I’ve been having lots of conversations with senior leaders lately discussing whether they have the right people on their team to hit their growth targets. This is an incredibly important topic (and something I’ll touch on in a moment), but before you analyze the people on the bus, it’s wise to make sure the bus is heading for the right destination.
Yes, you read that correctly. Not all growth targets are good for business.
A Mistake of Fact
Nearly every industry has a term or jargon to describe when something goes wrong. The healthcare industry calls mistakes in patient care “adverse events”. The manufacturing industry calls unintentional flaws in products or processes “nonconformance”. One of my favorite ways to wordsmith the word “oops” comes from our legal system. Wrong beliefs about the meaning of a law or identity of a person are called “a mistake of fact”. For example, if someone is accused of stealing a jacket, but they own a similar jacket and thought that was the one they were taking, they can claim it was a mistake of fact.
In business, we seem to share a mistake of fact by believing that “growth” only occurs if we generate more revenue, which can only occur if we increase our sales targets.
I know that as a business owner you’re under tremendous pressure to grow. But growth doesn’t necessitate a higher target. There are instances where overly ambitious growth targets can actually be the thing that holds your organization back.
Growth Targets Affect Everybody
An increased sales target doesn’t just impact your sales team; it potentially changes the game for people in every department.
Let’s say you want to grow revenue by 15% (which I know, feels like you’re barely keeping up with today’s inflation). Your first thought likely goes to figuring out what your sales team needs to make that happen—which is great. But what happens if Sales actually pulls it off? Can your customer service team onboard and support 15% more customers than they have now? Can your production facility continue to meet deadlines facing a 15% increase in output? What about your shipping department—can they ensure the same time frames are met with 15% more volume?
Most companies start executing against their goals on January 1st, but if you adjust the target and not your strategy, you’re headed for trouble.
Think through these four areas before committing to growth targets.
- Analyze your product(s). Are you focused on selling the most profitable products that are the best fit for you to be selling, or are you operating with too many skus?
- Analyze your team. Do they have the necessary skills, and time, to meet the new demand? If not, what are their skill gaps or time constraints, and what are you doing about them?
- Analyze your market. Just because you want to sell more doesn’t mean people want to buy more. Can you capture the increased market share? Can your existing markets even support that growth, or do you need to open new ones?
- Analyze your pricing strategy. Is your pricing (and the value you deliver) in line with the growth target? If not, what do you need to adjust?
Each of these topics merits its own article, but hopefully it’s clear that growth impacts almost everything you do.
Protect Your Culture
You can absolutely destroy an amazing company culture by setting unrealistic growth targets.
I once consulted with a company that went from being an idea to $5M in revenue in just four years. They had an amazing production manager, who had a large impact on the company’s growth. The executive team looked at the numbers, and set an ambitious growth target of $10M.
As you can imagine, the company was electric after so much success. The people had proven that hard work pays off, and the culture was positive and optimistic. Unfortunately, that was about to change. The production manager simply didn’t have the capacity to reach the goal. His skillset was capped at $5M, and no one considered whether he was equipped for the growth.
Each passing month revealed the truth; the company wasn’t on pace to achieve their goal.
And just like that, you’ve now got a culture problem. It doesn’t take long for the positive can-do attitudes to sour, and for key personnel to become susceptible to job offers from the competition. And if any of them do jump ship, you may find it hard to replicate what you did last year, let alone grow on top of it.
Lay The Groundwork For Growth
The process of preparing for growth should begin at least 12 months before you start going after it. Many smaller businesses are just reaching half time right now, and are trying to figure out how to reach their target by the end of the year.
If you’re off track, reactionary thinking is likely creeping in. Founders and owners may even be tempted to start working in the business (which is already tempting because it’s usually fulfilling) as opposed to working on it. You should ideally have strong people managing the day to day so your attention can be on the long term.
So as you prepare for 2025, remember to not lose focus on profitability and not just top-line revenue. Why strive to sell $10M and keep $1M, if you can sell $5M and keep $1.5M. What could you do with that extra $500K to grow properly in the years to come?
Care To Talk Strategy?
Reach out to Performance CXO if you’d like some strategic help setting growth targets and/or analyzing your people and infrastructure to make sure you reach them. We eat, sleep, and breathe this stuff—and would love to hear your story and share our experiences and expertise with you.