Building Multi-Dimensional Growth in your Business

As I travel and spend time meeting with partners, I regularly see something limiting their ability to maximize revenue and ultimately enterprise value – the stifling force I’m referring to is mono-dimensional growth. For some, this is a barrier they’re aware of and for others, they experience this in more of a latent fashion.

In almost every case, this problem is tied to over-pivoting on selling to existing customers and not devoting enough investment and focus on new customer acquisition. While scholastic teaching and experience has proven selling to a member of your client roster can be significantly cheaper than acquiring a net-new customer, myopically executing in this way comes at a cost. The way to solve for this is through an “AND” strategy – one that aspires to maximize Average Revenue per Customer (ARC – dimension one) while also creating a steady diet of net new customers (dimension two).  I would go as far as to argue that the dimensions should be ordered the other way around to better exemplify their importance.

The Costs of Mono-Dimensional Growth

A reduced valuation: in my experience, technology providers (VAR, SI, MSP, ISV – pick your favorite acronym) reach the pinnacle of market value when they possess a few key characteristics such as durable competitive advantage, proper structuring of their revenue composition (focusing on lines with higher margins and ones that provide recurring streams), and have nailed the formula for rapidly expanding their customer base. This last piece is big given it’s one of the leading factors that will determine if the business can continue its trajectory in a sustainable manner should the owner(s) decide to sell the company. Without it, the penalty can be meaningful when the business is valued.

The victim of unexpected churn: while this is most problematic among providers who focus in the enterprise space, the sudden loss of a customer (or a set of smaller customers) can be catastrophic. In the new cloud economy where revenue is captured over time, customers make a buying decision each month and the sudden loss of one without a steady stream of new accounts to replace it can put the brakes on any healthy company. Hustling out unexpectedly to find a new customer to replace that one you just lost is nothing short of a nightmare (for you Mad Men fans; remember how losing Lucky Strike nearly put Sterling, Cooper, Draper, Pryce out of business).

The seesaw effect on cash flow: most of the companies I engage with in this position witness an up and down cycle within revenue. The reason for this is that these companies typically have stagnate or nearly steady headcount across both sales and delivery – leaving a void in resources to assume the labor burden of developing a new practice area. The impact here is, whenever it comes time to sell that customer something new, they spend their time ramping up the requisite skills to do so. This either takes their resources offline or requires them to work harder – potentially burning them out – while creating a revenue trough – trust me, I can see this in the revenue contribution to Microsoft. With numerous providers, I’ve been able to pinpoint exactly when they took on an additional product line. You can see their revenue and already limited customer acquisition plummet.

The perceived value through the eyes of the vendor: the relationship between any technology provider and the vendor(s) is built on the backbone of bi-directional value. Vendors offer a product, enablement, co-selling/marketing opportunities and other benefits while the providers generate scale and customer engagement through the resale of the vendors’ products. The challenge with mono-dimensional growth is that the upside realized often is not all that great compared to what could be seen if both growth factors where addressed in balance (meanwhile, their peers are driving the right blend and outpacing them). Often, this increase in revenue contribution to the vendor unlocks incremental benefits ranging from higher channel incentives, additional marketing development funds, recognition, etc.

So, where’s the problem?

For the most part, this comes down one key element missing in the formula – a factory type mindset when it comes to customer acquisition and the delivery of project/managed services. Fixing this requires focus in four key areas; 1) finding-training-onboarding talent in order to grow capacity, 2) building a marketing machine that constantly seeks to attract and educate potential buyers, 3) executing a repeatable sales process with extreme discipline, and 4) deconstructing the services you deliver into t-shirt sizes and aligning resource skills and labor costs against them in order to maximize efficiency amongst your billable resources.

The one that I often receive the most visceral, impassioned response to is the first listed above (finding-training-onboarding talent). When I raise this with members of our channel, I typically receive a range of emotionally charged responses that include talent shortages, a history of bad hires, provider to provider poaching, etc. In my eyes, this is the number one challenge in my business of looking after 650 top partners here in the U.S. who collectively have upwards of 15,000 employees – my response is that, talent availability is not the problem – the willingness, ability, and commitment to building successful staff is.

Too often I see providers looking for someone to magically appear and begin selling or delivering services at levels we’d expect from a seasoned veteran. The challenges with this “pipe-dream” are; 1) too often, providers hire these profiles and they’re a bust, creating a very expensive mistake, 2) these individuals are of high-quality but low loyalty and are significant flight risks – when they decide to leave, you’re right back at square one, 3) if they do work out, they’re expensive and carry a high direct sales cost as a percentage of revenue, unnecessarily eroding the main profitability lever for customer acquisition, and 4) they are few and far between, meaning, building true scale to your business is limited because well, there aren’t that many unicorns roaming the pasture.

Okay, how do I fix it?

The answer isn’t hard – the challenge is in the discipline and commitment to doing it right. Building a scaled customer acquisition engine full of great talent is a labor of love. It’s a requirement for businesses that want to generate real growth and for owners who want to either have that windfall of a cash event or get out of the day to day mundane of working in the business rather than on it. Here are my five key components to getting this right.

1.      Build a sales process that resembles a factory line (picture an auto-assembly) – the more controls you put in place and the more repeatability you insert into the flow, the less chance there is for failure or for your reps to waste time chasing deals with low (or no) returns. Taking this approach greatly reduces your reliance on seasoned, super-hero reps and places trust in the process over the players in the game. There are many options out there to consider but Sandler Training is one I’ve bumped into a few times among top technology providers. 

2.      Find sellers and delivery resources in new places. To do this, you’re going to have to get a bit creative. It’s not about hiring someone that’s already at the destination of being outstanding, rather finding those with the right attributes (hunger to learn, leadership experience in school/sports, affinity for technology, knowledge of a particular market sector, etc.) and then taking them on a journey toward greatness. For example, there is no shortage of people working in the verticals you sell into (car salespeople, insurance agents, law firms, etc.) and there’s a mass of young, enthusiastic, hungry, sharp individuals coming out of universities every year – seeking and recruiting these types of staff can be wildly profitable and effective. 

Engagement with local universities can be particularly valuable in areas where new technologies are being addressed through emerging certification programs such as data science. We’ve observed providers sourcing talent from these areas for some time now and when you have the right guardrails of process and training, you set these people up for success. 

There are numerous providers who have established relationships with local universities, and in some cases serve as adjunct professors. This gives them access to students they want to recruit while at the same time allowing them to give back in a unique way. 

Lastly, some providers have diligently engaged in government apprenticeship programs. We’ve done a ton of work in this area in the UK – and it’s a formula you can follow here in the U.S. – there’s even potential funding and tax breaks available. 

3.      Invest in training that spans sales process, technique, product, and finance – I still remember taking a sales role and being handed a rolodex – that’s a sure recipe for disaster and you should never hire a seller simply for their account list – guess what, that’s a finite set of customers and if they come over with the rep, they’re just as likely to leave you when the rep does. Instead, investing in the knowledge of your people as the primary factor for marching toward success is likely one of the best decisions you’ll ever make as a leader. A great starting point are our MPN enablement opportunities. 

When I mention finance above, it’s important to remember that technology buying power has largely shifted. It’s now the C-Level and line of business leaders controlling the budget. Possessing the ability to quantify the impact of your solution in real dollars (revenue upside or cost savings) is a skill that will separate the good from the great when it comes to sellers. I highly encourage you to invest in this area as well. 

4.      Do the same for your delivery resources. It's key to remember, building a customer acquisition machine isn't only about sales and marketing. Ensuring that the delivery side of the house is hyper-efficient and primed for growth by inserting repeatability will prevent a bottleneck that leads to sales backlog from occurring.

 While we train sellers on the aforementioned aspects, for your delivery teams, this should be a combination of product readiness and business process learning – I would argue the latter is even more important as it allows them to not only understand the context of what they’re delivering but also enables them to perform in more of a consultative role, unlocking additional opportunities. One of my favorite new examples to support your technical staff is our AI School. 

5.      Create a career path and a structure for upward mobility. Onboarding is only the first step. Keeping them happy and learning while striving to take their ambition to the next level is the final ingredient. Much in the same way that you should be looking to break up your delivery tasks into easy-medium-difficult allocations, building an organizational structure that follows a similar path can help to drive loyalty and prescriptive advancement. As these individuals expand their skill set, potentially taking new technologies, having a defined path allows you to advance talent to the next level while addressing the role vacated with net new recruits who will follow that same well-formed and perfected journey toward success.

My hope is that I’ve stimulated some ideas to help you think about pushing both major elements of growth – customer expansion and new customer acquisition. Both play a vital role in the development of your business. The key to success in doing so is to think about implementing people, process, and systems that enable scale. Without these core components, we introduce risk and capacity constraints that limit our ability to realize our full potential.

Best of luck and please don’t hesitate to reach out – My amazing team of Partner Development Managers (PDM) and myself are here to help!

BC