article | August 24, 2017
A Success Story
A leading provider of healthcare software, recently bought by a private equity firm, came to see us at our executive briefing center. The deal partner from the private equity firm, the CEO, CFO, and the product, marketing, and sales leaders attended a 2-day workshop session. Their objective was to develop a plan to grow organic revenues from ~$566 million to ~$600 million at 40% EBITDA margin inside of 2 years. These were aggressive goals since the normalized historic organic revenue growth rate was flat, and their competitors were in decline. To hit these goals, the company needed to grow when no one else was.
To make this happen, the CEO wanted to participate in a workshop to apply the How to Make Your Number Workbook to their business. At the time, the 9th annual edition was used ,and now the 11th annual edition of the is available.
A large, brand-name consulting firm had performed due diligence on this company for the private equity firm. They suggested to move forward with the acquisition, and to pay a premium for it, based on a few factors.
For example, there were many positive demand drivers such as an aging population, an increase in regulations encouraging investment in this technology, and there were many green field customer penetration opportunities.
Given the premium price paid for the company, organic growth was essential and, therefore, sales and marketing improvements were a top priority.
The executive team was a little frustrated with the large consulting firm’s sales and marketing plan. They felt it would take too long to execute, was too expensive, was too complex, and would be highly disruptive placing unreasonable time demands on the team. A difficult plan was dropped on their desk, creating a lot of work for them. The team knew they would be blamed if the plan did not work because the investment firm perceived the plan to be excellent.
There were several cultural challenges to overcome. For example, the CEO felt threatened because the private equity firm suggested he work with us. In his eyes, embracing our help was a personal risk because of our relationship with his new board. In addition, he had never worked with us before and was skeptical our methods would be successful. He was particularly concerned because we had not worked in his specific sub-industry. Some of this concern and skepticism can be attributed to sales and marketing being a blind spot for this CEO, who was a brilliant engineer by trade. He was especially worried about his sales leader accepting us. When the sales leader learned of our involvement, he objected for he felt improving sales results was his job and questioned why they needed us.
Because of the cultural dynamics, we recommended our workshop be held at our executive briefing center instead of their headquarters. At The Studio, we have a lot of fun while getting a lot done. For example, we catered a Texas barbecue for lunch, had a tequila tasting at our bar during happy hour after a long day, and filmed the team on an episode of our award-winning TV show. The Studio setting is a safe-haven and allowed his team to get to know our team, which went a long way toward a successful workshop and engagement.
The executive team was led through a series of exercises meant to determine if emerging best practices would get them to $600 million. After 2 days, we developed two possible routes to success. Route No.1 was to increase sales rep productivity. Route No. 2 was to hire more sales reps. Here is the math on each and how they compared:
The executive team correctly determined that hiring many reps and getting them productive was going to take too long, cost too much, and had a low probability of success.
We turned our attention toward improving sales productivity, determining which investments to make, and toward building an execution plan to do so. We settled on a group of emerging best practices in the areas of:
During the workshop, we created the plan to fund these sales productivity investments, which totaled ~$1.7 million. A requirement of the board was to make this investment in sales productivity budget neutral. A thorough review of the expense budget revealed opportunities to reallocate existing spend from areas of low return to this initiative. For example, trade shows were not generating enough leads, yet the company was spending $600K per year on shows. The company was spending $180K on an outside sales training firm, yet sales were flat. The company planned to add 21 sales reps for a total cost of $4.2 million, yet one-third of the existing sales team was not selling enough to cover their cost. Lastly, the company had invested in a social selling software tool to the tune of $106K but only 20% of the reps were using it, and even fewer were using it correctly.
We built an execution plan right before the team left. This documented a timeline, milestones, deliverables, tasks, and team assignments. They were pleased to see that the plan was 2x faster than the plan that was originally laid out by the large consulting firm. Emerging best practices are easy to understand, easy to customize, don’t require an army to implement, they are affordable, and built with an eye toward implementation from the start.
This story has a happy ending.
The CEO of this company hired SBI to help with the implementation of the plan. The internal team did not have enough capacity to get the work done, as they had full-time jobs. He wanted to implement everything quickly and since it was budget neutral, he was eager to get started. There were other competing priorities demanding his time and he felt project risk was reduced by having us help.
As we were involved in the implementation, we can speak directly to the results.
The company reached $600 million 8 months ahead of schedule, and the 40% EBITDA margins improved to 43% due to the strategic pricing efforts. This drove up the enterprise value of the company as the multiple on earnings expanded. The private equity firm sold the company, successfully exiting the business. And the executive team all did very well in the sale.
I hope you can see yourself in the above story, in part or in total. If you can, commit the time to read through the Workbook. After doing so, consider coming to The Studio for a workshop. Maybe doing so will result in a success story of your own.
Have expectations gone up and left you wondering if you can make your number? Here is an that will help you understand if you have a chance at success. Take the Revenue Growth Diagnostic test and rate yourself against SBI’s sales and marketing strategy to find out if:
It’s hard to imagine a time where calendars weren’t inundated with video calls and discu...
Most CEOs state that Customer Experience is a differentiator for competitive advantage. If perfected...
For many services companies who achieve exponential growth within narrow timeframes, they often find...
Customer Experience is no longer just a buzz word that companies can throw around. It has become a m...
With the shift towards retention being the new growth, companies have increasingly seen the incremen...
Legacy companies have been able to withstand nearly every possible economic condition over several d...
Iconic customer programs generate fierce loyalty and accelerate revenue growth. CX professiona...
No more bets, please. Have you ever been at a roulette table next to the person who bets on nearly e...
SBI TV episodes bring you Sales and Marketing insights from B2B industry thought leaders and growth experts, on topics like product, pricing, customer experience and success, and go to market. Catch up on new and previous episodes here.