The 3 Keys To Profitable Growth

KENNESAW, Ga. (Aug 25, 2016) — This actually happened to Steve Wurzbacher, one of our Executives in Residence at the Tenacity Center for Account Management and Client Retention. The company that he worked for went “in play” as a target of the raiders in 1984, just a few months after he joined. The CEO was convinced that the company was dramatically undervalued and unappreciated by the Wall Street analysts, who he believed were vastly behind the curve in understanding the emerging outsourcing phenomenon. He resolved to compete for the company by leading a management buyout, initially enlisting the top 65 executives, some private equity and a few key suppliers to raise the funds necessary to take the company private. Ultimately, they all borrowed an amount equal to about one-third of their annual revenues, which in a relatively low margin cash-flow dependent business, was a staggering amount. A management meeting was convened in company headquarters to help everyone understand just exactly how this was all supposed to work out. The CEO had the full attention of everyone gathered in the room. He handled it masterfully.

Basically, he told them that day to let the finance people do what the finance people do. They’re good at it – don’t worry about it. But they (the operators, relationship managers and marketers) would need to do their part in a very specific and disciplined way. The deal would work – and work very well – if they focused on three things – the three keys to profitable growth he called them:

First, retain your existing clients. They would increase their internal rates of retention in every line of business with an absolute goal of 100% client retention. In a business highly dependent on cash flow and a high return on net assets – particularly one where new clients required high start-up costs and slowly maturing margins – stabilizing the current book of business would be critical.

Second, sell more to the clients they already have – in other words – grow organically.  Often there were opportunities to increase retail sales levels and/or expand or enhance (cross-sell) the range of services under management. All of this would be accomplished maintaining their traditional close attention to controlling operating costs – but they wouldn’t suddenly be trying to save their way to prosperity. Organic top line growth with each client would be the second critical priority.

Third, sell new business. I would guess that 90% of the people entering the room that day would have thought that this would be their most important task – and, to be honest, Steve was one of them. It was drilled into them on that day that, only when the first two priorities were well in hand would they look at acquiring new clients, and that when they did, they would do so in a disciplined manner -- and only on their terms. No longer were we looking to impress the analysts with flashy top-line growth in the short-term – they were doing what would be required to service their debt, generate quality earnings they could sustain, reinvest in their businesses and expand their leadership position.

All planning, budgeting, compensation and communications were adjusted to conform to this new reality and the laser-like focus on this new order of priority. The culture of the company changed that year too – clients became partners and were viewed as assets with which we were entrusted.  Colleagues became teammates.  Managers became coaches.  Everybody became family. It lasted for a good long while – longer than Steve would have imagined.  It was exhilarating too.

Importantly, it all worked and they were a better company for it. In no small part, we succeeded because our strategy was based on good sound fundamentals. So, while a management buyout would definitely not be the prescription for every company – the focus on these three keys to profitable growth – in their expressed order of priority – is simple and sound.

At The Tenacity for Account Management and Client Retention, we’re focused on helping our clients with #’s 1 & 2. Our Center for Professional Selling is focused on #3. We have found that priority #3 tends to take care of itself when you get the first two right!

Steve, John & Gary