CHAPTER 1
Our Priority: Build Predictable, Sustainable Revenue
I refer to myself as a revenue growth consultant. By assisting B2B companies generate sustainable revenues, I fulfill my purpose in business. It's what I know best and enjoy most.
A revenue growth consultant is a service professional focused on generating sustainable growth for clients. Many areas of business require growth focus; many growth-consulting firms fill the need.
My clients see me as a professional architect of growth initiatives enabling them to achieve their best, more effectively. It's all about helping companies reach their full growth potential.
My specialty is sales growth, using marketing and sales processes as my tools. However, I cannot focus solely on increasing sales revenue; I must work to increase a company's capacity to sell more so that the revenue stream sustains itself. Every company wants to leverage its sales expertise to rev up the revenue engine and build the infrastructure to support long-term growth.
Arguably, one could revenue is all that matters. However, it is not that simple today. Building revenue represents an intricate web of influences and actions that stretch beyond the act of making money or earning a profit. It involves strategy, structure, people, and process. It also involves brand esteem, customer loyalty, corporate citizenship and thought leadership.
Yet when I discuss growing revenues in prospect meetings, the first thing I hear people say is: "Well, the answer is to increase the sales force." They believe adding more reps to the team will boost revenues. "I see this strategy repeated to the point of banality and unfortunately it often leads to deeply disappointing results for the CEO."
And many times, it costs sales leaders their jobs. Growing the salesforce to improve the bottom line seems to make common sense, right? Well not exactly. Here's why.
First, what impact does the CEO and sales leader envision with the "add salespeople" strategy? They believe more salespeople will acquire more new accounts; they anticipate higher revenue. These added reps may be deployed in new geography to broaden the company's footprint or added within the existing footprint where the company can reduce the number of accounts per salesperson.
Then, those reps will invest more time to cross sell or upsell more offerings.
The strategy is flawed. Increasing the number of salespeople is setting yourself up for disappointment. Too often, the anticipated financial growth falls way short of expectations. For several reasons.
1. Unrealistic ramp-up time associated with the expected results. It may take six months for salespeople to reach full potential. But the company calculates the expected new revenue into the budget too early.
2. Unanticipated expenses of adding and supporting salespeople. New salespeople require considerable training and coaching, leading to higher cost of sales.
3. Unanticipated risks of hiring the wrong salesperson. I am continually amazed that companies do not use many of the personality and capability testing tools available to ensure that new hires possess the right sales DNA and fit the company culture. A second risk comes from a failure to establish an efficient onboarding process to accelerate ramp-up. A third risk is a misalignment of salespeople, accounts, and territories. It takes a highly diligent sales leader to stay on top of the changing dynamics of people, process, and places.
Let's set aside the add-salespeople strategy for the moment and jump right into areas that can drive revenue growth immediately. Then I would like to focus on the long-term strategy for sustainability.
Beauty of Picking Ripe Prospects
Your existing customer/clients provide the fastest, smartest route to more revenue immediately. Depending on the study or industry, acquiring a new customer costs five to 25 times more than holding onto an existing one. If you serve your existing relationships well, you won't have to go out into the cold market to cultivate new ones.
Research done by Frederick Reichheld of Bain & Company indicates that if you increase customer retention rates by only five percent, you can drive up profits by an astounding 25 to 95 percent.
Your current customers or clients trust you and already buy from you. Explore more practical or profound ways to serve them.
When you succeed, you'll increase the average transaction size or increase the buying frequency, or both.
To achieve this enviable goal, you must increase the "perceived value" of what you offer. You must educate your customer/ clients on this value to plant the desire and momentum needed to harvest larger and more frequent buys.
Nine Action Steps
Consider these nine ways to increase the average purchase size and sales frequency and spark more revenue:
1. Increase your prices. A straightforward way to increase revenues is to increase your current prices. Be careful, as you are most likely selling in a competitive market. Make sure your contracts cite a built-in inflation price increase. It's important to sell value, not price. Don't get hung up on what the competition is charging. The more value you can show, the better. Train your salespeople to look for the undiscovered need, the one overlooked by everyone else. In later chapters, I discuss how to do this and sell value and avoid the dreaded RFP (request for proposal) process.
2. Upsell. Carefully assess client needs and match them to products/services designed to create an optimal buying experience and satisfaction level. I discuss later why selling strictly to customer/client needs may not be the right approach. The MERGE process teaches you how to understand your buyer's vision for a solution and attach your solution to it. This effort differentiates you and helps you increase revenues because you educate them on the value of buying a higher-end product/service. Think car dealerships. You start with the basic car you need; then the sales process opens to custom wheels, leather interiors, service warranties, and more.
3. Cross-Sell. If you offer multiple product lines or service lines, educate your customer/clients on the full spectrum of your solutions, services, products, and expertise. Continually determine their challenges and problems. Match up with other solutions you offer. For example, CPA firms cross-sell their audit clients on tax and consulting services. Banks cross-sell their checking customers on investments, mortgages, lines of credit, credit cards, and more.
4. Bundle Products and Services. Consider packaging complementary products/services together to increase your revenue. However, think through this strategy based on the markets you sell. Microsoft was one of the first companies to bundle its product offerings. However, it experienced a healthy dose of customer push back. In the financial services industry, we now see insurance companies adding a long-term care benefit to life insurance policies. You can purchase either policy separately but bundling offers the better deal. The client may have only been thinking about the life insurance, but when presented with the ability to withdraw cash for long-term care, he jumped at the opportunity.
5. Offer Complementary Products or Services. Think about the complete product and any ancillary items that complement its impact. For example, if you sell computer products, consider selling technical analysis services on the front-end or installation and computer training services on the back-end. Be sure it makes economic sense to add such services to your business and that it does not detract from what you already offer. You see many companies offering extended warranties as part of their solution.
6. Keep Lines of Communication Open. Communicate with your customer/clients often and give them buying ideas or solutions by mail, phone, email, newsletters, blogs, white papers, webcasts and special events. For example, if you are an air conditioning company, communicate to your customer the value of a spring checkup for the upcoming summer months. Sell him or her on the benefits of taking such action. Your communication may be the much-needed reminder on how best to survive the coming hot summer months. Personalize your message for greater impact and appreciation.
7. Stage Special Events. Conduct special events to educate your existing customer/clients on your additional service/ product offerings. Be informative and bring value, like a webcast on industry trends or new legislation that could affect them. Hold exclusive events for your VIP customer/ clients. For example, one firm I work with holds private dinners around the country with Dr. Arthur Laffer, a respected economic advisor to President Reagan. Clients appreciate the insight learned at these dinners. Even those guests unable to attend, value the invitation, which adds to brand value.
8. Learn to Say No. Seems a little strange? Not at all. By saying no to bad opportunities, bad prospects, and even bad customers, you carve out more quality time to invest in more valuable sales opportunities.
The old expression win fast or lose fast applies here. Boost revenues in real time by focusing on ideal customer/clients. Look at your sales pipeline. I bet it's full of opportunities stuck in status quo. The decision makers are stuck. Or they do not fit your ideal client profile anyway. Devote more time and attention to your best opportunities and customer/clients. You cannot optimize your business performance if you're constantly bombarded by unprofitable, ungrateful, disagreeable, ever-complaining, and energy-draining prospects, customers or clients. Adopt a selectivity mindset and train your salespeople to land commitment from the buyer early in the process. Be certain the prospect has an issue he wants to fix. I will discuss a concept later called "crossing the chasm" that will help you create a selectivity mindset in your sales process.
9. Get Referrals from Existing Customer/Clients. I have never been a big fan of asking a client, "Who do you know who can benefit from our services?" It's hard to explain, but it doesn't feel right. I prefer to do what I call observation prospecting. With the tools available today, like LinkedIn, you can quickly learn the nature of your client's connections. Rather than asking for referrals blindly, improve your odds of success by doing your homework first. Research the name and background of your target. LinkedIn's people search feature makes it easy to turn up qualified second-degree connections to whom your client can make an introduction. This technique is a gratifying way to schedule new opportunities under favorable conditions. And you eliminate the imposition of asking your client to think about this request for you. I cover this action in more detail in a later chapter.
Growing Revenue at Different Lifecycle Stages
Companies struggle to grow for a variety of reasons: Limited resources. Changing markets. Regulatory climate. It is often a function of where it is in its life cycle. To develop a long-term growth strategy, first understand the stage you occupy in your business lifecycle.
Start-ups may face difficulty getting out of the gate, despite great products or services. The founders mistakenly believe the product will sell itself, underestimating how difficult the sale may be or how long it may take. Too often, they think they can keep costs down if they delay hiring dedicated salespeople. Start-ups jump into business without the benefit of a predictable, repeatable sales process. Many even sign up with channel partners who sell competing solutions.
Rapid growth companies struggle to manage fast-paced change. Rapidly growing companies sometimes expand so fast, their people struggle to keep up with demand. Fear, uncertainty, and mounting production pressures may cause employees to resent and resist change. Leaders of high-growth organizations need a disciplined process to manage explosive growth. They need to build a foundation that strengthens both the company's people and its processes to enable the organization to achieve sustainable growth.
Mature companies often hit a plateau and get stuck in a cycle of sluggish sales performance and weakening customer retention. A company with past success often finds it hard to re-invent itself. Management recognizes lagging sales revenue, but not underlying causes. They need to identify and remove obstacles to growth and accelerate sales to break the cycle of weak performance.
Declining companies fail to let go of something that has worked for so long. It's easier said than done to drop commoditized products and services with low margins. At least, there are sales.
Without those sales, companies cannot cover plant overhead or labor costs.
In a Harvard Business Review article by Richard G. Hamermesh and Steven B. Silk, How to Compete in Stagnant Industries (https://hbr. org/1979/09/how-to-compete-in-stagnant-industries), they said:
"Before turning to the most promising strategies, it is necessary to examine the difficult realities of life in a stagnant market. An appreciation of these realities is critical because, as we shall see, strategies that run counter to them nearly always fail, while the successful strategies are consistent with market conditions."
Their research uncovered three common characteristics in the strategies of businesses that succeed in stagnant industries. They are:
1. identify, create, and exploit growth segments within their industries
2. emphasize product quality and innovative product improvement;
3. systematically and consistently improve the efficiency of their production and distribution systems
Marketing and Sales to Develop Lead Flow
New customer/client acquisition remains one of the obvious ways to grow revenues in your organization. How you do it matters. I am a big believer in using marketing to develop lead flow for salespeople to avoid the drain of cold calling. Lead generation costs less in the hands of marketing than in the arms of highly compensated salespeople.
However, in certain situations, it does make sense to augment marketing with outbound cold calling. I will address how to develop an outbound marketing strategy in later chapters. I will also discuss how you use content marketing to improve the results of your inbound market strategy.
When you assign your salespeople some of the responsibility for lead generation, especially through cold calling, be sure you identify the right salespeople for the job.
For many years I developed in my organizations the classic role of hunters, those good at opening new opportunities under favorable conditions. And farmers, those with superior technical expertise and relationship management skills. By using the DiSC® assessment tool, supplemented with a more extensive sales force evaluation by Objective Management Group (OMG), I succeeded in placing the right salespeople in the right roles. When you understand a salesperson's innate capabilities and his sales DNA, you greatly improve success on the sales side of lead generation.
Even experienced farmers hate to prospect. That's why they're not good at it. Even if they do some prospecting successfully, as soon as they generate some pipeline opportunities, they become too busy to prospect. Good marketing can help to facilitate their efforts. Farmers need to learn how to use customer/client referrals, marketing support and triggering events to open prospecting discussions. In this way, they can perform better according to their DNA.
Regardless of the salesperson's capabilities, many companies expect their salespeople to do their own prospecting and lead generation. The more I study the way prospects buy, the more I see salespeople struggle with this aspect of their job. Through laser messaging based on research, my MERGE process enables even farmers to conduct effective initial conversations with prospects.
As I continue to do research and study the changes in sales and customer/client behavior, I see a need to change how we approach sales and marketing. This need for change is triggered, in part, by reading Aaron Ross and Marylou Tyler's book, Predictable Revenue.
Ross discussed his experience at Salesforce.com when he launched a new group using an innovative outbound prospecting approach (involving no cold calls) to create new leads. Ross's group came up with several important breakthroughs that enabled it to add more than $100 million in incremental, recurring revenues over a few short years.
It made sense to incorporate their best practices into my client engagements and make outbound prospecting a repeatable and predictable revenue generator.
