There are four pillars to evaluate the future success of any company. These include Management, Capital Reinvestment, Triple Digit Growth and comparison of Industry Growth Standards. In this article, I will be discussing the importance of triple digit growth for a company. While many investors might settle for double digit growth, I look for companies that target and are not afraid to reach for triple digit growth.
Steps to reach this milestone include the following areas:
Don’t look for more clients, focus on better clients. Continue to focus on your top tier clients and consider them your best source for referrals. Focus as much time and energy on them as you did when trying to win their business. Make sure that your mid range clients’ services are customized to their needs with the intent on moving their business to the top tier.
Focus your strategic plans around these areas: financial, customers, internal processes, and employees. Then, translate the three or five-year roadmap into 12-month and 90-day plans with growth goals and accountabilities shared by the management team
Re-package or restructure your existing products, services or offerings to drive more predictable, recurring revenue over-time. Recurring revenue provides much-needed stability. When you rely on one-off sales, you are vulnerable to wild fluctuations in month-to-month revenue, but things are much more predictable with recurring revenue. This matters a lot when you have bills, especially employee salaries, to pay. Finally, investors love recurring revenue, so if you ever decide to sell your business, you will be able to get a higher multiple for it.
Dividing a market into clearly identifiable customer groups can lead to increased conversions, improved financials, and faster product iterations. Separate current customers into distinct value-based segments. Once done, generate customer data & insights and then analyze the data and create profiles for each ideal customer. Finally develop criteria to measure each customer segmentation.
Start by optimizing pricing, contract values, delivery efficiency and sales mix to improve margin structure. Analyze your main systems from order to delivery and ask yourself these questions:
- How can you speed up the process?
- Are there steps you can eliminate?
- Ways to shorten parts of the process?
- Can you automate, template, or pre-do steps?
When you increase the amount you sell to your customer at one time, you’ll improve your margins because you’ll be increasing the purchase velocity and therefore lowering your cost per sale in terms of overhead burden.
- So how can you increase your average unit of sales per customer?
- Can you upsell to richer offerings?
- Can you offer larger units of purchase?
- Can you cross sell complimentary products or services?
Cut low-margin clients, products, or services, and invest the saved time and money in higher-producing parts of your business. Courting your current customers eliminates or greatly reduces the acquisition or marketing cost on that second and all later transactions. Finally watch out for scrap, spoilage, and wastage.
These are just a few key drivers that differentiate a company with single or double digit growth to a company that dares to reach for triple digit growth.
When it comes to Solomon’s Picks, we are looking for companies with Triple Digit Growth.