Highlights
- The revenue plan supports the company growth strategy. The two are integrated and symbiotic. The growth strategy defines WHAT to do. The growth plan defines HOW to do it.
- The plan is needed to organize the company's resources toward an overarching goal. It's essential that everyone rallies around a shared goal and agreed upon path to achievement. Without a plan, resources pursue the paths of least resistance in an uncoordinated and disjointed expedition.
- Revenue plans engineer customer and business outcomes to produce a forecasted financial result. They define the methods and actions to achieve targeted goals in the shortest time and least cost. They focus on the methods and processes that produce the outcomes that most matter and avoid wasting time with activities that don't.
A business growth strategy is all about effectiveness. It's more important to do the right things than do things right. That's because doing the wrong things well is a fool's errand that achieves little to nothing. Doing the right things, and in this case defining the right revenue growth strategy, is a prerequisite to defining the plan.
Building a revenue plan before solidifying a growth strategy is like shooting and then aiming. Ignoring, blurring or failing to align the strategy and the plan results in random, inconsistent and unpredictable execution. The two must work in lockstep to be effective.
A growth plan defines the financial target, aligns the actions (e.g., resources, investments, methods, technology) needed to make it happen and implements real-time measurement to verify progress or facilitate immediate course corrections.
We know from developing revenue plans for more than three decades that there are four essential steps to create the best growth plans.
- Construct the plan pursuant to the three sources of revenue growth
- Use evidence-based best practices to replicate already proven growth methods
- Apply predictive analytics to show how the actions come together to deliver the targeted result
- Implement governance for active oversight and the realization of the goal
Now I'll drill down on each of these steps.
Business Growth Methods
The growth plan is all about execution – and doing the right things right.
It drives execution with a focus on sequence, progress and measurement. However, that describes pretty much every type of plan whether it's a setting up a trade show event, planning a holiday party or increasing sales. What makes a revenue plan different is that it should be constructed pursuant to how revenues are earned.
Excluding inorganic methods such as mergers and acquisitions, the three sources and methods to increase revenue are to increase customer acquisitions, customer share and retention.
- Increase Customer Acquisitions
At a high level this means selling more products to existing customers or selling products to new customers. Your growth strategy will identify a combination of product and customer markets in a growth matrix. To get to the specificity needed for plan execution we need to drill down to the methods and best practices that show specifically how this goal will be achieved.
For example, a brand development program may promote company differentiation. An innovation program may create or extend product differentiation. A marketing transformation program may architect a campaign portfolio to increase qualified leads. Or a sales excellence program may combine a sale methodology with a streamlined sales process to increase sales win rates.
There are many options. Using company data or industry benchmarks to model the scenarios will identify the methods that deliver the best results in the shortest time.
- Increase Customer Share
Customer affinity is one of only four sustainable competitive advantages. Knowing your customers better than your competitors and using that knowledge to better serve them, solve for them, build relationships with them and earn their loyalty creates an enduring competitive advantage that will increase customer share.
Research from the Business Growth Report shows that customer growth strategies provide the roadmap to create and sustain customer affinity. Customer strategies may include Customer Experience Management (CXM), Customer Relationship Management (CRM), a customer engagement program or a customer loyalty program.
- Increase Customer Retention
Even with new customers coming in, company growth and valuation deteriorate when too many of those customers exit through the back door. Customer retention strategies improve short term revenues and create a multiplier impact to long term growth.
Managing customer retention is an imperative to achieve a sustainable growth business. Methods to improve customer retention may include programs for account management, account segmentation, customer engagement, customer loyalty, Net Promoter Score (NPS) and using technology to detect unhappy customers at risk of churn.
Revenue plans architected around these three methods will find the shortest route to the biggest impact.
Evidence-based Best Practices
Best practices deliver the next level of revenue plan detail. However, knowing which best practices are right for the job can be a challenge.
Best practices are born from research. Research and the rankings of sales performance methods, measures and results show what has been proven effective for top performers. Working backwards from successful outcomes and applying evidence-based best practices saves time, increases focus, lowers risk and shows the most direct route to predictable growth.
Evidence-based Best Practices change the question from "What can you do to increase revenues?", to "What should you do?" based on the lessons and methods that have worked for your industry peers and have proven to be consistent and predictable. Johnny Grow longitudinal research results show what sales programs work, which don't and what top performers do differently than their peers.
Below is sample growth plan that shows how prescriptive best practices roll up to achieve a target.
Predictive Analytics
We use a predictive analytics model to answer the HOW question. That is, how are you going to achieve your financial target? There are many types of models but we use one called the predictive pyramid.
The Pyramid is designed in a Design Thinking workshop, constructed from evidence-based best practices and published as a dashboard in the CRM system. It is holistic, integrated and interactive.
In fact, the revenue plan shifts from hindsight to foresight when it is built on data and becomes interactive. The data for the figures and calculations in the pyramid are sourced from company performance history where its available and from industry benchmarks where it's not.
The pyramid is an interactive model that shows how actions (aka levers and drivers) roll up to deliver the financial target. That interactivity allows us to model different scenarios, perform what-if analysis and experiment with trade-offs.
It shows how the actions work together to collectively produce the financial target before you begin. Without this predictive model, you won't know the end result until the end, at which time it's too late to make adjustments.
The Predictive Pyramid creates a blueprint that shows the most direct path from activities to results.
Governance
The thing about plans is that they seldom go according to plan. That's why governance is needed.
The revenue plan aligns the resources, actions and outcomes in a roadmap that if followed leads to a targeted goal. However, the route is seldom without a few detours, so a few course corrections will likely be required.
A governance framework is needed to organize the people, policies and practices designed to ensure transparency, inspection, accountability and adaptation. That framework will include some tools.
One tool we use is the governance hierarchy that outlines documented roles, cadence, communications and responsibilities. It makes sure everyone knows their responsibilities and expectations are clear.
Another tool is the Success Factors executive dashboard. It measures the health and progress along the journey.
A governance framework with supporting tools gives sales leaders and stakeholders what they need to do their job.
For example, they need clarity in communications. They want truth and they want it early. They want to know risks, issues, concerns and bad news objectively and early – so they can take corrective action at the earliest opportunity. Bad news does not get better with age. Most of all, they want to avoid surprises.
Good governance empowers sales executives to view the growth plan through the front windshield, and not just the rearview mirror. That allows them to proactively steer the plan to a destination, and not just be along for the ride.
See the four steps to create a revenue plan that exceeds expectations.
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