5 Focus Areas to Improve your Annual Growth Rate

If your company can't show a minimum Compound Annual Growth Rate of 10%, you are putting yourself and your company at risk. The key to a business's health and high corporate valuations is revenue growth.

According to Nathaniel J. Mass in his book The Relative Value of Growth, "… convincing the market that they can grow by just one additional percentage point can be worth six, seven, or even ten points of margin improvement, … resulting in significant improvement in business valuations."

If you want to improve your annual growth rate, here are the top 5 areas that you should address immediately:

Business Development Strategy – do you have a robust, innovative vision of where you want to drive your organization? Can you clearly identify your ideal customer? Do you have the right marketing message to attract that customer?

When developing your Business Development Strategy, here are some other high-level business development goals you should consider:

Customer Retention: If you generate $100 million in new sales and lose $50 million in existing revenue, you're not going to hit your $100 million revenue goal. And customer retention is a measure of the level of service you provide; all businesses (particularly technology and professional services) should strive to create a stellar customer service experience. Your service experience is at the core of long-term value creation.  

Customer Lifetime Value (CLV): CLV is the amount of revenue you can expect from an average customer over the lifetime of their business relationship with you. If you're a new business that is highly dependent on one or two customers, diversification should probably be important to you. After all, if you lose one (or both) of those customers, the impact on your business could be devastating. In this case, you would set a goal to reduce your average CLV as you bring on more customers to diversify your revenue base. On the other hand, you could have too many low-revenue customers. You could be spending your time chasing late-payers that aren't generating sufficient margins. In this case, you would set a goal to increase your average CLV.

Introduce new products/services or enter new markets: While it's essential to have a focused business development strategy, there may be circumstances to expand the services you provide or the markets you serve. For example, you may have hired a new business development professional who has relationships in an industry that you haven't served in the past. If your service adds value to prospects in this industry, you could set a SMART goal to expand into this industry. But make sure it's a goal that can be easily measured. However, be very careful: when you grow, you risk taking focus away from your core business model. You should keep a close watch on the expansion and be ready to exit if it's not working out as expected.

Some other areas you may also want to address:

• Potential adjacent market opportunities
• Blue Ocean opportunities
• Development of recurring revenue strategy
• Development of Strategic Partnerships
• Targeted acquisitions to improve your market position

Without a clear and robust Business Development Strategy, you have little hope of growing your revenue.

Sales Talent – Do you have the right style of the sales team for your intended market focus? Does your sales team have the right skills to drive the business growth needed? Some areas you should focus your attention on include:

Identify what style of sales personnel you need for your business type – In a professional sales organization, it is crucial to match the right personality to the proper role. Before deciding on final placements within the company, determine the unique set of skills that each individual on your sales team. Hunters are known as the doers. They get their sales energy through "hunting" new opportunities. Hunters can be described as independent (with a higher level of initiative) and are solution-driven. They tend to focus on big deals and love going from one to the next as soon as they close their current prospect. In contrast to the hunters, "farmers" are more focused on developing long-term relationships. They are the nurturers—building relationships with leads and clients for a lasting impact. They are team players that bring everyone else up and develop strong customer loyalty. If you can structure roles based on employees' skills, consider putting hunters and farmers into roles that take advantage of their unique skill sets.

Perform a Sales Skill Assessment of your team – This allows your business to determine if your current sales team is working efficiently and streamline the hiring process to ensure only the best candidates are hired from the start. Without frequent assessments, your business is at risk of weakening without you noticing. Additionally, if your business makes the mistake of hiring the wrong employees, you'll find yourself incurring additional costs to replace them. An assessment has two significant benefits that work hand-in-hand. It will determine if your current sales team is functioning at high-performance levels, and it will help you recruit top-performing sales reps so you can yield a higher ROI. These benefits work together to create the ultimate sales team—a group of people who are motivated, determined, and equipped with the characteristics needed to boost sales and grow your business.

Sales Structure & Compensation – Do you have an innovative sales structure that drives growth? Do you have the proper incentive structures to ensure your team is effective? Some areas you should look at are:

Designing a sales organizational structure focused on growth – The sales organization structure can enable proper strategic planning, provide clear opportunities for career progression, and a scalable solution for long-term organic growth. Focusing on facilitating effective coaching and a new account management function will drive growth within current accounts.

Properly designed Sales Incentive Plans – Are you incenting your sales team to drive actual results, or are you just paying them to do their job? There is a big difference. The most effective compensation plan will reward true growth and eliminate distractions. The sales team should be incented to focus on the task most directly related to the organization's strategic priorities. A properly designed and focused Sales Incentive Plan can make a huge difference in how much you can grow your revenue. It can also help you quickly identify your real Rainmakers and who is just riding in the bus.

Enhanced customer understanding – Newly discovered customer insights should be factored into the sales organization structure changes to ensure delivery of experiences desired by customers. Right now, the experience renaissance is a new focus within many industries. This focus is galvanizing companies to push beyond their traditional philosophies and organize their business to deliver exceptional experiences. These experiences must respond to customers' new, often unmet, and frequently changing needs and enable them to achieve their desired outcomes.

Increased role clarity – Focus on detailed competency descriptions and job descriptions for each role in the sales structure. A clear distinction should exist between the roles/responsibilities to gain new customers and grow existing accounts.

Optimized Sales Processes – Do you have the correct systems and processes to ensure you are building your sales pipeline? Do you have a methodology to move customers along a sales process with the proper stage gates to ensure you are not just spinning your wheels?

To effectively manage your sales process flow, you should ensure the following focus areas are developed:

Design a stable framework – It is essential that your sales reps feel free to interject their personalities and unique touches into their sales activities. However, a consistent selling process is beneficial to your business. First, outline a consistent approach. You can more efficiently train and develop your sales professionals to sell with it. More importantly, you need to continually develop your team members' skills and productivity levels to drive your company's growth. A well-outlined selling process enables you to set goals, evaluate each rep's performance on stated criteria, and coach salespeople that need to improve in particular areas.

Focus on data and analytics – The days of relying solely on intuition, hunches, or gut feel in running a business are essentially over. Competition is too high, and the quality of CRM software programs too powerful for you to not take advantage of technology in your business systems. By collecting data on your prospects and customers and comparing customer types to their buying activities, you get a more accurate depiction of what products and communication methods work best with each of your customer segments. When you gather and analyze quality data, you can significantly enhance your team's understanding of individual buyers' deep-level needs, preferences, and motives. People buy a solution that optimally matches their problem, and knowledgeable reps articulate value better.

Build sales skills at each sales stage-gate – Competing as a small fish in a big sea is challenging. You must seize upon any advantage you can to make a positive and lasting impression with buyers. This point is especially true in a niche industry. You can't afford to have a sales rep damage your brand because of a lack of discipline or knowledge. When coaching your salespeople, the most important thing is to hit on specific areas for improvement. Monitor execution at each selling cycle stage-gate, including lead generation, appointment setting, conversions, and customer retention. You may have some reps that need to get better at landing meetings with prospects. Others may need to focus on minimizing customer churn through enhanced training on post-sale actions. Streamline your training to express specific deficiencies. Build a consistent approach that leads to simplified performance evaluations and a standard selling framework.

Detailed Sales KPI Plan – Do you run your business with accurate data or hope? The most effective sales organizations have a robust KPI methodology. This means you must have critical measurements along all of the stages of the sales process. Without a robust KPI methodology, you can not effectively manage your sales pipeline and forecast your business revenue.

At a minimum, you should measure the following key performance indicators:

Opportunities created – Sales activity has no value unless it results in substantial pipeline growth. For this reason, productivity metrics such as sales activity are best compared to the number of opportunities created by the individual sales team member. Monitoring this will provide insight into which activities are working best and which reps generate the most results from their efforts. While there is no universal definition, a sales opportunity is usually a qualified prospect who has a high probability of becoming a customer. The sales pipeline begins with opportunities, which turn into deals and customers. 

Proposals sent – Whether the sales team member nurtures the relationship themselves or hands a prospect to the account manager, the number of proposals sent can indicate if they are prospecting to the right people and generating qualified sales leads and opportunities with a genuine interest.

Percentage of active projects within each stage of the sales process – If you break down active projects by stage (e.g., prospect, diagnose, present, propose, negotiate, close), you may be able to see the pinch points and bottlenecks that are happening within your sales process. You can then start to diagnose pipeline issues with this metric and begin to take action.

Sales cycle length – It is critical to look at the average length of your team's sales cycle. Are some reps closing in three weeks while others are closing in six? What are the respective churn rates six months from onboarding? You should analyze what sales cycle length produces the highest number of closed-won business.

Close ratio – This measures how efficiently a salesperson or team is closing deals based on the leads they've worked. This metric works in conjunction with system touches to help quantify the effectiveness of your sales team's outreach strategy. The close ratio can be calculated by dividing the number of actual closed deals by the number of lead opportunities the salesperson had during a given time period.

Customer retention rate – Tracking how well your team meets the customer's needs is key to customer retention. Customer retention measures how well a business retains its customers and their revenue over time. While there are several ways you can measure customer retention, it's easier to have a single metric to review regularly. It might seem obvious — of course, companies should want to retain customers — but when companies start growing quickly and struggle to implement a solid customer support program, proactive customer support for existing customers can slip through the cracks. It is even more important to keep a customer, or your sales and marketing efforts are a waste of time and money.

No revenue growth plan will be perfect from the start. Therefore, you should continuously reassess the strengths and weaknesses of your plan and make adjustments as necessary. With a strong growth strategy, you will be ready to grow your company's revenue and boost its long-term value.