For most businesses, linear growth – maybe 10 or 15 percent annually, year in and year out – is certainly not a bad thing, but many companies do not take a step back to think about moving beyond linear growth to the next level of exponential growth of 30 percent or more. So what is the difference between companies that grow by a small percentage, and ones that grow at a “hockey stick” rate?
To experience linear growth, most companies focus on a straightforward strategy of gaining about 10 to 15 percent more customers than they lose on an annual basis. To grow at an accelerated pace, however, businesses not only need to get more customers, but must also look at their existing customers to increase the value of those accounts.
Existing customers usually fall into three categories: the top 20 percent, which produce 80 percent of your revenue; the middle 50 percent, which generate 15 percent of your business; and the bottom 30 percent, which make up the last 5 percent of your revenue. For the top 20 percent, look at each account individually to see how you can grow them by 15 or 20 percent each. In other words, do a gap analysis of what you are currently selling to an account and what you should be selling to an account.
In the next category, for your middle tier of customers, look at how you grow those accounts and move them into your top 20 percent. And in the bottom category, examine how you can make them profitable (online-only, service plans – they most likely shouldn’t be getting the same service as your top-tier clients), grow them into a bigger account, or simply move on – that is, stop investing in accounts that don’t really yield anything.
This combination of growing your existing business with adding new customers will help push you to the next level. For example, one customer Arc worked with focused on averaging an additional 10 percent more in sales to their top customers and reconfiguring bottom customers by pushing sales online (instead of working with a sales rep), while acquiring the same number of customers as the year before. This resulted in a 40 percent jump in a revenue and a 50 percent increase in their bottom line. Taking a similar approach – increasing profitability by moving your middle customers to your top tier, moving your bottom customers out (or reducing service costs), and increasing your revenue from top customers by 10 or 20 percent – will move you from linear to exponential growth.
(Photo credit Jerry on Flickr)
