“I need your number by the end of the week!” is a phrase you have probably uttered or heard during your annual planning cycle. The “number” is the revenue bogey a partner or practice is “asked” to contribute to the overall growth of the firm and expected to hit by year-end. It is the combination of a top-down CAGR (compounded annual growth rate) and a bottom-up SWAG (scientific wild-ass-guess) that is cajoled, negotiated and extorted from line leaders.
To get there, firms plan to add a few new practices, expand into some new geographies, augment business developers, build new strategic partnerships, launch some new products and achieve the allusive “cross-sell.” If a firm is a little more ambitious, it might add an acquisition.
I call this the “grow everything” strategy. It sounds good, looks good and seems strategic. Can you say “adjacencies”? It gives everyone in the firm their do and doesn’t entail any hard strategic choices. Unfortunately, every time it launches, it hits the ground with a resounding thud. If you are planning to launch a plan like this, get ready to waste a lot of time, energy and resources. Instead of a “grow-everything” plan and a revenue number, I propose a more prudent approach and a relevant, complementary number. Try this.
In order to grow efficiently, you have to first stop shrinking. Starting each year from zero or a significantly lower revenue number than you finished last year means starting 50 meters behind the starting line of a 100-meter dash. Don’t focus on all the possible growth sources until you have protected your base revenue. To do this, make your “number” goal client loyalty. In particular, make your objective to establish such a high level of performance that your clients don’t look elsewhere. This means a relentless pursuit of understanding how you are serving clients, anticipating your clients’ evolving issues, offering solutions that deliver differentiated value and being easy to do business with.
The best way to achieve this understanding is to ask your clients two simple questions, “How likely is it that you would recommend us to a friend or colleague?” and “Why did you give that answer?” You may recognize these questions from the book by Fred Reichheld, The Ultimate Question: Driving Good Profits and True Growth, which details the Net Promoter Score, or NPS®. The score is based on the idea that every company’s customers can be divided into three categories: Promoters, Passives, and Detractors. Customers respond on a 0-to-10 point rating scale and are categorized as follows:
- Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
- Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
- Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.
NPS is calculated by subtracting the percentage who are Detractors from the percentage of customers who are Promoters (netpromoter.com).
If you have not read the book, read it (don’t consume someone else’s summary). If you have read the book, but have not taken the advice, ask yourself, “Why?” Reichheld’s ideas are simple, powerful and proven. They are at the heart of protecting your base and are invaluable in turning the flywheel on organic growth. Loyal clients do not send out RFPs; they hire you uncontested. Loyal clients to not shop on price because they have seen demonstrated value. And, loyal clients are more apt to “promote” your firm through positive word of mouth—the cheapest and fastest way to new business.
You might be pushing back right now, “We have loyal clients. We have great service. We understand our clients’ needs.” Really? Are you simply measuring client satisfaction or have you developed the associated discipline to actually drive improvements in customer loyalty and enable profitable growth? How does leadership demonstrate its commitment to loyalty? How is client loyalty built into to your business processes and operational DNA? How do you deliver real-time information to consultants, so they can act on client feedback? Does your process help employees clarify and simplify the job of delighting clients? Does it help them identify and engage their best clients? Does it allow them to compare their performance to the best from week to week and month to month?
“Grow everything” is not a strategy. Just because a practice leader is given a number based on history or assigned a needed growth rate does not make it strategic or realistic. More often than not, it is neither and is a huge waste of scarce, strategic resources.
To be more strategic and more practical in actually achieving your growth goals, start with protecting your base, while avoiding the cacophony of geography, business, new products, adjacencies, acquisitions and cross-selling noise (there is a time and place for these strategies, that is a later post). If your firm did nothing else but focus on retaining your base, the word of mouth recommendations could fuel most the firm’s long-term growth.
Keep asking for that number, but make sure that it is the right number.