When you're ready to start growing your company, a single strategy won't cut it—you need to think short-, medium- and long-term. “You need to approach the issue of revenue growth with logical steps,” says Tom Armour, co-founder of Toronto-based High Return Selection. “It helps you understand your timing and the best corresponding strategies.” Let's take a look at each stage.
To boost your revenue in the next six months, focus on sales force productivity. Disregard the 20-60-10 idea (that 20 percent are top performers, 60 percent are acceptable, and 10 percent are poor). Identify what attributes your leading people have, and look for that in new hires. “You can reduce the bottom 10 percent to one percent of your sales force,” says Armour. “And just doing that adds revenues—without adding any costs.”
Then change your sales force compensation system. Many companies try and create incentive plans to rid of low performers while also rewarding those at the top, by limiting the percentage of sales paid out in the first quarter. While this strategy encourages weaker performers to leave, it fails to reward high performers appropriately.
To boost growth over a period of about 18 months, consider forming OEM (original equipment manufacturer) relationships: embedding your products or services in the offerings of a larger company. “It’s a cost-effective way to open the door to new markets,” says Armour.
He points to a company that installs telecommunications systems in large businesses, usually selling directly to customers. About a year ago, managers decided to target another distribution channel, teaming up with major technology players and engineering firms that would include its products into their total offering to customers. While it was about nine months before the company started benefiting from the strategy, Armour figures it will another nine months before there’s a significant return. By then, he expects the company will double its revenues.
Steps that should take from 18 months to three years to pay off involve producing innovative products and services. For cash-strapped small businesses, it’s hard to find the time to come up with a new product. In that case, Armour suggests hiring an outside adviser.
This strategy worked for the owner of a technology company, he says, who was searching for a new product concept but couldn’t bounce ideas off his time-starved employees struggling to meet the demands of their regular jobs. Instead, he started meeting weekly with a marketing expert (his "innovation mentor") to toss around concepts. The result was a new product.
You can also build incentives into your compensation system that will create a culture of innovation. “It’s what the big boys do and for good reason,” he says. “And it requires that management demonstrate a strong interest in innovation.” Tie bonuses to successful new ideas.
Going one step further, set up special rewards for intellectual property advances. An engineer could receive an incentive for filing a patent. “It revs up the excitement,” says Armour. He points to an electronics firm that has filed “many dozens” of patents over the past three years, thanks to the approach.
The result? “You’re probably looking at tens of millions of dollars in increased revenues."