This is a white paper republished with permission from Accelerant Consultants. Greg Stanley, founder and owner, outlines how companies can leverage their revenue-generating function to maximize company value.
Are You Growing the Right Way?
This seems like a silly question, right? If I am growing, I must be doing things the right way. But the real question remains: Is there a wrong way to grow? All business owners focus on the growth of their organizations under the premise that when they grow their top line, more profit is generated (usually), and more money is available to reinvest in the business and take home for yourself. This all sounds great.
However, the challenge comes into play when owners grow the business without enough intentionality. Clearly there is an intention to grow, but other than funding additional investment in the business and an improved lifestyle, why are you growing? Mere growth is not necessarily good in the long term when it is not enhancing organizational value. There is only one right way to grow, and it involves being strategic, intentional, and focused. Mastering these elements will ensure that every pursuit, investment, hire, and even daily activity is focused solely on driving long-term organizational value.
Small business owners often create top-line growth by taking advantage of every opportunity that presents itself without enough thought to profitability, building a portfolio of clients that could be attractive to an investor or buyer, or building a scalable model.
At some point, all business owners look for an exit strategy. That strategy may be a successful transition to the next generation of family, an IPO, or finding a buyer that appreciates the value of the organization you have built and is willing to pay top dollar for it.
In choosing the latter exit strategy, you have one opportunity to maximize the value of your liquidation event, so it is imperative that you start planning for your exit several years in advance of seeking a buyer. There are levers that either positively, or negatively, impact your organization’s value to a potential investor.
Some of the key levers within the revenue generation function that can lead to significantly higher levels of profitability and impact organizational value include:
- Market Segmentation
- Sales Compensation
- Integration of Marketing and Sales
- Sales Leadership and Accountability Management
Determining who your prospective clients will be is of utmost strategic importance to your organization. These decisions should not be left in the hands of individual sales team members. This is not about a land grab for revenue and commissions. This is about growing your business based on clients that will enhance organizational value.
Your segmentation should certainly focus on maximizing the value of your largest clients, but also on the creation of incremental clients who fit the profile of those who create most value. In terms of addressing these desires and delivering successful market segmentation, some of the most important questions include:
- What is the profile of an ideal client, in terms of revenue size, geographic presence, industry, or potential for profitability?
- Which clients or prospects can consume the broadest array of your products and services?
- Was there solicited feedback within your industry or the investor community as to what they might look for in a geographic footprint, an industry focus or distribution of revenue across clients?
Salespeople do what they are paid to do. Furthermore, as is human nature, they will do what pays them the most with the least amount of effort.
You should strongly consider implementing a plan that highly rewards incremental growth and revenue that is, or can become, highly profitable and recurring. Those factors all impact the value that potential buyers or investors place on your business and, to the extent you align the behaviors of your sales team to the key valuation levers, you will see a significant aggregate impact over time. Furthermore, if your sales team is not creating incremental growth, you do not need a sales team.
Integration of Marketing and Sales
While this is not necessarily an issue that is typically explored by potential investors, your organization’s focus on this topic, if done correctly, is something that can bring much greater efficiency in your investments, higher returns, growth and more net new clients. These are all areas that certainly matter to investors. Many small businesses use primarily gut feelings to determine what trade shows they attend, sponsorships in which to invest, direct mail or social media campaigns they launch, or even what non-profits they support.
Every investment that is made in marketing or brand building needs to be made with the understanding of how a return is generated and how success is measured. Consider the following questions:
- How does this investment help us build our brand, develop relationships and produce revenue with those clients who we most highly covet?
- What should the partnership look like with sales to ensure that there is pre- and post-event activity that drives interest and meetings that could lead to revenue?
- How are you articulating your value proposition at the event in a way that is consistent and differentiating?
If there are not good answers to these questions, you are likely making a bad investment.
Sales Leadership and Accountability Management
This is an area of your business that will be evaluated by potential investors. While the talent of individual staff members can be somewhat subjective and difficult to quantify, the quality and experience of people on your management team and the turn-over and contribution of those on your sales team will likely be of great interest. This brings us to four key questions:
- Have you established organizational KPI’s which are reported on consistently and publicly within your organization?
- Are you effectively managing performance through effective one-on-one discussions about results, pipeline and activity that drives attainment, and are you effectively coaching up, or coaching out those who are underperforming?
- Are you doing what you need to do to retain your top performers who create consistently high levels of incremental revenue and continuity in your key client relationships?
- Are you maintaining a solid pipeline of high-quality talent that will allow you to either fill openings quickly that have resulted from attrition, or add to your staff in a way that drives additional growth with the lowest amount of management and ramp-up time?
Over time, operational discipline and excellence in the sales and marketing functions can make an enormous difference in a company’s value. The sooner that an intentional growth strategy is implemented, the better the chance of maximizing a buyer’s willingness to pay top dollar for the company you worked so hard to build.
This article was authored by Greg Stanley, founder and owner of Accelerant Consultants, a consulting firm dedicated to helping small and mid-sized businesses maximize growth and valuation through effective execution within their sales and marketing functions. Greg has spent a career of over 25 years helping large and small companies build sales and marketing teams from the ground up and managing existing teams in a way that leads to intentional growth, maximized profitability and enhanced valuation.
Visit Accelerant Consultants to learn how they help clients build and execute growth strategies that significantly increase organizational value, or to have a discussion on how to address your organization’s specific challenges. Discover other company-related stories on TechPoint Index.