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Verne Harnish is the President of Gazelles - the coaching organization that helps fast growth companies. In addition to his best-selling books, Mastering the Rockefeller Habits and his latest, Scaling Up, he writes the Weekly Insights, which I always read from top to bottom. In his June 30 insights, Verne included a quote from Greg Brenneman, author of Right Away and All at Once - 5 Steps to Transform Your Business and Enrich Your Life. Verne really liked Greg's emphasis on how to drive sales. Greg says, "Empirical evidence shows that you get at least four times the market value for a dollar of profit that comes from revenue growth versus a dollar of profit that comes from cost reduction."
Isn't that a great quote? But it's more than a quote. It's a blueprint! Let's discuss some of the ways that you can achieve the desired revenue growth.
I have encountered far too many companies that expect their growth to come from acquisitions, or their increase in profit from cost-cutting and it never made any sense to me. With as much data as we have at Objective Management Group (OMG), we didn't have that 4x data. I love it!
So the question to ask is, how can any company organically increase its revenue, beginning today?
From 30,000 feet, there are eleven possibilities:
- Expand your channel(s)
- Add salespeople to your existing geography and/or territories
- Replace under performing salespeople
- Raise prices
- Add products or product lines
- Expand your geography and/or territory
- Improve sales performance
- Improve sales management effectiveness
- Improve sales strategies
- Improve sales systems and processes
- Expand business within existing customers
From my 30 years of experience helping companies do many of these things, the easiest and fastest of these is the price increase. Most companies handle price increases very poorly, over complicate it, ineffectively communicate it, and manage to somehow get their sales force distracted for months by this simple step.
I worked with one company in Los Angeles that everyone knows and visits and we needed to change three months of sales training where we were working on their consultative approach and refocus on how to deliver the message of the price increase. All of that focus on price made them nervous, negative, and took them off message. It would have been much more effective to simply ignore the change and handle it when customers asked!
Replacing under performing salespeople and adding salespeople works - but only if you are significantly better at hiring the new ones than you were at hiring the old ones. If your recruiting and selection process haven't undergone significant changes, you might select salespeople who are even more ineffective than the salespeople being replaced! Check out the leading sales candidate assessment to drastically improve sales selection.
Expanding business within existing customers is a lot more challenging for salespeople than it should be. At this point in time they probably have great relationships and won't want to jeopardize those relationships by pushing for more, especially if the customer believes they are already buying as much as they can from you. In this case their need to be liked is a huge weakness. Read this article for more on how the need to be liked limits sales effectiveness.
Geographic and Channel Expansions are expensive and take time. While they usually pay off in the long term, they suck up resources, spread the leadership team thin, and the move is often risky and frustrating.
Adding Products can open new doors and increase revenue from existing accounts. However, your existing salespeople are typically creatures of habit and often struggle with new products. You'll probably have to bring on new salespeople if you want new product lines to successfully add revenue to your top line.
Companies get the biggest bang for their buck when they focus on Improving overall sales performance, sales management effectiveness, sales strategies, systems and processes. These tend to be some of the most cost-effective, fast-working, long-lasting changes a company can make to increase revenue. Read this article and this article for more on Sales Process. The most important thing to be aware of with this particular choice is that the improvements become an integral part of your sales culture and continue to pay dividends in the near and distant future.
There are several ways to achieve revenue growth but some will work 4 times better than others.