Three Paths to Increase Revenue and Margins
If you lead an organization or a business unit, odds are you have at least one objective related to growing your top line or improving the bottom line.
The task is deceptively difficult. The goal to increase revenue (and/or improve margins) is a clear mandate but, practically speaking, one that is very difficult to execute consistently across an entire organization. One reason I see companies struggle to meet their revenue goals stems from confusion over how growth will come from customers.
Ultimately, organic growth will only come in three ways:
1. Acquiring new clients.
2. Expanding business with existing clients.
3. Retaining business with existing clients.
Each of these potential income streams requires a discreet strategy and a different approach by customer-facing personnel. Each function of the organization that regularly interacts with customers is responsible for executing your growth strategy in the field. They need to be crystal clear about the strategy for each category of customer. If they don’t understand it, they put your growth strategy at risk, because revenue and net income increase based on successful execution of strategy, not board room declarations.
Here are the keys to driving growth through every interaction with potential and existing clients.
To effectively acquire valuable, long-term growth clients, ensure that all client pursuit activity is centered on companies that fit your ideal client profile and the level of decision maker you need to buy your products and services.
New client acquisition efforts in the business-to-business environment most often fail for two reasons. First, the sales pipeline is filled with opportunities that simply don’t fit the strategic profile. These potential new customers should not be pursued because they don’t have the resources, size, or needs to become a great client. I hear all the time from executives: “We shouldn’t be wasting our time with this kind of business!” It’s a matter of leadership effectiveness, not sales process: your team’s actions reflect how well you have communicated your strategy.
The other common mistake is pursuing companies that represent a good opportunity, but the contacts are at the wrong level. In this situation, sales teams are spending a lot of time, money, and energy calling on contacts who cannot buy what you want to sell them. In the technology and manufacturing sectors in particular, I see sales professionals spending significant time meeting with procurement or mid-level management people who will never be able to authorize a purchase for the kinds of services they hope to sell. They need to engage with a senior leader responsible for addressing a major issue or capitalizing on a big opportunity. As I remind participants in the Solution Selling course I created for LinkedIn, “If you want to sell solutions, you need to meet with people who have the authority to buy solutions.”
To grow your business with existing clients, focus on identifying opportunities where you can provide solutions based on the client’s needs and future plans.
The pitfalls in expansion efforts are often related to a lack of thorough exploration. It’s easy for sales teams to fall back on capabilities presentations and assume they already understand client needs, rather than engaging deeply to root out opportunities and create value as they did to first win the business. I’ve seen teams completely dumbfounded when a competitor is awarded business in an existing account because they weren’t even aware of the opportunity.
The key here is to create value in the ongoing sales process with existing customers. While research indicates that 25% of the buying decision in business-to-business selling relies on the quality of the sales experience, and that number jumps to over 50% for existing customers, according to this study. A valuable sales experience might include helping clients see issues they have missed, identify opportunities they can capitalize on, and realize the consequences of decisions that are potentially hurting them. It’s an ongoing process of mutual diagnosis that continues throughout the customer relationship, demonstrating your commitment to helping that client improve.
To retain your current clients, focus on consistently delivering at a high level and look for ways to increase value.
Retention can be considered a subset of expansion when there is isn’t an immediate opportunity to expand. If you value your existing customers and want to keep their business, retention should be thought of as a third area for potential growth. It’s often overlooked by executives, who forget the importance of treating existing customers as well as new customers.
For example, I recently switched to a new telecom/internet/television provider after thirteen years with a company that consistently proved to be less responsive and offered fewer perks than other providers. It was hard to leave because I have their equipment hardwired into my home security system and changing services would create other integration headaches. But after years of neglect and declining service from this company, it was an easy call to make. Forget the hassle involved to change – I was done with them.
When neglect happens and good customers leave, it creates a hole in the revenue and net income bucket. Remember, retaining a long-standing customer isn’t a guarantee when the competition is always knocking at their door. Retention of existing business may seem less exciting than new business acquisition but preventing a loss can be just as valuable as a win.
Each of these paths to growing the top or bottom line represent a discreet strategy requiring different approaches and resources. But the three keys to driving growth all rely on the same thing: customer facing employees at all levels who understand your strategy and know how to execute it, in every interaction with established and potential clients.