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One Corp Dev Teamâs Secrets to Sourcing Foreign Acquisitions
As part of our ongoing series profiling the inner workings of active corporate development teams, we sat down with Greg…
Business objectives of company owners vary as much as the individuals themselves. Some seek moderate growth for stability in a âlifestyleâ business, while others pursue breakneck growth for the ârushâ and satisfaction.
As companies mature, and owners age, those objectives often evolve. For every company thereâs a moment when the theoretical and distant prospect of a transition suddenly becomes real and immediate. Some owners carefully plan and prepare themselves and their companies in advance – others react to circumstances. Regardless of the path by which they arrived, that moment focuses participants intently and exclusively on a companyâs bottom line.
This focus is both understandable and natural. Most companies habitually attend to the bottom line by rigorously managing operations and costs. They often implement lean initiatives for key business processes, and managers rely on âdashboardsâ of financial performance metrics to flash early warnings of trends. Thereâs a strong and common culture in American business that focuses management attention on the bottom line.
Companies grooming their financials for an impending transition have little choice – the only place to readily âmove the needleâ in the short term is to cut costs.
The âbottom lineâ snapshot doesnât provide much texture, but it is the inexorable sum of the top line and the costs. As such, itâs an indicator. But the science of business valuation recognizes the inherent limitations of a static indicator and therefore works with a projected profit stream. In other words, itâs a video compared to a single snapshot. Cutting costs is equivalent to posing the snapshot while the ongoing storyline is primarily a reflection of the top line.
The challenge for companies, whether they are embarking on a 3-5 year program preparing for a managed transition or simply bolstering resilience and vitality to increase value for current owners, is to grow the top line consistently. Doing so requires a change in business mindset.
Managers must squarely confront the dissonance that exists in common approaches to managing top line revenue growth vs. operations and bottom line cost factors. Rigor and scientific management are commonly applied to the bottom line while top line growth is managed with stale methods. Just as companies might have added another inspection station at the end of a line before they embraced operational excellence, today companies add another marketing program (e.g. SEO or social media) or another sales resource (inside rep making cold calls) to fix inconsistency in the top line.
The direct connection between a strong, growing top line and enterprise valuation is clear. But consistent top line growth, and the approaches that create it, have additional tangential implications to maximize valuation that are often overlooked.
All growth isnât equal, as they say, and the source of revenue growth impacts its value.
Every manager faces the challenge of balancing competing priorities and resource constraints. Their first job is to run the business, and thereâs no easy answer to the question, âHow do I grow in a way that strengthens my business and increases our resilience and viability?â
Itâs easiest to answer that first in the negative. Donât just add another rep, another trade show, another series of magazine ads, etc. Simply doing more of what isnât exceptionally effective wonât make it so.
The real answer is to reengineer your revenue growth model, and there are two customer centric themes that guide successful initiatives:
These are deceptively complex – both in tactical execution and in the mind-shift that is required for most companies to succeed. Weâll dive into each of these in future articles, but hereâs a quick overview.
Back in the last millennium, buyers needed sales reps since they were the link to the information buyers needed in a world of asymmetric information distribution. Sales cycles were generally linear and predictable. The periodic direct contact between buyer and rep created a tempo and a series of progressive âyesesâ, afforded the rep the opportunity to keep tabs on the buy side process and status, and allowed capable reps to sell – to influence the process.
Today buyers no longer need reps for information (except in late-stage negotiations.) And buyers who have always disliked âsales repsâ now use technology not only as a proxy for reps, but to avoid them (hide behind caller ID, etc.)
There is still a critical role for a talented, creative sales person – but sales, as most companies persist in practicing it, is dead. Today the âsecretâ to revenue growth is to help people buy. Thatâs tough enough if your product is a cup of coffee – itâs downright challenging if yourâs is a complex sale.
The key is buyer empathy and an approach that leverages digital tools to establish thought leadership and authority. Companies can create a framework that builds relationships with buyers through a virtual sales process. It:
This sounds simplistic, but very few companies really execute it well. Typically companies define their targets reflexively based on historical success. Thatâs a self-limiting approach for several reasons:
Not only does the old bromide that a âbusiness that isnât growing is therefore dyingâ apply, but for companies preparing for a transition (and every company should be!) growth must be sustainable, predictable, and secure. Thatâs not attainable by pressing harder on the accelerator of traditional approaches. Rather it takes an enlightened and bold approach to business development analogous to the revolution on operations of the last two decades – and it takes time to build. Companies that forge ahead will thrive.