Member Insights by Anthony McIntosh, President and Founder, SSE Advisors
“If you are not growing, you are dying”. Most companies operate under this philosophy and unfortunately, many associate growth with revenue only. Startups look for it to secure investments. Emerging businesses look for it to continue momentum and mature companies seek it to reinvent themselves. Revenue growth is essential for business success, but alone is not the Holy Grail.
Growing revenue can cure many ailments within an organization; however, it can also create challenges. Decline in customer satisfaction, fulfillment disruptions, reduction in cash reserves, and organizational instability are just a few of the issues that may arise when revenue growth is improperly managed. What’s good for revenue growth today may be detrimental to the business tomorrow.
As companies grow or look to grow, questions such as 1) are we chasing “bad revenue”, 2) are we building the right infrastructure to support growth, and 3) can our organization withstand the growth, must be addressed.
- Are we chasing “bad revenue”? – “Bad revenue” does exist and in the height of growth, it is easily overlooked. “Bad revenue” is associated with customers, who cost more to serve compared to the profits they contribute. These customers strain resources, diminish cash flow and hinder the ability to sustain growth. Understanding the desired customer target(s) and the cost to serve them is key to ensuring that the organization avoids growing through “bad revenue”.
- Are we building the right infrastructure to support growth? – Key elements to building the right infrastructure include enhancing financial and operational capabilities.
- Financial capabilities – As the business grows, so does the need to better monitor the health of the business, which is reflected through financials. How is revenue generated? Are we properly managing expenses? How do we continue to fund the business? These are a few questions that require closer examination with growth.
- Operational capabilities – One result from growth is the need to meet the demands of an expanding customer base. These demands put added pressure on product / service delivery and customer service expectations. Properly managing growth falls on the strengths and/or weaknesses of the company’s operational capabilities and the ability to retain newly acquired and previous customers.
- Can our organization withstand the growth? – As the business grows, the organization will change. New people will be hired and not all will acclimate to the culture. Current employees will require additional development, and some will no longer be the right fit. These dynamics will stress the culture, causing tension across the organization. With the company culture having the ability to derail or invigorate any strategy, protecting it during growth cannot be underestimated.
Revenue growth is critical for the survival of any company. If managed improperly, it could be the beginning of a downward spiral. If managed properly, it is the beginning of a successful journey to truly growing the business. Growing the business is a challenge and growing it the right way is an even bigger one. So, don’t just grow revenue, grow the business!
About the author:
Anthony McIntosh is President and Founder of SSE Advisors, LLC, a strategic business advisory and consulting firm, focused on developing strategies and plans that help clients build sustainable success. You can contact Anthony at firstname.lastname@example.org.