In our article last month, Beat the Bear: The Limits of Cost Cutting as a Strategy, we warned against the insulated approach of cost-cutting for business survival. This topic resonated with many of our readers and so we wanted to take this a step further: If cost-cutting is limited, what does it take to pursue the other side of that coin? It takes the implementation of an aggressively targeted growth strategy.

Those words “aggressively targeted growth strategy” look good on the page and make for a solid sound bite, but what do they mean and how does a company arrive at such a strategy? The first and most important step for a business to take is to thoroughly understand its sources of profitable business.

Effective decisions cannot be made based solely on revenue amounts and trends. Can the CEO determine in what regions the company should push for growth? One region might clearly have a larger quantity of need or ability to purchase, but what if that region’s profit margin is negative? The same goes for identifying unprofitable customers and SKUs. Aggressively targeting means getting very specific into the who and what of top line growth: Increased sales with THIS type of customer, in THIS area of the market or with THESE product groups.

While this sounds like common sense, surprisingly few businesses have access to the type of information that can make these determinations possible. The adverse results of insufficient data include: a CEO's inability to properly deploy resources, and a sales force that is unable to differentiate between accounts that are adding to or detracting from the bottom line. After spending the last 18 months in cost-cutting mode, most companies cannot afford to misdirect resources in this way.

Before a growth strategy can be designed, let alone implemented, the following information needs to be identified and analyzed with the management team:

• Profitability by account type
• All of the following with a focus on profitability:
  • Growth and Decline by Account
  • Growth and Decline by Region
  • Growth and Decline by Industry
  • Growth and Decline by Sales Rep
• Ideal mix of account type
• Possible reallocation of resources to maximize profitable revenue sources

Following this analysis, the CEO needs to spend time with accounts that are declining or have been lost within the last 18-24 months. A very strong case can be made that a company’s clearest path towards growth is in understanding its lost revenue. While a portion of lost revenue can be attributed to the recession, other factors are usually at play. For example, certain cost-cutting measures may have had an adverse affect on the quality of your product and customer accounts are filtering business elsewhere. No news is not good news and the most effective way to curb decline is to meet it head on.

We recently worked with a $50M consumer products company that had made an add-on acquisition. After the deal was closed, the CEO of the newly merged companies went on a series of customer visits to introduce the additional services that could now be provided under this partnership. Sitting across the table from a long-time customer, it became apparent that not only was the customer disinterested in new services, but that because of quality and delivery issues the company was on the verge of losing this account entirely.

Meeting with customers that are sending less business your way provides first-hand knowledge and identification of your barriers to growth. CEOs and management can skip the head-scratching and immediately allocate the proper resources to fix the problems.

Properly armed with customer feedback and genuinely useful financial analysis, CEOs are able to form a realistic, achievable growth plan whose progress can be quickly measured and tracked. Resources are no longer spent pursuing additional business from money-losing accounts, relationships with current clients are strengthened, and customer churn is decreased. The aggressively targeted growth plan resulting from this method does a lot more than look good on the page, it looks good in the bank (and to the bank, for that matter!).

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Media Contact:
Margo M. Ten Eyck
Client Relationship Manager
(847) 291 9944 x119
margo@forteone.com