Seven Tests for B2B Growth

The greatest source of long-term shareholder returns and value creation is growth. In the case of an average industrial company which is continuously growing 200 basis points ahead of the market, a two to three-fold or more rise in enterprise value to EBITDA multiple can be achieved. Proven practices can induce growth above market rates but companies usually do not have a clear litmus test of what they should have as benchmarks and goals of effective sales growth in case they are going to do so. What does sales and business leaders need to be answerable to themselves and their commercial teams to provide assurance that they are on the track of development? Our study on successful large and serial growers in the B2B industries has assisted us in responding to the question. We were able to determine seven practices that leaders of sales growth always embrace and translated them into a litmus test. This litmus test is recommended to companies seeking growth opportunities to compare themselves to best performances of growth companies:

• Growth performance is monitored against your market
• It has a tangible portfolio of three to five 100 basis point growth bets
• Share of wallet is calculated on each individual customer or prospect
• New customers contribute over 10 percent of the yearly growth in revenues
• The growth in annual margins is approximately 25 basis points
• The seller bonus/commission is at least half commission
• Sales technology is not an anchor, it is a force multiplier

It is interesting to see how many B2B companies take the initiative to discuss their performance in relation to the market as well as the trends in shares in general. Although it may not be easy to get absolute information on that level of analysis, even a good enough index of market performance as an instrument of measurement is achievable. Nothing is more significant as a metric in our experience. The performance of a company relative to the market must be at the forefront and as granular as possible (i.e. by area, product line, or customer vertical). The business leaders ought to be benchmarked to performance targets utilizing market wisdom, and resources ought to be assigned based on market possibilities and growth. The more religiously and strictly followed companies that trail against market are more nimble- capable of detecting their possible slip in particular ways in a short period of time, and make a turn.

Many companies put all their bets on a single large growth initiative, whether in the form of a new product or service, or a new go-to-market model or a new e-commerce portal. In far too many cases, that has a dismal result on the scale of impact. In our study we have demonstrated that the best B2B growers make multiple bets- that is, three to five -each with minimum ability to produce at least 100 basis points of incremental enterprise revenue growth. Such 100-basis-point bets are alleged to be present in most companies. However, when you request to see them, how they are measured, and how they are monitored, most executives admit that they do not handle growth bets of that magnitude or with that degree of aspiration. Although it might appear like it is an uncomplicated ambition, the truth is that any bet that can cause a sustained additional growth of that scale should be a big opportunity. Although it is not common to see the aggregate effects of the bet portfolio go to maximum potential, the aggregating effects of the collection of bets are sufficient enough to provide large-scale above-market growth in a wide range of scenarios in the market. This mix of three to five bets usually entails a mix of the opportunities in the core and the adjacencies of the organization and in the new breakout-type opportunities. Most common among leading growers is the one in which 70 percent of incremental growth is core, 20 percent is adjacencies, and 10 percent is breakout growth, between the more tactical (e.g., launching inside sales teams to hunt small / medium accounts better, using analytics to identify white space customers in new markets, creating predictive churn models to get ahead of customer losses) to the more strategic (e.g., innovation).

Sales teams would generally have minimal information about their customers and prospects, but not in a level of detail necessary to know how to sell better to them. With AI, third-party data sets, and sophisticated analytics, the companies in virtually any industry may map the entire potential of the market, calculating the volume of spend of all individual customers (current or prospective), and on all products and services they are expected to be purchasing. Using that information, sales teams are able to know the amount of potential spend involved, rank opportunities and create an ambitious plan to attack that opportunity.

Suppliers in food services can scan online restaurant menus and reviews to determine the product basket and size of spend of each restaurant. In services of after-market, after-market sell-in data, historic service rates and real-time data-monitoring may be integrated to anticipate with a high likelihood the probable service and parts requirements of a customer.

One of the initial aspects companies that can hardly grow at the pace of the market should consider is the rate at which they acquire new customers. In our experience with such firms, such rate is nearly always many lower than that of the industry. Sales practices tend to reinforce the issue including low levels of prospecting, compensation schemes that emphasize farming, little to no committed hunting resources and little to no visibility and management of the performance on the prospects. Although targets in new-customer acquisition vary with industry, such as in transactional businesses such as industrial distribution, and long-term contract businesses such as healthcare providers, our study establishes that on average strong growers aim to get more than 10 percent of the annual revenue growth to be attributed to new-customer acquisition. The positive news is that this can be hastened swiftly by the companies (we do acknowledge that sell cycles may take longer than others). Certain old-fashioned methods are helpful, including:

• Having more committed hunters on the sales team
• Creating an outbound calling inside sales team to generate leads
• Turning on senior visibility on the top new opportunities
• Enhancing value proposition messaging
• Top-to-top conversation
• Thinking of special pricing Changes in compensation are also essential to make sure that sellers are overcompensated in regard to new wins. This is also being transformed by analytics and gen AI through which leaders can do this with rapidity and at low costs. The relevant customer leads (thousands) can be discovered via diverse sources (cold CRM contacts, industry databases, and third-party aggregators) and reached using individualized messages created by AI through customized outreach, which enhances the response rate as opposed to more standard email and SMS marketing. Another bonus? There would be no more cries by the sellers that they needed to deal with thousands of leads and many of low quality. In our case, properly structured AI agents will be able to find, screen, and deliver the finest leads to reps with minimum or no human intervention.

Firm growers lead to a consistent margin increase due to price and cost discipline. They all have specific goals of expanding margins by approximately 25 basis points annually, measure anticipated changes in cost per year due to material-cost inflation and transfer the same. They have an innovation pipeline, and hence customers are ready to pay regular price increments and not blanket price increments. Indicatively, one company discovered that the readiness to purchase rush orders was nearly twice as high during the high season and adjusted the prices. Leaders also match compensation to lucrative growth. Table stakes consists of a margin part of compensation. Most major companies have extra, which has the incentive of strong pricers, and it is often based on a deal score in which the margin of a deal is rated based on the size of the deal, the size of the customer, and the value of the deal.

Although most companies have variable compensation plans, the variation in the top and bottom sales team performers can be as little as $5,000 to $10,000 per year. That will not inspire your top performers and this usually leads to long sales cycles and inertia. Winning of business should be rewarded and properly rewarded to good reps, and the business should be vastly differentiated between the best and the worst. High growth and high margin bonuses can be as much as the base salary and even higher and low performers may get significantly less. This may be done in various ways, but among the tenets that we observe to work are:

• The absence of limits on the upside
• A simple formula to allow sellers to easily know the value of every additional win
• Bonuses based on such things as bringing in new brands or achieving better margins
• Reduced payments on farming, i.e., steady-state accounts are managed at a lower cost, which can be transferred to a farming rep with a different compensation model With time, the incentive model that is wired to reward high performers will keep the sellers of the highest value and lead to turnover of those who are not suited to the job.

Top growers have smooth and connected omnichannel experiences on both sides, sellers citing technology as a force multiplier to their performance. It has three essential sales technology strengths:

A frictionless omnichannel experience

Biannual Customer Pulse survey B2B has revealed a consistent shift over the last ten years where customers were mainly using sales reps, to an average of ten channels during the purchasing cycle. Best growers encourage reps to drive sales activities to online platforms and reward sales in all platforms (and even have digital penetration as a measure of the incentive plan). They also provide a well-linked customer experience across digital as well as in-person and remote sales and service platforms by a well-integrated CRM and 360-degree customer view. People find it easier to make purchases online as opposed to calling a customer service representative to respond to the specifics of an issue or a product or service. AI agents are able to respond to up to 90 percent of questions with ease.

A CRM that the sellers are enthusiastic about

Sellers in low-growth organizations often tell us that their CRM is nothing more than a management reporting tool. Even so, this is supposed to be achieved through CRM, but the quality of the data is usually poor (opportunities are being added at the final step of the pipeline, not all data has been entered, wrong numbers) thus interactions with the sellers are inefficient. The CRM is perceived to be another job requirement rather than an essential enabler to the work of sellers day to day. Organizations that have succeeded in high growth rates have made their CRM a one-stop shop of all a seller requires, stocked it with insights of value shared pro-actively with sellers at the time they require it. Reps get high-value leads that are highly enriched with AI on a daily basis (contact information, why the opportunity is a good lead, what value proposition to lead with, historical information about the relationship). The sales journey is permeated with automation (automated service requests insights, automation-based new customer prospecting, automated account planning).

A value-backed AI road map

The field of AI is developing fast, which increases the accuracy and viability of an ever-growing number of new applications. In reality, it is incredibly hard to have AI deployed properly and realize the value of AI in the profit and loss (P&L). It is valuable because it has an established yet adaptive AI road map which is end-to-end seller and customer journey. Such end-to-end perspective based on opportunity that is well-aimed is the way to grow.

The customer then continues communicating with the AI agent through emails to assist answering prelim questions and the agent checks whether the customer is a good lead or not by searching CRM and other related sources of information. Then the agent schedules a live chat with a sales rep and gives him a synthesis of the chat and suggested talking points to get the sales rep ready to have the conversation. The sales rep is automatically priced and AI-generated talking points to value proposition are based on the individual needs of the customer. Once the deal is closed, the seller receives real-time notifications according to AI propensity model on what they should sell next (and why), whether the customer is likely to churn because of service and purchase behavior, and computer-generated quarterly briefs of business review in case of regular customer communication. In case a customer misses a regular order window, a prompt text message inquiring the status is received. In case they skip two windows, they receive an automatic pricing proposal on their preferred purchases according to a custom price algorithm, and it is presented in the form of an app notification. This is made possible by an AI coach that shows the reps and their managers what they are doing well and what they could improve on during a weekly basis. Organic growth is important when it comes to value creation and total returns to shareholders. Hopefully, this practice checklist will help you to be candid and critical about the performance and practices of your organization.