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GROWTH TIP #1 – Weigh the Tradeoffs between Revenue Gains and Drains

As the economic recovery remains elusive, senior executives face increasing pressure to improve revenues. However, many have fallen into the trap of pursuing revenue gains without first closing their company’s revenue drains. As a result, returns from gains are marginalized or fail to materialize at all, sparking questions about the legitimacy of growth initiatives, and diminishing employee and Board confidence in growth strategies.

The graphic below highlights the gains and drains companies face most frequently. While not an exhaustive list, drains can exceed gains by a wide margin.

New Markets New Channels/New Partners New Products Sales Management Processes		Account Penetration Improved Customer Segmentation Better Sales Enablement
Poor Sales Force Deployment Sales Force Inadequacy Inadequate Sales Capacity Poorly Executed Sales Processes		Weak Customer Service Undisciplined Pricing Weak Targeting and Qualifying

Although the optimal way to avoid this trap surely is to ensure that all revenue drains are closed before pursuing revenue gains, managers may not have this luxury. The need to pursue revenue gains, for strategic reasons, may trump blocking all drains. Thus, managers must prioritize revenue improvement opportunities based on three factors: strategic value, financial value, and ease of implementation. To do this, we offer the following guidance.

Assess the economic and strategic value of eliminating drains.
Use a 2*2 matrix to rank your gains and drains with strategic value on one axis and economic value on the second axis.
Now overlay the ease of implementation onto your options and build a sequence that allows you and your team to maximize strategic, then economic value as quickly as possible, beginning with a few quick wins to energize the organization.

While results from this process vary by business, it is not uncommon to swiftly generate 20-25% incremental revenue by blocking drains alone, making annual drains vs. gains analysis a mandatory exercise.
For more insight on developing and implementing growth strategies, visit us on-line at www.evergreengrowthadvisors.com or contact Tom Knight at 630.364.8805 or tknight@evergreengrowthadvisors.com.