7 Reasons You Need Net New Business

Every sales leader or sales manager is responsible for growing their company's revenue. To grow, you need net new business. There are two ways to do this. One is to sell more to your existing clients, which helps recover lost client revenue. This is a good starting point because you already have contacts and contracts, making this strategy fast. The second way to increase your revenue is to acquire new clients which is critical for any new sales company.

When selling to your existing clients, you create new opportunities that result in net new business. When calling on prospective clients, you are prospecting to win new clients which is especially important for a new sales company. A leader pursuing growth will use both strategies simultaneously. What follows here outlines the reasons sales leaders and sales managers need net new business, which is one of the sales objectives worth pursuing.

1. Increased Revenue

Without a focus on net new business, you put your business at risk. It’s counterproductive, but some sales organizations are structured to prevent net new business and revenue growth. In some cases, compensation is to blame, as some plans function, essentially, as annuities instead of rewarding net new business. Another obstacle many sales organizations face is a culture where there is a lack of accountability for creating new opportunities.

If you are not acquiring the new clients you need faster than your churn rate, you can quickly shrink instead of growing. The best way to get out of a hole is to stop digging. You will always need new clients to make up for the revenue you lose through churn, plus new clients that provide net new business.

2. Market Share

Without capturing net new business, your business may shrink, even if your revenue stays the same. Your market share shrinks when your competitors acquire new clients and grow their revenues while you stagnate. You don't need to calculate accurate percentages to know you are losing market share. Knowing you are losing ground is enough.

The more new opportunities you create with your existing customers, the more net new business you create—bringing in the revenue it generates. But to increase your market share, you will need to acquire new clients, taking large clients away from your competition. (See Eat Their Lunch: Winning Customers Away from Your Competition).

3. New Products and Services

To stay relevant in your industry, you may need to bring new products and services to the market. New products and services can help you cross-sell or upsell your clients, providing them with new value. When these new offerings improve your clients’ results, you will find that they make it easier to engage with new clients. Novelty and innovation are always helpful with net new revenue.

Selling your new products and services to your existing clients and your prospective clients provides you with the net new business that results in revenue growth. These new products can also prevent you from losing clients to your competitors.

4. Business Stability

When one or two large clients make up a high percentage of revenue, your business is susceptible to harm if just a couple of clients leave. The more you are beholden to a few clients, the more your business is at risk. Every new client you acquire reduces the percentage of revenue that comes from your larger clients.

Three times in my life, I lost my largest clients, but because my team was taught to always pursue large clients, we made up the losses. If your pipeline doesn't have clients that would replace a lost client, you need to focus on prospecting. New clients are an insurance policy, and so is your pipeline.

5. Your Reputation

When you are growing, you will develop a reputation. The more you win new clients, especially large clients, the more your reputation will grow. As you continue to acquire clients, you'll be perceived as an industry leader. As you deliver better results, your clients will talk about you.

You make it easier to acquire new opportunities and new clients when your reputation precedes you. When people have heard from others that you can help them improve their results, new conversations are easier. When your clients or customers refer you to people they know, you have a tailwind with new business.

6. Staying in Front of Your Competition

Net new revenue, growth, and the profit they create lets you get in front of the market, capitalizing on trends before others do. The sales function isn't always treated as a company's sustainable competitive advantage, but it should be. It can be the revenue engine of the company, but only when the sales force has strong sales skills, a compelling value creation model, and high sales effectiveness.

Sales leaders who want a competitive advantage growing net new business would do well to help the sales force adopt an approach that puts them squarely in front of their competition. Those who don't invest in a highly effective sales force will find net new business challenging at best, or impossible at worst.

7. The Overall Health of Your Company

In the business I grew up in, I was taught that “sales are vanity” and “profit is sanity.” When there is too little revenue or profit, businesses are at risk of struggling or failing. A business that isn't expanding is likely to shrink. The health of your company is dependent on cash flow. Making net new business your priority prevents all kind of dangers.

It's rare that sales leaders have a candid conversation about the reasons why net new business is important to the success of the sales force, their company, and their clients. These conversations are important. Not only can they help your team develop their business acumen, but they also help salespeople understand the economic reality they are working in. Using team meetings to share the importance of net new business can help your team focus on what matters most to your organization.