Congratulations. You and your team have created a powerful solution using sophisticated technology or a clever platform that solves an important business problem. Even better, you designed your business model around a product that can scale. Unlike a professional service business or a capital-intensive manufacturing business, you’re able to provide your product to vastly more customers with very little marginal cost. People are hailing your company a “high growth business.”
Growth vs. Scale
Businesses that are designed to scale should be growing, but not all growing businesses scale. That’s because growth and scale aren’t the same. Growth simply means you are increasing revenues. But if your costs increase proportionally, you may be bigger without being more profitable. Scale is different.
When someone says that a product, function or business can scale, they mean it can maintain or increase its efficiency and performance when volume significantly increases or decreases.
Your product scales. If you sell software, providing your offering to 10x more customers may simply require more downloads or logins. Even if you provide a manufactured product, there are economies of scale because cost per unit usually drops as quantities increase.
What doesn’t scale? People. To the degree that finding, winning, and retaining customers requires people to do it, that part of your business model doesn’t scale nearly so well. And if you are a B2B company with a relatively complex offering or selling to enterprise clients, scaling the customer-facing part of your business is even more difficult, because you need highly-skilled and well-trained people to interact with those prospects and customers. Therefore, to fulfill your mandate as a “growth” company, it is critical to make your front office as scalable as possible.
Why the Front Office Doesn’t readily Scale
For sure, the people-intensive nature of sales and marketing is the fundamental reason why the front office is the “weak link” in your business’s scalability. But it’s worse than that. There are additional dynamics at work that make scaling this part of your business incredibly challenging.
Consider this. If you were to grow substantially while your offering stayed relatively the same (your dream-come-true, right?), what would actually be changing in your business?
First of all, you would have a lot more customers (or much bigger customers), which means that who the customer is would change. Even with the same offering, growth comes from new customer types and expanding market segments. In your early days, your founders had the original insights into who your ideal customers were, their big unsolved problems, and how your innovative offering would solve those problems. As your customer profile expands, so do the use cases, the stakeholders within the customer, and the specific ways your offering creates value for those customers. And who needs to navigate all those changes? That’s right: the sales organization.
This leads us to Take-away Question #1: How well has the sales organization been equipped to connect your unique value to recently emerging customer types?
Secondly, if you are growing rapidly, it won’t take long for other companies to want a piece of your expanding pie, and competitors emerge. Now, customers are increasingly comparing how you solve the problem to how other solutions would solve it. Who in the organization is tasked with creating competitive strategies to respond? Again, it’s the sales organization.
Take-away Question #2: What is your biggest competitive threat right now, and how well is the sales organization responding?
And third, the sales organization itself is rapidly changing. But it isn’t just in head count. Rather, your rapidly growing front office is a system of mutually reinforcing and tightly integrated teams and processes. This is no simple, monolithic phone bank of robots. In fact, sales is probably the most complex part of your organization. Let’s consider just a few of the ways that your sales organization is a system under the stress of change as you grow:
- As your installed base of customers grows, adding upsells and cross-sells becomes increasingly important, on top of the always-important need to increase retention. Who should do that upsell and cross-sell work? Are your customer success people equipped to do it? Should your new business AE’s allocate some of their time to this effort? Or perhaps you need to create a new sales role.
- As your customer types evolve, so must your sales process. You know that selling to enterprises is vastly different than selling to middle market companies. If you are going up-market, can the kind of salesperson you hired a few years ago successfully execute your new sales process? Does a change in sales process impact the point at which inside sales hands opportunities over to the quota-carrying AE’s? Do you need to add support roles like product specialists, or people to manage demos, trials, and onboarding?
- In the early days, you may have had a handful of gunslinger salespeople loosely managed by your founder. As the front office balloons in headcount and complexity, that high-performing salesperson who you made sales manager a few years ago (by the way, how is that working out?) may not be the CRO and leader-of-leaders you need now. The leadership capability required to lead your front office is growing exponentially.
Take-away Question #3: As you think about how the sales organization has changed numerically and structurally over the last 12 months, what are the knock-on effects, and how are they impacting your business results?
Bonus question: Are you expecting the sales organization to figure this out on their own?
In a strange twist of irony for businesses built to scale, the one part of the business that doesn’t scale is most impacted by scale as the company grows. In the world of B2B high-growth businesses, great products are absolutely necessary; from there, victory goes to the companies who face this front office dynamic head-on by building agile and scalable commercial systems and strategies that can grow with the rest of the business.
This fall, Entheon Partners launched a 5-part complementary webinar series devoted to helping high growth B2B businesses build scalable front office organizations. The series kicked off on October 8 and the final live event takes place on Tuesday, March 16, 2021 at 11:00am central time.
Sign up to watch the recording of this first live event, “Scaling Revenue: When your sales organization is your growth constraint.”