3 things investors need to know about the whole growth picture.

An investor in a struggling technology business asked me to take a look at their sales and marketing performance. The SaaS based business had seen stagnant revenue for four quarters.  The sales team had been adding SDR’s for 6 straight quarters and the CMO had been spending almost 8% of revenue on brand ads.  How could this be going wrong, the investor asked? After some investigation I suggested a focus on these three areas. 

1. More is also less.

Ramping up increased quantities of QBH’s in a sales organisation is a common recommendation from due diligence analysts and other advisors. Sales leadership rarely resists the opportunity to expand their organisations and CEO’s accept it as an established path to growth. 

The logic is that each new sales head adds productivity - add more sales people and revenue will flow.

This is a largely false assumption and should be challenged. Prices Law states that “50% of a given result is generated by the square root of the number of those who contribute to it”. Only a small part of the sales team (the square root of the size of the team) is generating 50% of the revenue. Sure, the size of the contributing team will grow as you add more, but this has to be balanced against the cost to adding each head, the impact on EBITDA with adding many unproductive heads and the time taken to achieve tenure. 

2. Marketing is a sales multiplier.

Marketing is an almost entirely digital profession these days. If your advisors are telling you that marketing’s role is to make “collateral” or “raise awareness” then you need to find an expert.

Instead of continuing to add SDR’s or BDE’s to your sales organisation in the hope of finding new growth, take a look at what's happening in marketing.

A properly constituted marketing team with the correct tech stack, can efficiently generate opportunities for sales to convert at scale and without killing your EBITDA. 

Think of it this way. If your driveway is blocked with snow it might take several hours to clear it with one shovel. You could keep adding more people with shovels but you’d need to pay them. Or you could use a snow blower and have it done in 10 minutes. Marketing is a snow blower, it's an automation machine that identifies high quality opportunities and pumps it into the sales team. As a result each QBH becomes more productive. So if you see an inflating sales organisation, you should be asking if the investment would be better spent on a scalable return through better marketing automation?

3. Brand sustains growth

If marketing leadership had focused on driving brand awareness in the belief that volume is best, there's an issue.

If the sales leadership is only driving tactical demand generation, there's a problem.

Brand visibility is an effective tool in driving perceived value and therefore market valuation. As B2B Institute has demonstrated (HERE) if a brand’s Share Of Voice (SoV) exceeds Share of Market (SoM) then long term growth is the outcome. Short term, tactical sales incentives and demand generation affect only the short term, they won't support the sustained growth needed to achieve a successful exit.

The question to ask here, is what the leadership team is doing to secure long term value creation as well as short term revenue generation? If the business is not investing in both, it's not likely to grow.