Advisor Marketing Collateral: Growth Capacity

This client-facing article is designed for several uses including advisor marketing and client retention. 

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Your job as CEO is like racing: to win you need to get out front and stay there. How will you? With great strategy. Great strategic plans are harnessed to strategic capacity: the capacity (read: ability) of your business to execute strategy. Want to grow? You need growth capacity.

Strategy that ignores capacity is doomed. Why? It’s great to have a goal and a plan, but without hard data on your capacity to execute the plan, you could be sitting behind the wheel of a race car with a go-cart engine. Ask yourself: do you understand your capacity to grow?  

Growth Capacity refers to your business’ quantified ability to meet its revenue targets. You can throw a target number on the board, but how confident are you that you have the people, cash and processes to make the number a reality? If you're like most CEOs, you're only moderately confident.

Here’s why you should be thinking about this now: it’s Strategic Planning Season. Planning for 2023 is especially tricky because outlets like Bloomberg are predicting a 100% chance that the economy will slip into recession. You need to be ready. Here are a few questions you should be asking yourself:

• Does your business planning include contingencies for an economic downturn?

• Did you know that one third of the middle market is owned by Private Equity firms? Thats 1 in 3 of your competitors, and PE brings cash and processes with a proven track record of success. Should you be doing what they do? 

• Since strong companies are more likely to survive and thrive, have you prepared by strengthening the capacity of your business to deliver your 2023 goals?

Let’s focus on capacity. Look at your 2023 revenue goal, and ask yourself: how confident are you that you can hit it? Confident means “we can hit our goals and have the data to prove it.” In our experience the difference between companies that consistently nail their goals and those that struggle is simple. Those who nail their goals have complete clarity about their future profits and cash flow, and can therefore invest confidently in growth. 

Growth capacity is on a scale, low to high. Step One is to understand where you are on this scale. Step Two is to see what areas of your business are limiting your capacity. Step Three is to design and execute a plan to neutralize these growth limiters. Within the context of a looming downturn, where should you focus first? On people, cash and SOPs. Take a sec and rate yourself 1-5 in the following key areas, where 5 is “Yes and we have data to prove it”. When you can confidently say you’re a 4 or a 5 in all of these areas you will have created the capacity to generate predictable cash flow, which is the launchpad for growth.  

People

• Effective Senior Leadership: can your team run the business, or is everything crossing your desk? There’s a simple test for knowing if you have truly effective senior leadership: how long can the business run smoothly in your complete absence? Anything less than a month is a sign of trouble.
• Productive and Loyal Employees: employees -including senior leaders- thrive and productivity soars when every team member understands their role, their place in their team, and the metric that defines their individual success. Does your team? Further, given how hard it is to attract and keep good people, what activities are you using to make sure your employees will stay for the long term?

Cash

• Maximized Recurring Revenues: can you predict a high percentage (more than 80%) of future revenues? Using contracts, loyalty programs, retained payment methods and other tools, nailing recurring revenues is the lynchpin to creating predictable profits & cash flow. Predictable cash flow allows you to weather a downturn and confidently invest in growth. How effective are you in this area?
• Strong Margins - your gross and net margins should be at or above the industry average. Maximizing margins delivers cash and increases your growth capacity. When was the last time you benchmarked your margins against your competitors? Does implementing a margin improvement program make sense? 

SOPs

• Strong Financial Reporting Processes: this may surprise you, but businesses are leveraging technology so they can close their books daily. That’s right, daily, and this kind of control is a competitive asset. The main reason is not because you have performance numbers daily. It’s because the processes, teamwork, transparency and collaboration required to make this happen are the hallmark of a strong business. Imagine your team working in concert to improve the numbers in your weekly flash report: sales working with operations working with finance and so on… Effective senior leaders and productive employees can drive these kinds of results.    
• Scalable Sales Process: sales is a science. The myth of the ‘born salesperson’ is just that: a myth. Having a documented sales process with a proven track record of success means you’re not at risk from sales folks leaving, and you can hire smart people to deploy your process and increase sales. What would your world look like if all of your sales people could deliver like your top performers do?
• Strong SOPs for delivering orders on time and to spec: your objective is to have a document that anyone can refer to and understand exactly how to deliver the promises made to the market by sales, on time, and to spec. Strong SOPs feed high customer satisfaction, recurring revenues, higher margins, a stronger brand and more. 
• High Customer Satisfaction: the dark horse. Are you tracking what your customers think of your business? Do you interview them to understand why they buy from you - and also why they don’t (lost sales)? Creating a business engine that consistently delivers high customer sat means that your sales folks don’t over promise, that your cash can cover inventory (goods or people), that operations consistently meets or exceeds customer expectations, and that you are tracking and using customer information to fine tune the machine. Nailing the earlier objectives feeds this critical metric. 

Pro Tip: Print this out and write your score next to each objective. Consider having your team do the same thing. Then meet and discuss where you are, and what you need to do to get to 5s. Consider having a professional growth-driver moderate this meeting. These strategic insight sessions have a proven record of success. 

Taking action on these objectives means you’ll be able to say “My business has an effective senior team leading productive and loyal employees. Our margins beat the competition, and we are highly confident in our future cash flow. We live our numbers, and have total clarity about both our sales pipeline and our ability to deliver new sales. Because of this: our customers are thrilled, referring us to their friends and coming back often to buy again.” Notice how these are all related, like the gears in a business engine - an engine that generates revenues and profits. Top CEOs are driving fine-tuned racing machines. We can show you how.

You might be thinking "That's a lot of work." But what happens if you don't take action? What could happen to your business as the economy contracts? Down economies kill companies. You owe it to yourself to at least get clarity about what shape your business is in. What's in it for you? The information you can use to create predictable profits and cash flow, the mother of all growth capacities, and your sea anchor in an economic storm.

1. Confidence in future cash helps you fund growth, it also puts you in the best position to capitalize on the opportunities that a downturn presents. When the competition is failing, growth capacity helps you increase market share.
2. Hitting these 8 objectives makes the business easier to run, and maximizes business shareholder value at current revenues.
3. Predictable cash flow drives your ability to create a war chest for weathering the downturn, and to borrow if you need to. 

Ask your advisor what steps you can take to analyze your growth capacity and take action on your bottlenecks. Wise CEOs are recession-proofing their businesses right now; the quicker you take action, the further ahead of the competition you’ll be. Drivers, start your engines. 

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Advisors using the Growth-Drive system are delivering client wins. We are onboarding the next cohort of Growth-Drivers in January, email George to set up a consultation about whether Growth-Drive can help you build a thriving advisory business. 

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