Ah growth. One of the most elastic words in business. Almost everyone wants it, but few get the amount they want or know how to go about it.
If the (social) media is to be believed everyone wants to sell out for a billion. We’re all trying to change the world, and build the next big thing by selling our Why and not our What.
I’m not a billionaire, and unless I win one of those enormous overseas lotteries, or that politician from Nigeria who promised to share his loot with me comes through, I never will be. I don’t have a tech start up, and I don’t know what series A funding is.
But that doesn’t matter
Because growth isn’t always about hyperbolic sales or subscriber rates. It’s not always about changing the world. If you could double your current take home cash how would that improve your life? What if you could double the value of your business, triple it? 10x it?
It seems people think it’s got to be $1 billion or nothing. But what if you could double your profit in 5 years, then double again in the next 5. So in 10 years time you’ve quadrupled your income (and business value). Some of you will think 10 years is too slow, I don’t want to wait that long. Fine, it just means you’ve got more work (and bigger investments) to make now. But don’t think that’s too long I want it now or I don’t want it at all.
But for growth to happen you need to have the right structure. The stories of the businesses that have gone bananas will allude to shooting from the hip whilst eating ramen noodles whilst wearing the same clothes everyday, but the truth is, somewhere in all that, were systems and processes. People behind the scenes were building the structure for the business to succeed. Do you really think Apple went from $0 to $117 million in sales in 3 years without someone, somewhere putting together the accounting, banking, HR, IT and operations systems and processes required to take the orders, make and deliver those products, whilst continuing to develop new products?
It’s not seen as glamorous, it’s not seen as visionary, it’s not seen as “entrepreneurship” but it’s the necessary building blocks for any business to grow.
It’s not how many followers you have
You see, it’s not just sales or marketing. It’s not how slick your product or service is or how many followers you have. That’s all well and good, but to deliver your slick little product to your customers you’re going to need systems and processes. Still don’t believe me?
Ok, riddle me this; If you went and doubled your sales tonight. Say Meghan Markle wears your whatever and suddenly everyone wants it. Wonderful. How are you going to fill those orders? How will your inventory management and warehousing cope? Can your website even handle the traffic? What about your shipping? Your accounting? Shit are those sales GST free? Can your supplier give you that much stock? And if they can, how are you going to fund it? Is your brand trademarked in those countries? How much will Paypal reserve and for how long if your sales spiked?
So yes, your product needs to be great, but so does the rest of your business. People will only forgive so much, and terrible customer service, delivery or quality is a sure fire way to test those boundaries.
So how do you structure for growth?
Well here’s how we do it.
- Define what growth is for you. Increase our sales (or profit or both) by $x or X% by………..
- Analyse your current growth rate. What’s the difference between your current growth and your desired growth?
- Break down the gap between 1 & 2.
- Develop & Implement the processes needed to close the gap
- Manage and Improve
If you’re targeting revenue growth, there are only 5 ways you can do this;
- Sell existing products to new customers
- Sell more existing products to existing customers
- Sell new products to new customers
- Sell new products to existing customers
- Increase your prices
These are not mutually exclusive and its rare for one to be the panacea for growth. Small changes in some or all of these areas, add up to large changes for the business and it’s important to model those changes financially.
If you’re targeting profit growth there are an additional 2 levers you can pull, both of which are on expense reduction; reduce direct costs and reduce overheads.
Now you’ve got some detailed goals and made some choices of how you are going to achieve them (i.e we are going to cross sell x products to existing customers, we are going to increase prices on average x% etc). You can now look at the underlying IMPACT areas to develop, or improve the systems and process that will achieve these goals.
For example, the goal to cross sell an existing product to existing customers. One of your IMPACT areas would be the sales process. Specifically, the process of up-selling (you want fries with that?).
In this process you would
- Examine what customers buy (and if you have, or can get the details which customers buy what products/services) and what they don’t.
- You’d look at what is the natural compliment to the products they are buying or what they aren’t buying.
- Write a sales process around the up-sell and the expected results. At each sale the sales team will offer x products for $x. We expect a take up rate of 10%. This will increase our sales, and gross profit by $x or x%. (You don’t need to be a dictator here. Your sales team needs to have buy in because they are going to execute this. Get them in a room, tell them what you are trying to do, and how it will effect the business and THEM. Explain the benefits to the customers. Get their input, and get them to write the sales process)
- Train the sales staff (new and existing) on this process.
- Manage this process. Check compliance with the new process. Is it being followed? How can you check this? Create a process around this. (Every sales person will complete a checklist when preparing the quote or the website will present a pop up offering the product for $x when they add the main product to their shopping cart).
- Measure the results. Is the take up meeting expectations, if not, why not? Is it because the sales team aren’t following the process? Is it something else? What can be done? Collect feedback from customers, from sales staff etc.
- Make changes as needed.
- Update the sales process
- Update training
- Manage the process
- Measure results
- Rinse and repeat
This isn’t set and forget, new or changes to processes fail because they aren’t ingrained deeply enough for long enough. But if you’re diligent on the above for 6 months until every sale is the same, offering the same cross sell every time, and you’re measuring the results and refining the process as needed, it will become second nature and the machine will take over.
This example has focused on the sales process, but that’s not the end of it. Other processes that would be effected by this would include;
- Shipping/distribution – selling more products/sourcing more volume of the add on product. Can our current supplier meet this demand? can we fund the inventory? Can our distributors handle the increased volume? At what cost?
- Accounting/Tax – will the current process need updating, can it handle it? Have we got the right legal structure to minimise tax and maximise cash flow? (Hint: If you’re using a trust the answer is No)
- Can the website/ordering process handle the upsells. Can we track it?
- Onboarding new staff, is the new & updated process included in the new staff onboarding process
- Has the remuneration policy been updated? Does it need to be?
- Has the HR policy/process been updated to attract team members who will support this new sales process?
- If we increase sales, at what point do we need more staff (sales &/or admin). Will they fit in the current physical space we have? When do we need more space? Will the stock fit in our warehouse/shelves in the back room?
So whether you’re targeting a billy, or an extra $1,000 a week the process is the same, it’s just the details that will change.
So no, it’s not glamorous and it won’t get you featured in the business news, but it will allow your business to grow.