Illustration by Karl Krieg, Creative Director, The Business Lab

What Fertilizer to Use When Growing Revenue

True story — Some time ago, we visited the owner of the a large concrete manufacturing company. He told the story about how he wanted an airplane. He had his license and, for years, had been hounding and hounding his wife to let him have a plane — both, of course, smiling during this story. When she finally said “yes,” he was so excited, he ran out the front door, jumped in his car, but then realized he had no idea how or even where to go to buy a plane. 

Sometimes marketing plans are like this.

Everyone gets excited about the latest thing, say, “outbound lead generation,” but then it’s pretty unclear what that means, how you’re supposed to start the process and how to measure success.

When we look at many manufacturing companies, especially those with revenues less than $100M, it seems to us that growing revenue is easier and far less complicated than many other initiatives the company is invested or investing in — cost efficiency programs, automation, digitalization of everything, new investors, etc.

At its core, growing revenue follows these steps:

  1. Define a target market or competitors you’re going to take market share from
  2. Learn how your buyers buy — all the way from the influencers to the CEOs
  3. Build a plan to educate/win the heart of each person in the buying process
  4. Execute the plan, adjusting where necessary
  5. Qualify, then send those leads to the well-prepared sales team

Of course, there are many steps involved. But none of them are hard and, except maybe for some guidance, each company already has everything it needs to do this. 

Like our airplane friend, companies get excited and think they need to blog, and tweet, and link and like, create personas, go inbound & outbound, create sales videos, go to trade shows, send newsletters, and on and on and on. 

We call this a marketing seizure with a high poop-to-value ratio — meaning a lot of sh#&! is going on, but you don’t have much to show for it.

We are not saying that you should or shouldn’t do these things. If you have the reason, commitment, and proper investment (full executive-support, patience, time, money, talent), then you probably have a full-fledged Marketing and Communication department and are omni-channeling your way through sales heaven.

But, let’s look at it this way.

Manufacturing throughput is the rate at which a system generates revenue through sales (Goldratt). Applying this to the marketing side — customer throughput is the rate at which nonpaying prospects (inventory) are processed into paying customers.

For our purposes and example:

T = throughput = revenue

I = inventory = cost of turning suspects into prospects, then into customers

OE = operating expenses = customer service, marketing, marketing/sales salaries, etc.

ROI = (T-OE) ÷ I

ROI = (Throughput – Operating Expenses) ÷ Cost of turning suspects into prospects, then into customers.

Here’s how it works

Somehow, someone, who has a need they think you can maybe help with, finds you — they are now a suspect. They “engage” enough and become a prospect. When they purchase your product/service, they become a customer. Once they become a customer, you/your company receives revenue.

The goal is to increase throughput while minimizing operating and inventory (prospecting) expenses — assuming reducing these expenses does not negatively affect throughput.

Decreasing operating expenses will increase your ROI. Reducing your cost of turning suspects into prospects (conversion) will also increase your ROI. But of course, neither is as profitable as increasing your throughput.

Here’s something many companies don’t realize.

And it’s costly — It not only increases conversion expenses, it decreases throughput. Ouch!

What is this “something” you ask?

Well, it’s “guessing.”

Yep. Guessing. Guessing? Yes, guessing is the main reason for a high poop-to-value ratio and low ROI.

We would explain it all here for you, but the stats tell us that this article is already way too long — We guess we have overstepped our pixel limit. OMG, 733 words, 3,712 characters without spaces, 4,426 characters with spaces. Our apologies!

Until next time, Remember reduce poop-to-value ratio and improve your investment.