Consistently Grow Revenue at Record Levels
Rare is the CEO who is not concerned about sales growth, especially during the pandemic. The vast majority of CEOs I have spoken with recently describe their sales growth as:
-Overall sales are below last year.
-Overall sales are about the same as last year.
-We are growing, but our growth rate is slower than that of our top competitors.
-Our growth rate is slower than last year.
-Our growth rate is not where we want it to be.
While this may not come as a surprise, you’ll be interested to know that the solutions to growing your revenue are easier than you think. Even more fascinating is that many companies are meeting sales targets that have been significantly set below potential. In this blog and the next, I will share how you can continue to grow revenue at record levels consistently.
One of the hardest and most important skills executives must learn or add to their repertoire is forecasting. Companies typically fall into one of two categories: 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 forecast correctly 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 good talent. The answer to this is simple. It costs far less to hire than not to hire.
Then there are the organizations that meet expectations. While it is possible that some companies set and achieve aggressively ambitious expectations, this is rarely the 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, or using ineffective incentive programs.
A great example of this is a client who hired us because their historical norm of 8 percent in annual sales and profit growth had slowed to 3 percent. During our strategic planning process, it was determined that their annual growth goal rate for the upcoming year would be 10% (instead of 20%, as I mentioned above) because 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 making any acquisitions or harming their culture. This sounds like a fantastic 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 tough 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 or do not spend enough time engaging their best people in strategic thinking. If you are not setting at least one 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 is. In other words, they do not 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 excellent 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, instead of recognizing the staff cuts they made were 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. They decided to have a third party to conduct a customer survey. From that survey, they learned that the real key to winning customers in their business was excellent service. In the end, they refocused strategy around customer service, and the results were outstanding, with sales growth rates outpacing those before 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 at strategy first.
In my next blog, we will switch gears slightly and address what you can do from an operational perspective to boost sales growth. Be sure to come back for it.
At Activate Group, we love to roll up our sleeves alongside our clients to determine the opportunities your company has for consistently growing your revenue (as well as other challenges you may be experiencing). Schedule your FREE 30-MINUTE CONSULTATION with one of our business coaches and see how we might be of service. We bring proven tools that lead to new ways of thinking, which lead to better results.