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March 21, 2016 The Rainmaker

Business focus areas that enable growth

Ken Cook
By Ken Cook

What did the manufacturing company president say when asked what enabled his company's growth over the last year? Focus, focus, focus.

Some manufacturing business leaders were talking recently about growth and one of the participants shared what he and his company did last year to expand significantly, while positioning themselves for even stronger growth in 2016.

Staying focused was a key theme; he identified and paid attention to customers where the company had a strong differentiation and strong margins.

At the end of 2014 the company did $14 million in revenue. At the end of 2015 they were just shy of $18 million in revenue. By the end of 2016 they expect to exceed $24 million in revenue. That's a 42 percent revenue increase over two years, and all of it is organic growth; no acquisitions or mergers.

Of even greater impact is the fact that the company's gross margins over the two-year period will grow by over 25 percent, and the net profit will grow from 9 percent to 16 percent.

To explain further, the company paid attention to market openings, customer interactions, and their people. Here's the path they took.

They began with a detailed analysis of their customer base and where they made money. And when I say detailed I mean it. They determined on a customer-by-customer basis total revenue, gross margin, contribution margin and net profit. This entailed not only assigning to individual customers the direct costs to serve them, but the indirect costs as well. Their financial people worked overtime on the allocation formulas, but it was worth it.

Once they understood how much each individual customer was worth to the company, they prioritized the customers. The important ranking was for the contribution margin and the profitability. Gross revenue dollars mattered, but efficiency and profits mattered more.

The end result of the analysis was clear identification of market openings where the company could leverage their expertise. They learned there were a few clustered markets where their most profitable customers resided. The company's offerings were very good fits for the needs of customers in those markets. Competition existed, but it was not competition tied to price. The competitive battle was around quality and delivery.

Knowing the market opening was important. How they interacted with customers was as important. In essence, the company and customer became virtual to each other. The IT team worked with individual customers to integrate their systems. Customers could go to an online portal to place, check on and expedite orders, and personally interact with operations, sales, etc.

The transparency factor mattered most to customers, and the company took advantage of this. They invested in their IT and connectivity with customers. It gave the company a distinct advantage that the customer valued, and was willing to pay for.

The third link in the chain was to focus on their people. They trained their people on how to interact with customers, most importantly in terms of their communication skills. The company realized that what they did enabled deals with customers. Keeping those customers relied on the ongoing relationships they developed with them.

In summary, one manufacturing company's three areas of focus that enabled growth are:

Market openings

Pursue opportunities where you are distinct and valued in the mind of the customer. This is where your return on your resources and investment will be greatest, and your potential for growth is strongest.

Customer interactions

Understand how the customer wants to connect and interact with your business. Touch points with customers shape the customer's reality. Make sure the touch points work and deliver value.

Your employees

Help employees think about the customers first. Provide the training on communication skills and relationships that strengthen the bonds with customers. What you do gets the deal; how you interact keeps the customer.

Focus enables growth. Look for the market openings where you are valued by the customers. Focus on your employees and their interactions with those customers.

Ken Cook is the co-founder of How to Who and co-author of How to WHO: Selling Personified, a book and program on building business through relationships. Learn more at www.howtowho.com.

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