Business Strategy: Plugging the Leaks in Your Revenue Stream – Part 2

Part One of this article discussed how emerging and mid-market companies often need to raise growth capital, attract an M&A or private equity deal, or boost profitability and capital readiness for other reasons. Most management teams know their ability to generate cash flow will be scrutinized as an indicator of potential to generate future returns by investors, acquirers and banks alike.

But so often the CEO and board’s first reaction is to squeeze cost of goods and / or operating expenses. More often than not this quest amounts to “silver bullet” fixes that focus on relatively easy expense reductions. Unfortunately, some of these quick fixes can be counterproductive, with negative long term effects that are hard to foresee.

As an alternative to improving transaction-readiness and attaining an attractive valuation, I suggest a different strategy. Focus your efforts first on the top of the P&L and the issues impacting the ability to generate additional revenues - then take decisive measures to fix them! It’s been my experience as an operating executive and advisor that the ability to drive even slight revenue gains is a far more persuasive indicator of a company’s future value than short-sighted expense cuts. But doing so requires an unvarnished look at the core components of your sales culture.

The Critical Components of Revenue Generation

After years of advising CEOs and Boards on revenue generation issues, I arrived at the conclusion that a clear and defined set of unique components must be present for a strong sales culture to thrive. The components are strongly complementary – in other words when even one is missing or compromised, revenues and profits will suffer. Review the model below and ask yourself; “Which component(s) are weak or missing from my revenue generation strategy?” You have to acknowledge the problem before you can find a fix.

Eight Leaks That Drain “Top Line” Revenues

If you identified one or more components as problematic, determine how they are causing revenue “leaks.” The following list describes those I see most often. Ask yourself; “Which ones are present in my revenue generation culture – and why?” Be honest. If revenues are a problem, you have one or more leaks:

1. Lack of C-Level commitment. The most critical! C-level executives can’t delegate leading the charge to others. Culture comes from the top, and demonstrating commitment is the glue that holds a sales culture together. You must provide clear expectations, strategy, resources, encouragement – and demand accountability for results.
2. Poorly defined sales processes. Sales processes and tasks that build the sale must be clearly defined and accepted. For example: how salespeople present your company’s value proposition and differentiation from the competition. They must be trained, tracked and coached. Don’t allow salespeople to just “wing it.”
3. The wrong sales people. Top performers have a “sales mentality” that causes them to look, act, and breathe sales. They must be carefully chosen based on their ability to plan, talk with strangers, identify needs, and offer logical solutions. Product and process training should enhance the sales mindset, not try to build one where none exists. An entire industry has evolved offering assessment tools to help identify this mindset.
4. Inadequate sales infrastructure. Sales people can’t sell without the resources and structure that facilitate and accelerate lead generation, conversion and customer service. This means the right mix of marketing, sales tools, collateral, support personnel and an effective value proposition delivery system.
5. Poor sales management. Managing sales activity is a continual process of planning, organizing, training, coaching and inspecting activity to develop and hold teams accountable. Managers must be required to use them to drive results.
6. Poor sales skills. Exposure to training is not a replacement for actual learning. Just as it is not possible to learn to play tennis or golf by watching a video, it is not possible to develop sales skills without face to face, hands-on training. There are no short cuts to skill development - invest in skill training.
7. Poor measurement & accountability. You can’t expect what you don’t inspect, measure, reward or correct. Sales people want to know how they will be measured, where they stand, and how they did - results vs. standards. Measure results, as well as the activity needed to build the sale.
8. Ineffective reward structure. A unique mix of rewards must be used to encourage the behavior needed to drive results. The right mix of monetary, recognition and job mobility incentive “carrots” will convince the sales team to direct their activities toward behaviors that produce results.

This recommendation is simple: if you seek better financial performance (and who doesn’t?), start at the top of your P&L and look for the revenue generation leaks. Some you’ll be able to plug yourself. Others you may need the assistance of an expert advisor to help find and fix. Companies cannot cost cut their way to prosperity. Growing the top line is a constant necessity. Stopping revenue links should be the first step.

About the Author

Sam is a seasoned executive with a proven record of developing and implementing strategies to enhance revenues and profits across a variety of industries. He has designed and implemented supply chain and revenue growth plans for clients in industries as diverse as office products, aerospace, banking and non-profits. Contact or learn more about Sam.

Connect with Sam on LinkedIn

Photo credit: Flikr.com