right now. Twenty percent of the world’s oil and fifty percent of its helium are not flowing. Pull up IMF PortWatch and see for yourself.
  3. You cannot print molecules. Money printing is one problem. Physical supply chain disruption is a different problem. Both are happening at the same time.
  4. The boiling frog kills more businesses than the crisis. A container going from $2,500 to $20,000 gets an emergency call. Margins sliding from 43% to 37% over seven months gets ignored.
  5. Rates of change on your input costs are the early warning system. The 3-month rate leads the 12-month rate. When those diverge, your tire pressure light just came on.
  6. Build tiered battle plans before you need them. If input costs hit 8%, here is Plan A. If they hit 12%, here is Plan B. Do the math now so you are not doing it in a panic.
  7. Your salesperson is caught between company pressure, customer pressure, and the fear of losing the deal that pays their mortgage. Without the “why” and the tools, you are sending them into an impossible position.
  8. Segment your customers before you communicate a price increase. Tier 1 gets a personal visit. Tier 2 gets a personalized email from leadership. Tier 3 gets the mass communication.
  9. State what is NOT changing before you discuss what IS changing. Casey Brown calls these power statements. Anchor the customer on the value that continues, then explain the adjustment.
  10. Run at least one full pricing analysis per year and rotate which customer segments get increases. Pricing discipline is a cadence, not a crisis response.

Sound Bites

“How much damage you can handle on your margins is a valuation decision. It’s just that simple. The equity holders and the shareholders get to choose whether they keep a division, sell a division, or burn cash to keep a division going because they see something in the future.” (@00:46:06) — Ryan Tansom

“The whole point of going into a war room is you’re battle prepping. Inflation is real. It’s going to continue for the foreseeable future. Businesses need to have scenario plans and battle plans in place to manage through it so they can maintain those margins.” (@00:13:03) — Kim Clark

“We had to figure out a way. It was like $3.5 million in costs that we had to appropriately pass on to the clients. Otherwise, they would have been bankrupt. And they did it. They ended up selling their company for an insane amount of money at the end of 2020.” (@00:26:17) — Ryan Tansom

About Kim Clark

Kim Clark is the Chief Revenue Officer track lead at Independence by Design™. She owns the Predictable Revenue module and co-facilitates the quarterly workshops. Kim spent years at ITR Economics before joining iBD, and her background in economic forecasting and revenue operations is all over this conversation.

Resources Mentioned

  • Casey Brown / Boost Pricing — Pricing expert, power statements framework. — boostpricing.com
  • ITR Economics — Economic forecasting firm. — itreconomics.com
  • Lyn Alden — Macroeconomist for supply chain and dollar analysis. — lynalden.com
  • Luke Gromen / FFTT — Macroeconomist for geopolitical and energy market analysis. — fftt-llc.com
  • IMF PortWatch — Live chart for the Strait of Hormuz shipping status. — portwatch.imf.org
  • Ray Dalio — principles.com
  • Phil Knight — Shoe Dog — Amazon

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