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Guest: Tracy Tolbert, a coach here at CEO Coaching International. Tracy has nearly 30 years of experience as a global sales executive. When Tracy was Executive Vice President of Global Sales at Xerox, the firm hit its yearly target of over $1.5 billion in annual recurring revenue. He also grew sales more than 15% year over year while maintaining a customer base retention rate of over 90%.
Episode in a Tweet: Carefully managed growth might not make splashy headlines, but it’s the surest path to BIG profitability.
Quick Background: If you want your company to stay successful, then maintaining a meaningful growth rate needs to be one of your BIG annual goals. But as we’ve seen recently at companies like WeWork and Uber, chasing growth for the sake of growth just pumps your business full of hot air. Once the hype bubble bursts you could find yourself overvalued, understaffed, and bleeding cash.
On today’s show, CEO Coaching International’s Tracy Tolbert lays out a more practical managed growth strategy that will get your company BIG without sacrificing profitability.
Transcript: Download the full transcript here.
Key Insights on Managed Growth from Tracy Tolbert
1. Find the right kind of growth.
“We have pressure to grow our business and it’s good pressure,” Tracy Tolbert says. “But you have to have what I call ‘managed growth,’ which means you don’t grow just for growth’s sake. You have to make sure that you’re growing in a way that you can manage and maintain the growth.”
Tracy believes that the right kind of growth is “growing profitably.” We’ve seen too many examples recently of companies who thought they were the next Amazon, blazing a trail on the bleeding edge and believing that profitability would eventually follow huge cash expenditures. That’s just not how it works 99% of the time.
“I think WeWork is a good example of a company that let the growth get out in front of them to where it’s created catastrophic problems,” Tracy says. “That’s the thing you have to be careful about versus growing in a way that builds a good, solid foundation for your company.” Controlled growth puts less stress on your critical resources and can lead to long-term sustainable growth.
Another important nuance is the type of growth you’re pursuing. A successful acquisition brings about a whole different set of challenges than broadening your customer base or seeking a major equity investment. Depending on your strategy, managed growth might drive up numbers in one part of your organization while stagnating others. “All growth is not going to be the same,” Tracy says. “Inside of an organization you can have a subset of the organization that may have less than profitable growth, and that’s okay. I’ve worked in organizations where we had different products or services that had different margins. And we were willing to accept some lower margins because we had another part of the business that had extremely high margins.”
It all boils down to having a defined goal and defining the steps towards hitting it. A good place to start your managed growth is to ask, “How fast can my company afford to grow?” Answering that question will help you tie your growth strategy to speeding up your cash operating cycle. You also might find inefficiencies you can address to make taking that next step less daunting in the short term.
2. Define your sales comp.
“One of the things I’ve learned after 35 years of managing salespeople is that they will do what you pay them to do,” Tracy Tolbert says. If your sales comp rewards employees who take the path of least resistance, they’re going to keep selling what’s best for their commissions, not what’s best for your company.
“Part of managed growth is that you incentivize the particular action that you want out of your salespeople,” Tracy says. “If you’re trying to grow profitably and you’re trying to target specific margins on whatever it is that you’re selling, then you build your compensation plan around those margin targets and you make that an element of the plan. If there are products within your mix that you want to accelerate because they’re more highly profitable than something else, then you want to target those products. And so you might put in a little higher compensation based on those specific products and say, ‘You’re going to get X if you sell the normal product, but there’s a subset here that we want you to really focus on because there are higher margins to the company and we’re going to pay you a little bit more for that.’”
Another great incentive target is new business. Salespeople who get too comfortable fishing in the same pond every month aren’t going to care about how they’re stalling your managed growth. But if you put a higher commission on hooking new whales, your sales team will start broadening their prospect pools, maybe even opening up new geographic territories to your business.
3. Continually build your organization.
One of the problems that led to WeWork’s massive devaluation was that the company bought more shiny objects than it could effectively manage: schools, real estate, other companies. Similarly, the businesses hurting the most from the coronavirus outbreak are those whose supply chains aren’t robust enough to withstand sudden, unexpected kinks.
If you want your business to get BIG, your company has to get bigger too. And the best infrastructure investment you can make is to hire the absolute best talent you can find – especially the salespeople who will be the face of your company to new customers.
Tracy Tolbert advises, “The most successful sales leaders that I know are always targeting growing the sales organization. They’re always recruiting, they always have open requisitions, they always are networking and looking for people who may fit into the organization. They never stop doing that because it takes time to find the right kind of people to fit into your organization. And when you’re in a company that’s growing very, very quickly, that’s probably one of the biggest challenges, particularly in a market like we have today where unemployment is so low. You don’t have people lining up to come into your sales job. You have to go out and find them and you have to be willing to do creative things to get them to come to work for you.”
Interestingly, Tracy likes to target the same unconventional talent pool that CEO Coaching International client Jim Bennett mentioned at last year’s CEO Summit: former college athletes, especially those who didn’t ride scholarships to their degrees. Former athletes are usually coachable, hardworking, and competitive – all ideal traits for an exceptional sales team, especially if your company has a strong in-house training program.
“I think some of the tech companies today are doing a really good job with training new workers,” Tracy Tolbert says, “because they are trying to grow quite rapidly. They need to hire salespeople and get them up to speed pretty quickly. They hire out of the universities and they have very, very sophisticated training programs where they’re teaching them how to sell properly. It’s a way that you get salespeople to act the way you want them to act. They don’t have any bad habits. They aren’t doing it the way that they did at their last company. They’re open and they’re eager and you can mold them to be the kind of salespeople that you want them to be.”
1. Grow the right way. If you don’t have a path to profitability, you risk stretching your resources past their breaking points.
2. Always be on the lookout for top talent and keep thinking of new ways to incentivize, energize, and retain that talent.
3. Build up your resources today so that you have what you need to grow BIG tomorrow.
Transcript: Download the full transcript here.
About CEO Coaching International
CEO Coaching International works with the world’s top entrepreneurs, CEOs, and companies to dramatically grow their business, develop their people, and elevate their overall performance. Known globally for its success in coaching growth-focused entrepreneurs to meaningful exits, CEO Coaching International has coached more than 500 CEOs and entrepreneurs in more than 40 countries. Every coach at CEO Coaching International is a former CEO or President that has made big happen. The firm’s coaches have led double-digit sales and profit growth in businesses ranging in size from startups to over $1 billion, and many are founders that have led their companies through successful eight and nine figure exits. CEOs and entrepreneurs working with CEO Coaching International for three years or more have experienced an average EBITDA CAGR of 66.4% during their time as a client, more than five times the national average. For more information, please visit: https://www.