What Do High Growth Businesses Do Differently?

Over the past 5 years the importance of the “High Growth Business” and how this relatively small group of businesses disproportionally impacts our economy, has become widely recognised.  Firstly, let’s just clarify what we mean by a High Growth Business. The generally accepted definition is a business that is growing at a minimum of 20% per annum with a turnover of at least £500,000. 

The now defunct, Government supported GrowthAccelerator service, recognised the importance of this group and provided financial support to stimulate further growth through business advice and leadership & management training. 

Despite its importance, there is very little empirical evidence on what businesses do that is likely to make them a candidate for high growth and how they maintain a high growth state.

However, a report published in the USA by Hinge Marketing as recently as February this year, at last, gives us some empirical insight into the workings of these businesses. It looks only at service businesses, but the results are from a sample of over 500 firms.

I don’t propose to give a blow by blow account of the report but rather pick out some of the more interesting findings. There is a link at the end of this article for those who want to read the report in full detail.

One of the most surprising findings was that High Growth Businesses were 45% more profitable than their no growth counterparts. Put another way, High Growth Businesses in this sample had an average profitability of 19.9% compared to 13.7% for No Growth Businesses. 

This finding seems to defy gravity as conventional thinking tends to suggest that in the high growth phase, businesses substitute top line growth (turnover) for bottom line growth (profit). The report itself doesn’t analyse why but having thought about it a bit, I’ve a couple of suggestions. 

Firstly, High Growth Businesses tend to be better run. In order to sustain high growth, the leadership team needs to have a detailed understanding of how different aspects of the business interact. That tends to mean that they are more efficient as a business including delivery and managing creditors. On the other hand, I know from personal experience that many High Growth Businesses can also be rather chaotically run and certainly aren’t then efficient.

Secondly, could be the adoption of technology. By employing technology appropriately, you can substitute new recruits for capital investment. This means that you can reduce the level of recruitment for any given level of growth. In my experience it is the need to recruit, and recruit heavily, that impacts profitability because it often takes several months for new starters to add value to the business. 

I don’t have a clear answer as yet but do hope it’s something that is followed up in a later survey.

The survey also looked at how firms differentiated themselves: this also generated some startling differences.

In response to the question “What are your five most favoured differentiators?”

High Growth Businesses listed;

Our marketing/ business development approach

Our culture

Our business model

Our use of technology

The quality of our people

No Growth Businesses listed;

Our commitment to results

Where we are located

Awards we’ve received

Our reputation

The specialised services we offer

What is blindingly obvious is that these two groups focus on completely different things and if you wish to embrace high growth there may need to be some significant shifts in your way of thinking.

Let’s now turn our attention to how the two groups approach marketing. The survey uses the idea of Total Marketing Effort, which represents an approximation of the sum of explicit marketing costs and implicit costs such as time or diversion of expertise. The rationale behind this is that no marketing is free because marketing time often competes with billable time.

In respect of total marketing effort, High Growth Businesses investment are slightly less than No Growth Businesses at 55.7% to 58.8% respectively. This may also be somewhat of a surprise as I suspect many would expect High Growth Businesses to be spending a lot more on Marketing. 

Logically then in order for this to be true, High Growth Businesses must have much more effective marketing. I think this goes back to a point I raised earlier that because they have a much better understanding of their business they get more “bang for their buck” out of each pound of investment than their No Growth counterparts.

What is more, High Growth Businesses invest their spend very differently. High Growth Businesses spend much more on digital marketing. Comparing these two groups again, High Growth Businesses only spend 40% of their marketing effort on traditional marketing compared to over 50% by No Growth Businesses. By contrast, High Growth Businesses are much more heavily invested in digital marketing, where they spend 60% of their effort. 

Also, as you might expect because they are more rigorous in measure relevant metrics than traditional businesses. Typically High Growth Businesses monitor at least 4 separate metrics where No Growth Businesses monitor just over 3. This might be for two reasons, firstly, digital marketing is easier to track, therefore building reliable metrics is simpler. Secondly, though perhaps a more circular argument, is that they run their business more effectively which means they’d rather spend their marketing investment where they can monitor its performance which would bias them towards digital marketing.

So what are the takeaways from this survey?

If you want to have a successful High Growth Business, then you need to take a holistic approach and look at how your business can best deliver what you are selling. The idea that culture and people can be a compelling differentiator at the strategic level might be a surprise. However, if you look at many of the highly successful businesses of the recent past, these two components have been key attributes to their success.

Marketing isn’t just about spend, it’s also about finding the right techniques to use. Currently digital marking is delivering a better ROI, however, that might just be because traditional marketing is harder to measure, not that it’s less effective.

We are a specialist High Growth consultancy. Using our Seven Steps programme we can help you set your business for long term High Growth. For further information please go here 

This article was originally published on BusinessZone.co.uk

For a full copy of this survey go to Hinge Marketing

Does Spending More On Marketing Equal More Success ?

There is no doubt that many surveys show that an increase in marketing spend leads to an increase in growth. However there seems to be only a limited correlation. Take this statistic for example; if we compare at High Growth businesses (defined as growing at 20%+pa for 2 years or more) with average growth companies we get a radically different picture. The figures collated from a recent survey on High Growth businesses by Hinge Marketing is that an average business, that is one that grows at less than 20% per annum, spends about 5.1% of its turnover on marketing. At the top end of average businesses marketing spend can be as much as 12% of sales. The average of the high growth firms surveyed showed their average spend was 4.9% of sales. Slightly lower than the median for the average business! A bit of a surprise given that they are growing up to 5 times faster than the top spenders of the average business and spending much less on marketing.

That leads to the obvious question. Why? In short its to do with how High Growth businesses address their market. For one thing they are much more focused on meeting clients needs than the average business. For another they have a much clearer understanding of who they were selling to and what their needs are. Basically these high growth businesses have recognised more than the average business, that their clients and prospects are only interested in themselves and concentrated on answering two questions: 

What problem do I solve for my customer?
Why should my customers buy from me rather than my competitors?

These High Growth businesses seemed to have recognised two things. Firstly that customers are selfish and are really only interested on what suppliers can do to help them overcome their own problems. Secondly High Growth businesses have spent a considerable amount of time and effort answering the question why me? 

This really sets them apart. In a recent workshop I asked the 20 or so participants to answer the question “why should my customers buy from me rather than my competitors?” and without exception they all struggled. Some actually admitted they couldn't answer it at all. 

This was further demonstrated when the same survey rate the elevator pitch. They asked each CEO to give us their brief elevator pitch. They then rated their response on a 5-point scale based on three criteria:

1) Clarity of the firm’s capabilities and purpose

2) Clarity of the target market

3) Articulation of the firm’s competitive advantage

High Growth businesses scored an average of 72.7%

Average growth businesses scored an average of 45.2%

What this signifies is that successful sales and marketing has more to do with the clarity and uniqueness of your proposition than the size of your wallet.

To get a full copy of the report from Hinge Marketing go here

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Exigent Consulting provides specialist services to the Small and Medium Business including Managing High Growth, Business Turnaround, and Mentoring. We help business owners improve the profit performance of their business. 

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What Do High Growth Businesses Do Differently?

That’s a question that most of us find intriguing because we all want to know the secret of success. Many business owners I know, whom others might consider successful, are themselves a little nervous as they don’t really understand why they got to where they are now. Their problem, obviously, is that if they don't understand why they got there in the first place; they won’t know what to do if things go wrong.

You might have noticed that more recently I have been focusing on ambitious business owners that are seeking to rapidly grow their business. These High Growth businesses provide us with some valuable insights about how to be successful. A recent survey of High Growth businesses in the USA by Hinge Marketing concluded that there were 4 things that high growth businesses do differently from others, which contributed to their growth.

1. They focus on delivering client’s desired outcomes. They were not touting the firm’s qualifications or their products or service strengths but rather what the results were of providing their product or services and what it meant to the client. This idea of focusing on outcomes makes them much more likely to deliver as they have their eyes on the prize.

2. They are truly customer focused; their job is to make the client’s life easier. You won’t hear complaints about customer attitude or how clients are making their life difficult. They see a problem with a customer as an opportunity for them to improve. Some businesses are actually disappointed if they don’t get negative feedback from their clients as it doesn't give them the opportunity to further improve their business.

3. They are flexible. They recognise how much, both prospects and clients, value flexibility and very many high growth businesses feature flexibility in their marketing and sales material.

4. They focus on their reputation. They work very hard at promoting and protecting their reputation and their brand.

There is a 5th thing that High Growth businesses do, or rather and interestingly what they don’t do and that is spend excessive amounts on marketing. Surprisingly, High Growth businesses spend slightly less than the average business on marketing. You'd intuitively expect that High Growth businesses (in this case growing @ 20% plus pa over 2 years) would be spending disproportionately more. However the survey indicated that these " High Growth " businesses spent only 4.9% of their revenues on marketing as opposed to 5.1% for the average business.

This leads to the obvious question; how do they do that? Whilst I have no empirical evidence I can anecdotally, at least, support this finding. If I look at those High Growth businesses I've worked with virtually all of them spent much less on marketing than you’d expect. Having looked into this further it seems to me that many High Growth businesses have accidentally locked on to something which fits the market demands better than the competition and the clarity of their proposition has got prospects pounding at their door. 

I can think of two obvious examples; one a construction business that is currently experiencing an 80%pa growth over this year and forecasting similar next with no marketing spend at all. In fact they are receiving so many enquiries that they are hard pressed to respond at all.  Looking at it for the first time you might even think that their sales process was broken. Yet despite all of that their growth is and continues to be phenomenal. Why, "word of mouth". They will move heaven and earth to get things right first time. This attitude marks them out from their competition and keeps both existing and new customers approaching them for proposals.

The second is a services business which has landed several strategic contracts with some very high profile companies in the UK, with no formal sales function and more startlingly having no one with any formal sales training. Its success once again appears purely based on what it can deliver and “word of mouth” from a couple of existing clients.

What I find interesting is that the results of this report suggest that a business’s success has much more to do with how well they had thought through why and how they deliver their product or service and their value proposition and much less to do with the size of their wallet.

For a full download of the Hinge Marketing report click here.

Exigent Consulting provides specialist services to the Small and Medium Business including Managing High Growth, Business Turnaround, and Mentoring. We help business owners improve the profit performance of their business. 

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Does Your Website Pass the "I" "We" "You" Test?

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Two-Point Perspective. Write from the readers perspective on your website. (Photo credit: Wikipedia)

As the use of websites to promote our brand and generate leads intensifies too many of us fail a basic but critical test which dramatically impact the performance of our sites.

You will know by now that Google wants everyone to focus on content, yes, that’s the boring bit we have to produce which goes on those lovely well designed web pages we've paid for. For most of us writing copy is not something we do as a profession, but there is something simple we can do which will help us connect with your audience even if we aren’t confident about writing copy.

The most influential is the "I" "we" "you" test. What does that mean? This is simply the number of times you use the terms "I", "we", or "you" on a single page of text. The ideal ratio is 1 "I" "we" to every 6 "you". Sadly for most web sites the ratio is the complete opposite. Why is this important? As a visitor to a site I want to you to be writing from my perspective about thing of interest or benefit to me and about things that might or should be important to me. Its a basic marketing principle that you should always write from the prospective of the reader not the writer. The reason for this is simple when we write from our own perspective we get to focused on what is important to us, which in most cases is not what is important to the reader.

For example writing on your web site “we’ve been established for 25 years and we offer the best in class widget, our quality makes us different” Well lovely, but frankly I’m just not that bothered. However, if you wrote “As a user of widgets you've probably found that the biggest problem is inconsistent quality. So you’ll be looking for a supplier who can give you guarantees about the performance of the widgets you need”. Well you know what; I’m interested.

The two short extracts are talking about the same thing but from a completely different perspectives and it’s the latter which employs “you” that speaks from a potential purchasers perspective which engages the reader, and that is the perspective you must have to get the maximum performance from your site.

Now then why don’t you nip over to your website and see how you fair in the "I" "we" "you" test.

Exigent Consulting provides specialist services for High Growth Businesses, Business Turnaround, and Mentoring to the Small and Medium Business. We help business owners improve the profit performance of their business. 

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Cold Calling or Lead Generation, Are We Missing The Key Point?

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Over the last few weeks it seems that the intensity of the debate about ditching cold calling and moving to digital lead generation has increased to a level of intensity where it is getting a bit absurd. It seems to me that proponents of both sides are trying to make unrealistic claims about the efficiency of their pet route to market, I decided it had all got a bit too extreme when I read the following quote: “And that’s when it hit me: Cold calling isn’t just a terrible idea during a recession, but may actually be contributing to the recession itself! Think about it…”

Cold Call (Photo credit: Alan R. Light)

Well I did and I thought it was just about the most ridiculous statement I had heard in a long long time. We have the collapse of Lehman Brothers, the Global Banking crisis, massive individual and corporate debt, and then we have cold calling. Nope, I just can’t get my head around that one.

So I thought I would go back to basics to try to bring some sense back into this debate. Cold calling as we know is a rotten job, I’ve been in sales and marketing for all the best part of 30 years and I can honestly count on the fingers of one hand those people who enjoyed making cold calls. Yes cold calling has its drawbacks; in particular cold calling in a B2C environment can be very difficult and counterproductive. Increasingly that type of intrusive marketing is getting a bad name, partly because telemarketing companies are having to make more cold calls per sale, and partly because of the damaging effect some of the “Cowboy” operators out there are having on the industry as a whole. Nevertheless the there are many situations when cold calling is effective.

Going right back to basics, a cold call, or lead generation through email marketing or even printed mail shots, are all attempting to achieve the same purpose; to identify if the recipient has a need for the product or service on offer. With a cold call you find out immediately because of the person at the other end will tell you “no” straight away. This is the essential problem with cold calling, as the vast majority of people can’t cope with being told repeatedly “no, I don’t want what you are offering.” We eventually get the same answer from a mail shot or an email but it is a much more comforting “no” as it is simply no response at all, that’s much less hurtful and much easier to cope with.

Also lead generation has volume on its side, it’s much easier to contact 10000 people by email than to phone 10000 people volume gives you a greater chance of success; and as George Bernard Shaw said, “God is on the side of the big battalions.”

What seems to have got lost in this argument is any form of analysis about what is the best way to contact your target market. In order to come to that decision, it seems to me, we just need to understand how people in our target market prefer to be contacted.  In the UK certainly many industry sectors work on the basis of cold calling, and this is particularly true of construction where main contractors will expect calls from a multitude of subcontractors who may be interested in using their specialist skills to deliver a small part of the overall solution. By contrast if you were to contact media companies many of the office based organisations, in particular, service companies, you might find that using lead generation techniques an effective way to contact your target prospects.

New Target Market (Photo credit: Intersection Consulting)

The essential point here is that we should be led by our prospects preferences and not be dictated to by the method of communication. So just remember put yourself in your customers place and try to understand what form of communication they are likely to respond to best. Now this isn’t easy and you will probably have to try a number of different routes which may involve using both cold calling and lead generation.

After all let’s face it, marketing, or at least getting marketing right, is hard. If it was easy we’ll all have very successful companies, and because it’s not we don’t. The trick is to engage your customer to either progress or close the sale, and from my point of view I don’t care which route gets me there as long as one of them does.

Exigent Consulting provides specialist services for High Growth Businesses, Business Turnaround, and Mentoring to the Small and Medium Business. We help business owners improve the profit performance of their business. 

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Social Networking How To Stop it Becoming a Time Sink

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Over the past 5 years, yes it's really that long, social media or social networking has moved from the fringes of marketing to centre stage. At the same time industry pundits are recommending that we engage with people across more and more platforms. Yesterday for example I was sent and an email entitled "the 9 must use social networks". 9! This is clearly getting out of hand, how am I going to do any work?

Now even a dinosaur like me recognises that I need to utilise this route to market but how can I  keep our social networking under control. We all know that the beauty of using social networks for marketing it is that it's free. The bad news is that using social networks for marketing is free. What do I mean by this? Because using social networks is free we tend to ignore one of the key measurements for successful marketing that of return on investment! All to often we become seduced by the fact that we can connect with all sorts of people without ever asking ourselves the key question what am I getting out of this effort. In this way social networking can easily become a time sink, where we are spending increasing numbers of hours without really looking at the returns.

If by contrast I send out a sales letter it's pretty easy to work out the leads from that mailing. The problem I have found, at least, for most businesses is that returns from social networking are a bit like wait for a bus, nothing much happens for a long time and then suddenly 3 turn up at once. 

Faced with this situation I wanted to come up with a few key questions I used  to help me and subsequently my clients work out how important the use of social networking might be as part of their marketing mix, and therefore how much time should be committed to social networking. The list is by no means exhaustive but it short at least help people get social networking into some sort of perspective, they are:-

1 What do I want to get from my social networking effort? More leads, more profile or more sales?

2 Are my prospects active on social networks? If not why bother?

3 Are my products/services something that is currently actively marketed through social networking? If not. Is there a good reason?

4 How widely spread are my potential customers. Does it matter that there's billion users on Facebook if my customers base is limited to 3 miles from where I live?

5 How much time can I reasonably spend on social networking? 30 mins  or 3 hrs a day?

6 Do I understand enough about social networking to use it effectively, if not, do I have the desire to learn through training?

7 Which social networking platform is best suited to my needs?

8 Do I understand that using social networking is for life. Not just for Christmas.

So what do I use?

Twitter daily, LinkedIn daily, Blogging twice monthly, Email marketing twice monthly and a bit of Facebook but mostly social stuff, it is meant to be social networking after all.

Exigent Consulting provides specialist services for High Growth Business, Business Turnaround, and Mentoring to the Small and Medium Business. We help business owners improve the profit performance of their business. 

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Taking Your Business to the Gym-How to be successful: Give your customers what they want -Positioning

Giving your customer what they want requires business owners to understand to which type of customer they are selling; this is called positioning. Positioning is one of the least understood tenets of marketing and is critically important in getting your business on the right footing to make the best of any given market conditions. It is surprisingly simple to understand the positioning of your business; at the very basic level you need to decide if you are going to be a value provider like say Asda, a broad middle market supplier like Tesco, or a premium provider like Waitrose. Now they all sell the same wide range of products but there is no mistaking in peoples' minds their positioning in the market.

Why is positioning important? Customers like to be confident that they are going to buy products or services from suppliers who have similar aspirations to them, so if you're interested in quality and service you'll be prepared to pay more for an equivalent product than someone who's mostly interested in price. More importantly someone who prefers Waitrose will be just as unhappy shopping in Asda as a person who prefers shopping in Asda would be shopping in Waitrose. This is a simple but really important concept especially as most business owners consider that pricing is the dominant reason for purchase decisions, when in reality it is not.

Let me give you a really extreme example to drive home this point. A kennel and cattery in a fairly poor area North East of England was struggling to make money and initially hired a manager to help with finances. However this new manager persuaded the owners to tap into the fact that pet owners love their pets more than anything. Consequently they went from positioning themselves as a non descript Kennel to a very up market "Pet Hotel". Obviously that meant they had to offer better services, but by tailoring their offering to each customer by having a menu of services they went from a struggling Kennel charging about £6:50 per night to a very successful "Pet Hotel" able to charge a base price of £40 per day in high season.

The moral of this story is to truly understand what you customers want, then you'll have tapped into a successful business.

Exigent Consulting specialises in providing Business Turnaround, Sales, Marketing and Mentoring to the Small and Medium Business.We help Business Owners improve the profit performance of their business