Growth is worshiped above all else in our business culture. After all, what could possibly be wrong with a company’s sales growing quarter after quarter?
Actually, quite a lot.
Sales growth can be a bad thing, and it’s a trap that ensnares too many companies.
Beguiled by the high-growth mantra, CEOs often push their sales teams to sell more, faster, regardless of what is happening in the rest of the company. This obsession with growth leads some companies to neglect the quality of their product or service, eventually driving clients away.
And, typically, leaders realize too late that scorching sales growth has been burning a hole in their business.
Too much, too fast
Growth turns bad when the sales side of the business gets too far ahead of the company’s capacity to deliver a quality product or service. Quantity starts to drives quality when it should be the other way around.
Many sales teams aren’t set up to value quality. Instead, they are under pressure to hit top-down sales quotas that match the company’s growth expectations.
Eventually, this affects the rest of the business. Key client relationships suffer when the product doesn’t live up to expectations, and orders and projects get canceled.
In contrast, a healthy company recognizes when growth becomes too risky. That may even mean deliberately slowing down sales in order to build the capacity to consistently deliver a quality product first.
Consider, for example, an interaction I had recently with the electrician whose family firm had done excellent work on my home for years. He was so keen to talk about how business was booming that he barely registered my request for another round of wiring work. Feeling I was no longer a valued customer, I called a different electrician shortly thereafter and gave him the (substantial) job.
It’s easy for billion-dollar firms to make similar mistakes, even though they should know better.
Growth is addictive. It makes everyone feel great in the short term, even as it may be worsening their long-term health.
How should a company target balanced growth?
Sustainable levels vary widely from company to company and sector to sector, so there is no single solution for balanced growth. For a software-as-a-service firm focused on expanding its customer base, it could be 30% to 50%, whereas for companies in other sectors it could be 5% or less.
However, consider some universal truths that every business should follow.
Know your starting point: Rather than imposing arbitrary, top-down sales quotas, why not tap your own sales team’s knowledge and view of the pipeline to get aggressive but realistic revenue targets? To be effective, this method needs to filter out those who are over-optimistic as well as those who are holding back. It also requires a culture of openness and honesty rather than one based on fear.
Plan early, plan often: Many companies don’t announce their revenue targets until three or four months into the year, which is way too late. Well before the year begins, companies should systematically work out how much growth they can handle without sacrificing quality, taking into account the whole ecosystem of financial resources, logistics and sales.
Narrow your focus: Adopt the philosophy of less is more when planning revenue goals. Instead of getting your sales team to do 15 things to meet the full sales target, have them focus on the one or two things that will do the most to achieve your goal. Maintaining discipline is much more likely to result in higher quality, lower risk growth.
Rethink your motivations: For sales teams, pay is nearly always determined by volume, reflecting the “all growth is good” mentality. But if balanced growth is genuinely a priority, the sales team should be judged by metrics that reflect the company’s long-term strategy, not short-term wins.
Improve the COO - CSO relationship: Chief Operations Officers and Chief Sales Officers are too often at odds, blaming each other for sales and delivery issues while focusing entirely on their slice of the business. This is a complex problem, but to support sustainable growth these two executives need to be closely aligned and pursuing mutually beneficial strategies.
Too many companies let sales quantity drive quality. Instead, by putting quality first and aligning your sales team’s goals with your long-term strategy, you can create real, sustainable growth that won’t put your business at risk.
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