External Growth Starts With Internal Growth

The Gist

  • The formula for revenue growth is simply adding enough revenue to exceed your churn.
  • It is difficult to create growth by increasing ineffective activity.
  • External growth starts with enabling internal growth, the growth of individuals.

Research shows that 53% of CEOs have growth as their number one priority. The growth formula is simple: Existing Revenue – Churn (Lost Client Revenue) + Net New Revenue. There is no mystery here. First, you need to retain your existing revenue while limiting the revenue you lose. Then you need to create enough opportunities with your new or existing clients to create net new revenue.

While the growth formula is simple, it isn’t easy. Retaining your existing revenue means executing for and with your clients and doing what is necessary to prevent churn, i.e., customers no longer buying from you. No matter how well you execute, you will always have some level of churn that you need to make up before you can create one dollar of growth. It’s easier to sell to your existing clients than it is to displace your competitors. Because we live in a complex environment, the fear of making a poor decision and a lack of consensus leads many companies to inaction.

There is, however, a meta-growth formula that improves your ability to grow your revenue: the speed of growth is equal to the growth in the competency of the individuals responsible for executing the growth formula. And yes, that works for both sales forces and individuals pursuing their own revenue growth.

Why Internal Growth Proceeds External Growth

Why Internal Growth Proceeds External Growth

One sales manager I knew had a small team in Los Angeles. He was not a very good manager. In fact, he was a terrible leader. His primary approach to growing revenue was reviewing the number of outbound phone calls of each member of his team, then badgering them to make more calls. As the company pursued growth, he doubled the sales team’s quota. He had no ability to help his team improve their effectiveness, so insisted on more activity.

There are times when more activity is exactly the right approach to improving your results, typically when the root cause of poor results is too little activity. More often, though, the real reason you don’t improve your results is due to a lack of effectiveness.

Imagine a salesperson who creates two new opportunities a month with a thirty-percent win rate. That salesperson will win seven of the twenty-four deals. A forty-percent win rate would improve that to ten won deals, an improvement of thirty percent. To achieve that same result merely by increasing their prospecting activity, that same salesperson would need to add six more opportunities. But even given more activity, they would still be losing a higher percentage of the opportunities they create, limiting their yield (the number of deals that create new revenue). Your goal should certainly be to create new opportunities, but not if you are only going to waste them.

It’s straightforward to calculate how many opportunities you need to create to grow your revenue. What is more difficult is enabling yourself or your employees to improve the competencies necessary to generate net new revenue opportunities from your new and existing clients.

A New Set of Competencies for B2B Sales

A New Set of Competencies for B2B Sales

In The Only Sales Guide You’ll Ever Need, there is a set of competencies for B2B sales that are rarely taught, trained, and developed. Without these new competencies, you make it more difficult to achieve growth. But by sharpening them, you improve your effectiveness and your yield.

Business Acumen: It would be ludicrous for, say, a janitor who knows nothing about medicine to counsel a surgeon on a medical decision. Effective counsel requires knowing enough about the situation to offer your recommendations. Yet business acumen, one of the pillars of a consultative sales approach, is rarely taught, trained, or developed.

Insights and a Provocative Perspective: Another pillar of a consultative sales approach is providing the insights and perspectives that create value for a prospective client. The legacy laggard approach to sales focuses on the salesperson’s company and their products as a way to differentiate, even though doing so creates no value. You cannot be consultative without insights and a helpful perspective.

Change Management: It has taken too long for those of us in B2B sales to recognize the centrality of change management in the initiatives we help our clients pursue. One of the reasons opportunities die is that we pay too little attention to the fact that change is often difficult, messy, and political. We are fast to compel change and slow to help the client change.

Consensus Building: Another reason opportunities die is because the salesperson is unable to help their contacts build consensus within their company or team. Most salespeople are unaware that building consensus is part of their responsibility, and those that do are ill-equipped to help their clients find a way forward.

New Fundamentals of Growth

New Fundamentals of Growth

The legacy approaches are failing primarily because they leave these new fundamentals out, so the internal growth that proceeds revenue growth requires changing your view about the fundamentals of B2B sales. You should treat the four competencies listed above as every bit as important as prospecting, objection-handling, and negotiation. They will allow you and your teams to create the kind of value necessary to creating, winning, and growing your clients.

Prioritizing revenue growth means prioritizing individual growth. The growth of individuals is challenging, especially when you work thoroughly to teach, train, and coach your sales force. But individual growth never fails to improve results, simply because it helps you develop the necessary competencies to achieve your goals.

Adding more ineffective activity isn’t the right approach for today’s complex environment, especially when much of the time and effort is wasted. The right approach is to increase and improve your effectiveness, so you can increase your yield.

Do Good Work

  • What competencies, if enabled, would help you improve your effectiveness?
  • How do you increase your yield, the revenue you generate for the effort you invest?
  • How do you enable individual growth that precedes revenue growth in yourself and your team?

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