CEOs face intense pressures today to deliver consistent double-digit revenue growth year after year. But with the right strategy focused on business development, sales, and key performance indicators - hitting that 10% annual growth benchmark is achievable. This article provides a blueprint for leaders looking to spur growth.
As a result of the current market conditions, a new benchmark has been established: If your company can't show a minimum Compound Annual Growth Rate of 10 percent, you are putting yourself and your company at risk. As never before, revenue growth is the key to a business's health, high corporate valuations – and CEO job security.
According to Nathaniel J. Mass in his book The Relative Value of Growth, "… convincing the market that they can grow by just one additional percentage point can be worth six, seven, or even ten points of margin improvement, … resulting in significant improvement in business valuations."
Though no magic wands, secret potions, or crystal balls can guarantee results, I can assure you that You can best help your cause with a keen focus on the ingredients that constitute CAGR success! In my years of experience working with CEOs, I’ve had a front-row seat as companies experimented with formulas for growth success.
The foundation of rapid growth is a clearly defined business development strategy identifying markets and buyers to pursue. With strategic clarity on ideal customers, you can save resources chasing deals misaligned with your offer.
Do you have a robust, innovative vision of where you want to drive your organization? Can you identify your ideal customer? Do you have the right marketing message to attract that customer? Without a sharp and crystal-clear focus on business development, you’ll continue to cast your line into a muddy creek of prospects.
Here’s what I mean: I once worked with a third-party logistics provider (3PL) that aspired to expand beyond its current customer portfolio and into new market segments. However, they did not have a clearly defined, robust vision for doing so, nor did they have a clear view of who their ideal customer should be. The results, predictably, fell short of their expectations.
After we worked together to define their strategic vision and ideal client profile, this 3PL company was able to develop its correct messaging, positioning, and value proposition to attack the new market segments – necessary prerequisites for a successful business development gambit.
Growth relies not just on new customer acquisition but also on retaining and expanding existing ones. Research shows retaining customers costs about 7X less than attracting new ones. You don’t need to be a mathematician to understand this stark reality: If you generate $100 million in new sales but lose $50 million in existing revenue, you're not going to hit your $100 million revenue goal. This ultimate measuring stick gauges customer retention results, but it can also indicate your service level. That’s why all businesses (particularly technology and professional services) should strive to create a stellar customer service experience. Your service experience is at the core of long-term value creation.
CLV is the amount of revenue you can expect from an average customer over the lifetime of their business relationship with you. Consequently, companies should obsess over customer lifetime value (LTV) - the revenue expected per account over time. Maximizing LTV means minimizing involuntary churn through stellar service and account expansion via upsells and cross-sells.
While having a focused business development strategy is essential, there may be circumstances when you want to expand your services or the markets you serve. For example, you may have hired a new business development professional with relationships in an industry you have yet to serve. If your service adds value to prospects in this industry, you could set a SMART (specific, measurable, achievable, relevant, time-bound) goal to expand into this industry. But be careful: You risk taking focus away from your core business model when you grow. You should keep a close watch on expansion and be ready to exit if it's not working out as expected.
The most value-creating strategic partnerships stem from a shared vision to leverage each partner's complementary strengths and capabilities, facilitated by a technology integration layer that enables seamless joint solution delivery. By identifying partners that fill critical capability gaps and provide access to new markets and customer segments, companies can co-create unique value propositions that offer more benefits than what each organization could produce individually. To ensure all strategic partners are aligned, these collaborative solutions must be supported by clearly defined success metrics, risk-reward models, and joint objectives. When done effectively, strategic partnerships allow companies to achieve strategic goals, serve customers better, and share risks and rewards - creating a whole more significant than the sum of its parts.
The foundation of a successful recurring revenue model is to offer subscription-based products or services that automatically renew, supported by pricing tiers to accommodate different customer needs. The focus then shifts to maximizing customer lifetime value through excellent retention efforts, convenient and automated payment systems, and perpetual expansion of each subscribed account over time via value-added services, upselling, and cross-selling. This expansion increases switching costs through loyalty incentives and custom integrations, making it more challenging for the customer to leave. When executed well, the recurring revenue flywheel results in predictable, growing cash flows far less vulnerable to market fluctuations than transactional or one-time purchase models.
Without a clear and robust business development strategy to build the foundation of your CAGR growth, you have little hope of growing your revenue. However, if you use carefully planned business development, retention programs, and strategies like partnerships and subscriptions - hitting 10%+ revenue growth is within reach. Leadership commitment to the relentless execution of such a strategic growth roadmap is instrumental for ambitious companies today.