Real Growth Requires Leverage
To grow fast, you need the impact of every action to grow.
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If you think about your business like a homework assignment, it can seem very simple. If a salesperson can sell $500k in a year, then a team of 10 salespeople can sell $5M in a year. If we want to sell $10M in a year, we just need a team of 20 salespeople.
Simple!
In real life, business is never that simple. Hiring sales people can take a long time, and there is no guarantee every salesperson we hire will be successful. If we want to have 10 salespeople this year, it might take us 4 months to hire them and another 3 months for them to ramp up. Only then would we figure out that 3 out of the 10 aren’t going to make it!
Even worse, as our teams grow they require more overhead. Managing 10 more salespeople might require another sales manager, and more people on the sales development and marketing teams! This means the cost of growing revenue is going up, our margins are going down and we’re looking at trying to grow revenue even further to make it up.
Whew, business is complicated.
Businesses are harder to grow the larger they get. You might be able to double revenue when you have 2 salespeople by hiring two more, but if you have 200 salespeople doubling revenue is much more complicated. This leads to a flattening of growth as the business begins to be held back by its size.
To break free of this gravitational pull, you need to focus on efficiency. Real growth requires you to do more with less, to get more leverage on every dollar you spend. You can hire more salespeople, but can you increase the amount a single sales rep can sell? You can spend more in marketing, but can you generate more business for every $1 in marketing spend?
Can you do more with less?
Efficiency isn’t simple, and you don’t find solutions like these overnight. A better way is to focus on a simple goal: Can we be more efficient next quarter than we are this quarter? If you are always focusing on improving your efficiency every quarter, you don’t need to make huge leaps. The improvements will add up over time.
Where do these efficiencies come from? Everywhere! If you set goals to improve every quarter you will find small opportunities in almost every part of your business. Here are some examples from an enterprise software company:
Pricing. If you can raise prices by even 10% that means every sales person is 10% more efficient! Across a team of 10 sales people we get the equivalent of another sales person without having to hire anyone.
Process. If you can reduce friction and let customers buy 20% faster, you can increase your new customers per year by 20%. Simply because you spend less time per customer and it frees up time to pursue new business.
People. If you can reduce internal meetings and overhead by just 2 hours a week, everyone is 5% more efficient. Those 2 hours a week add up fast, as a team of 20 has a whole new employee’s worth of free time every week.
These are some general examples, but most of the efficiencies you’ll find are specific to your business. Maybe it’s in how you train your team, or how you approach solving problems. As long as you have a continual goal to be more efficient every quarter your team will find the opportunities.
The hardest part is maintaining focus. Every team has some low-hanging fruit that helps them improve efficiency the first quarter you set these goals. It gets harder in the 2nd and 3rd quarters and by the 4th quarter efficiency gains require hard work. At that point many companies give up and move on, exactly when they should be pushing harder!
Remember, the gravity that slows you down when your business grows applies to your competition as well. If you can keep going and focus on always being better next quarter, eventually your efficiency becomes a competitive advantage. If you can grow faster with lower costs, you have a huge business model advantage over everyone else.
You don’t need to set huge efficiency gains every quarter, just that you are better than the last. The habit is more important than the destination, as keeping this up for even a handful of quarters will lead to better habits on your team and a different way of thinking. If you are lucky, eventually your team will find efficiencies on their own without the need for an overall efficiency goal.
Most of the time we think about growth as separate from other things we do. But, real growth comes from doing more with less over time. If you can do that, you will never stop growing.
For more on Growth, see:
I had a boss that liked to have long meetings. I started showing him a record of how much each meet cost him in his team's billable time. He wasn't as appreciative as I thought he'd be. : P