What Senior Executives of Growth-Stage Companies and Their Investors Need to Know.
A phenomenon many companies experience during their growth lifecycles is that of reaching revenue plateaus, past which point, incremental growth is markedly more difficult. This may occur because of addressable market, product or production, or geographic constraints, among other reasons. The ability to surmount these obstacles is what differentiates companies that continue on to long-term success and market domination from those that are left behind. And sometimes, breaking through to that next level requires an infusion of capital from a Growth Equity partner.
If you have made the decision to accept growth equity investment capital, it will be important to you and your investor(s) to derive the greatest value and results from your mutual partnership. Here are twelve tips for scaling revenue successfully when working with a growth equity investment partner:
Remember, You and Your Investors Share the Same Interests and Goals Growth Equity partners invest in companies because they see the potential for significant growth and return on their investment if their capital, advice, and networks can help remove barriers to success and growth, and accelerate the pace of expansion and scale. Growth is not an easy process, however, and Growth Equity investors do expect a few bumps in the road, so it is imperative to remember you and your investors are "on the same side" throughout the process, even when the going gets difficult. Don't be afraid to seek their counsel when challenges arise -- your investors will help where they can, because when you win, they win.
Invest the Time, Effort, and Money to Do Things Right You don't want to burn through the investment your growth equity partner has made in your company too quickly, but the money is not there to just be a safety net, either. Your growth equity partner understands what it takes to grow, and they want you to use the money, wisely, for those purposes. Heed their guidance on where to spend, and develop and agree with your growth equity partner on a solid plan for each such area. But when you do spend the money, commit to the spend and make sure you follow the plan well enough to get the results you need. Don't just dip a toe in the water, don't take half-measures, and don't skimp in the wrong areas. Prioritize, commit, and do things right.
Develop and Follow an Agreed Revenue Strategy Having investment money available to support your revenue growth is great, but it is not enough by itself. You have to have a plan for scaling revenue. That plan needs to define what you are going to do, how you are going to do it, when, where, why, how much it will cost, and how much revenue and profit you expect to make in return. A good revenue strategy aligns marketing, sales, and service to optimize customer experience and maximize profitable revenue, and it covers many areas, including definition and alignment around objectives and intended business outcomes, marketing & sales demand funnel and sales process, roles & responsibilities, revenue-team organizational structure, markets, channels, geographies, enablement, tools, operations, metrics, pricing, sales comp, and more. You need to develop this plan in alignment with your growth equity investors, and have everyone on the leadership team and board in agreement with the plan, or you will not be likely to succeed.
Define your Sales Philosophy Once you understand your revenue strategy, it is important to act with intention relative to how you sell to your customers. Do you sell on specs, or on value? Do you take a consultative approach to selling? How do you engage with customers across their entire journey and lifetime with your company? Your positions on these questions play a key part in shaping your company's perception and brand reputation, and they need to be fully understood and embodied by your sales team.
Establish a High-Performance Sales Culture The life-blood of a highly-performant sales organization is the culture and set of values that drive the day-to-day behavior and attitudes of its sales reps and sales leaders. It is a belief system that includes things like truthfulness, transparency, and trust, both internally and externally. It is the notion that reps never take their foot off the gas, even after making quota. It's a pervasive belief that reps and managers owe the company a certain level of bookings every month throughout the year. It's countless other things, as well. But it is critical to have the right culture in place ahead of your first upsurge in sales hiring, as you look to scale your sales organization.
Understand and Drive to the Targets that Matter When growth equity investors put money into companies in which they see potential, they do so with specific expectations regarding the valuation of the company upon exit, within a certain time frame. It is essential that company executives and sales leaders are on the same page as their growth-equity investment partner(s) regarding revenue, cost, and profitability targets by quarter and year over the anticipated lifetime of the investment. You must thoroughly understand and embrace these targets, and make the necessary plans and investments, early enough, to support their attainment.
Organize Early for Scalability Design your revenue organization for scalability from the outset of your relationship with your growth equity partner(s). Imagine what your revenue organization might look like at full maturity -- what roles, teams, and leaders might be required to sell to and support the markets, industries, geographies, and channels you expect to have, across the range of products and/or services you expect to sell? And what other roles will be required to support those sellers? Define each role you might need in specificity, and build a library of these roles. You can then use them to model out what the revenue organization will look like at each quarter between now and full maturity, including during the time horizon of the growth equity investment. This will inform your hiring plan, and go hand-in-hand with your Revenue Attainment Model.
Model Your Path to Revenue Attainment When you are putting to use your Growth Equity partner's investment money, you should leave nothing to chance. "Hire more sales people and hope" is rarely a winning strategy. Instead, you must model out your revenue, cost, and P&L projections by month, so you can figure out how many people to hire, when, where, and into which roles, in order to hit the periodic revenue, cost, and profit targets you and your investors desire. A proper revenue attainment and cost model must be assumptions (variables) based, and every number in it must be calculated from those variables, rather than simply typed in as a "magic number". Importantly. these assumptions must be conservative and grounded in reality. When done right, a revenue attainment model like this allows you to answer the key questions, "What would happen if we did 'X'?" and "What would it take to achieve target 'Y'?". Having a quantitative basis for answering these questions de-risks your revenue strategy, improves your likelihood of success. It also gives you the ability to monitor actuals vs. target by month, and understand at a detailed level why variances from target may be occurring.
Build Revenue Processes that Work Companies at the beginning of a significant growth stage, particularly when outside investment money is involved, must build repeatable, integrated sales processes that connect demand generation, opportunity qualification, deal pursuits, pipeline management, forecasting, and more, in a consistent and coordinated manner. Not only does this improve sales results -- shorter sales cycles, larger average deal size, higher win rates, etc. -- it also provides greater transparency and predictability of results. You can read more about building effective revenue processes in the longer, more detailed version of this post, as well as in my five-part blog series entitled "How to Create a Basic Sales Process that Works".
Provide the Right Tools Access to, and correct use of, appropriate tools for demand generation, business development, sales execution, and sales intelligence, is nearly as important as having a proper sales process, and certainly crucial for effective, efficient, and consistent execution of your revenue processes as your organization scales. This leads to better data, better forecasting, and actionable insights that will help you manage your sales organization more effectively, improve performance against key sales metrics, and improve customer experience.
Don't Skimp on Education, Training, and Change Management Too many organizations have failed to achieve their intended business outcomes because they have skimped on education, training, and change management, usually to reduce costs, or sometimes because someone senior in the organization does not see value in those things. Don't make this mistake. Make the commitment early that you will invest in supporting the execution of your revenue strategy with good education, training, and change management. It can make the difference between failure and success.
Communicate -- Early and Often The importance of frequent, clear, and consistent communication cannot be overstated. It needs to happen, bi-directionally, between sales reps and their managers, between sales managers and sales leaders, and between sales leaders and executive management. It also needs to happen between executive management, the board, and investors. And when it does, communications need to be transparent, truthful, and consistent in both directions, and occur on a regular and frequent cadence. Avoid the trap of having a culture in which people are afraid to communicate bad news up the food chain, or where people tell their superiors what they think they want to hear. As someone told me early in my career, "Bosses don't like surprises. Surprises make for excited bosses, and excited bosses do exciting things." That wisdom applies at every level, including up to the board level. Develop a culture that truly values and rewards honesty and transparency, and your company will be better for it, and you will achieve your revenue and profit goals more quickly and easily, as a result.
Want to learn more? Read the longer, more detailed version of this post.
I hope you have found this article helpful. As always, thanks for reading!
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About the author
Eric Heine, Founder of Growth Point Solutions LLC, draws upon over 25 years experience in marketing, sales, service, and IT leadership to advise C-level executives and boards of directors of growth-stage companies, as well as growth-equity investors, to help organizations develop, refine, and execute the revenue strategies that power significant, sustainable year-over-year growth.
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Tags: #GrowthStage, #GrowthEquity, #RevenueGrowth, #SalesProcess, #Forecast, #WinRate, #Tips #Communication #RevenueStrategy #SalesCulture #SalesTools
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