By Howard Shore, Executive and Business Coach
There are very few CEOs that are not concerned with sales growth. Ninety-five percent of CEOs that I have spoken with this year described their sales growth as follows:
A) Overall sales are below last year.
B) Overall sales are about the same as last year.
C) We are growing, but our growth rate is slower than that of our top competitors.
D) Our growth rate is slower than last year.
E) Our growth rate is not where we want it to be.
While this may not be a surprise, you’ll be interested to know that the solutions are easier than you think. Even more fascinating is that many companies are meeting sales targets that have been set extremely below potential. This article and the next will discuss how you can continue to consistently grow revenue at record levels.
One of the hardest and most important skills executives must learn or add to their repertoire is forecasting. It is most common to find two types of companies, those that fall well below sales expectations and those that meet them. Both should be concerns. The former usually miss their numbers because they are pulling numbers out of the air with no real plans. This group is under the common misconception that there is no way they can predict their numbers and believe they must guess. The main issue here is the harm this does to the company when you have no real measurements and standards to which you can hold people accountable. In these companies, hitting goals is no indication of good or bad performance because the numbers have no substance to them.
The typical excuse for failing to properly forecast is that the nature of the industry is too volatile and uncertain for accurate predictions. With the proper tools and talent management can conquer these challenges. The other excuse commonly offered is that the company is too small (or its margins are too thin) to hire adequate talent. The answer to this is simple. It costs far less to hire than not to hire. You must pay what it takes to hire the right person or person(s) or hire a consultant to come in at least quarterly.
Then there are the organizations that meet expectations. While it is possible that some companies set and achieve aggressively ambitious expectations, this is rarely case. In my experience, these companies use poor reference points (e.g. what they have done historically), allowing cultural norms to hold them back, fearing failure, and/or using ineffective incentive programs. A great example is a client that hired me because their historical norm of 8 percent in annual sales and profit growth had slowed to 3 percent. During the strategic planning process it was determined that their annual growth goal would be 10%, as they were concerned about harming their culture.
We developed a good strategy, and in the first year they grew 30% in revenue and 40% in profit, without doing any acquisitions or harming their culture. This sounds like an amazing success, but something stunning happened at about halfway through the year. The company was so far ahead of projections (actually 50%) that the leadership team stopped pushing and complacency kicked in. They lost focus on the business plan and failed to execute most of the business plan goals, even though they were achievable. At the end of the year one of the owners confided in me that it was very hard to get anybody focused when everyone was fat and happy.
I find that, regardless of the industry, if you are under $500 million in revenue and not consistently growing at 20% or more annually, you probably have a strategy issue. If you have a good strategy you should be growing at the top end of your industry’s growth rate, and in many cases your industry’s growth rate becomes irrelevant because you are far outpacing it. Many companies I encounter do not have a strategy. In other words, there is very little difference, if any, between them and their competition. These companies believe they do not have time for strategy and/or do not spend enough time engaging their best people in strategic thinking. If you are not setting at least 1 day aside per quarter for strategy, you are leaving revenue on the table. Most companies have great underdeveloped opportunities right within their organizations. They are too busy focusing on issues that seem important (and are not) and allow themselves to be taken away from truly driving the business to the next level.
Additionally, it is common to find companies with good strategies whose management unwittingly fails to understand what their strategy really is. In other words, they do not really understand the key reason why their customers have chosen them over the competition. Case in point, a company thought their customers chose them because of great quality. The economy turned, and they decided to cut staff to manage profits. Sales dropped almost immediately. As time went by, management noticed that sales were dropping much faster than expected. This was initially misinterpreted as the result of the bad economy rather than the staff cuts they made primarily in the customer interfacing areas of their business.
Eventually management started to realize that the company was losing market share, which meant that their sales were slowing much more than the competition’s. They decided to have a third party conduct a customer survey. From that survey they learned that the real key to winning customers in their business was great service. In the end, they refocused strategy around customer service, and the results were outstanding, with sales growth rates outpacing those prior to the economic downturn.
In the end, if growth rates in sales are not at the top end of your industry, or at least at 20%, look toward strategy first. In article 2 of 2, we will assume you have a good strategy and will address what you can do from an operational perspective to boost sales growth.
Review our website to understand how an executive coach or business coach can help you increase the success of your career and business, or contact Howard Shore at (305) 722-7213 or [email protected]. We bring proven tools that lead to new ways of thinking that lead to better results.