Business Services

Best Practices to Drive Profitable Growth & Valuation

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Findings from Recent Alexander Group Research

Winning in today’s environment requires you constantly strive to meet changing customer expectations. Top commercial organizations understand that their investment strategy is the key to driving differentiated outcomes compared to their peers. Whether you are looking to enter new markets or re-thinking your go-to-market model, you need the latest insights to support your next move. In this article, we will explore current trends and best practices that drive profitable growth and valuation for business service organizations.

As a part of Alexander Group’s ongoing study, we analyzed thousands of companies across six industries, including business services, against 13+ metrics categories to determine how leaders separate themselves in the market. Profitable growth leaders in the Alexander Group Growth and Margin Index—those who achieved above median revenue growth and below median sales expense/managed revenue compared to peers—were pulled from a pool of companies with a revenue of $50MM+, operating in a B2B or B2B2C model and global reach.

Across the surveyed industries, profitable growth leaders outperformed their peers in terms of overall growth, productivity and efficiency, achieving 39% higher managed revenue per seller on average. Leaders balance new and current customers for efficient growth, recognizing the potential of existing customers to drive sustained growth while maintaining new logo growth momentum. Profitable growth leaders achieve 12% higher net revenue retention (NRR) compared to peers, while maintaining the same level of new customer growth as the rest of the pack.

Leaders Balance New and Existing Customers

To grow new customers and maintain current ones, leaders should coordinate their Marketing, Sales and Service functions across the buyer journey. Companies can use cross-functional growth levers to grow new customers while retaining and expanding existing ones.

For new customers, Marketing should develop more advanced, data-driven approaches to segment new opportunities and customize their outreach to unique buyer personas. Meanwhile, Sales should deliver compelling propositions based on ROI-positive use cases and offload or streamline non-selling activities to free up time to fully engage with the customer.

For existing customers, Service should take the lead in guiding the customer through the activation phase and track the buyer’s usage so they can realize full value from the solution. Sales, in turn, can coordinate with Service and Marketing to target the right expansion plays for the right contacts. When it comes to retention, leaders are deploying both human and digitally enabled service and success resources that are better aligned to customer needs and preferences (e.g., high-touch, low-touch or digital-only engagement models).

Across all these areas, thoughtfully tracking key productivity and efficiency metrics put profitable growth leaders ahead of their peers. If you are trying to retain existing customers, for example, then you better be tracking and prioritizing NRR. Empowering Revenue Operations can help bring alignment across the model so that Marketing, Sales and Service are all sharing insights with each other.

Alexander Group’s research identified key practices profitable growth leaders use to demonstrated ROI and drive valuation.

1. Marketing Actions to Drive Profitable Growth
Successful marketing organizations capture growth can measure and demonstrate return on marketing investment. Best practice marketing organizations expect 6-7x Return on Marketing Investment (ROMI)

Priorities of Modern Marketing Organizations:

Tracking ROMI: High performers can measure and demonstrate return on marketing investment.
Leveraging Data: Modern marketing organizations leverage data effectively to target accounts.
Aligning Functions & Roles: Leaders align with sales and deliver on customer experience.

2. Sales Actions to Drive Profitable Growth
Top salesforces drive productivity and efficiency and can expect to 1.4x Higher Revenue per Seller for profitable growth leaders compared to peers.

Efficient, High-Growth Sales Organization Priorities

Become Client Centric: Customer centricity focuses on meeting customer needs, not on selling on offerings.
Enable with RevOps: Leaders use Revenue Operations to drive Marketing, Sales and Service integration.
Reward Sellers Effectively: Leaders use smart compensation design to drive outcomes.

3. Service Actions to Drive Profitable Growth
High performers can measure and demonstrate return on service investment. Profitable growth leaders realized +12 points higher Net Revenue Retention compared to their peers.

Priorities for Delivering Customer Success

Invest in Customer Success: Deploy customer success motions to deliver & demonstrate customer ROI.
Tailor Customer Experiences: Invest in models that segment based on customer experience
Prioritize Recurring Revenue: Maximize recurring revenue growth to reflect market valuation. preferences with laser focus on measuring and growing NRR.

Path to Profitable Growth

Profitable growth leaders understand the commercial levers necessary to pull to drive valuation and generate the best outcome for their customers and stakeholders. As we’ve discussed, there are multiple ways to achieve profitable growth – what’s more important is getting on the profitable growth path.

Companies should be continually asking themselves whether they have the appropriate balance of growth, productivity and efficiency. Here are questions that all commercial organizations should consider:

Are you growing too quickly without a plan to reign in costs?
Are you harvesting margin but hindering growth?
Are you balanced, but failing to see adequate returns on your investments?
What is your plan and time horizon to generating profitable growth?

Key investments and thoughtful execution can put companies on the profitable growth path. Alexander Group can help business service companies realize these best practices and keep them informed about the industry trends, insights and frameworks. Contact a Business Services practice lead to receive a briefing on our latest report about Commercial Practices to Drive Profitable Growth & Valuation.
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