When a healthcare technology company works with an investor, the ultimate success of the relationship comes down to how each performs the responsibilities associated with their role.
The investor will bring a wealth of experience to the relationship in areas such as managing costs, purchasing leverage and, when appropriate, securing adjacent businesses to create new opportunities. While these activities will help increase valuation, the most significant contributor to investor success is organic-growth generated by their portfolio companies.
Investors will spend a significant amount of time and energy working with company leadership to inspect, manage and correct the critical drivers of organic-growth, as this is fundamental to laying the groundwork to execute a successful exit strategy. An investor we work with recently shared that sales and marketing are the biggest risks they take in a deal, which is a key realization for a company who has taken on investment to understand. The investor is betting on you and your ability to take the lead in driving the best and quickest path to organic-growth.
Three Paths to Organic Growth
Even when a company has secured an investment, competing priorities and resources are often spread thin. In this situation, the best course of action is to engage in an intense and consistent analysis of your sales engine to determine the fastest path to greater topline growth. Based on my experience, I would keep things simple and focus your review on the three main sales pillars: Renewals, Upsell and Net New Clients.
1. Renewals. In assessing the overall health and commitment level your customers have with your company, there are specific questions you should ask. Are your customer renewal rates and retention strong from both the percentage and dollar rate they renew? Are there opportunities to raise your rates? Can you offer add-ons as a trade for a longer-term commitment? Are you consistently addressing customer satisfaction issues that may impact retention? Have you proactively created renewal programs to take to your client before they get in the renewal window?
An honest assessment of these points will illuminate areas for additional revenue opportunity or potential revenue risk if left unaddressed. If both your customer renewal rate and the dollar amount they renew is above 90%; you are generally out of the danger zone. If your rates are below 90%, there is room for improvement.
2. Upsell. When you aggressively assess your existing product upsell portfolio to determine where you can create new services and billable features to solve customer satisfaction issues, this has the potential to both increase your renewal rate and backfill gaps from uneven new business sales.
Given that the cost of sales is much lower for an existing customer, upsells can be small in size and scope, yet still drive same-store-growth numbers year over year. The key to being successful with upsells is to always keep your customers moving forward with you to prevent your competitors from getting a toehold.
3. Net New Clients. An investment almost always comes with the expectation of higher sales targets and net new customers to fuel growth. If you are limited by your current direct sales territory coverage, consider building a strategic indirect partner model that augments the efforts of your sellers. Ideally, the partners you choose will create new revenue streams thereby allowing your direct sales force to focus on richer segments where your fit is best and your leverage strongest.
Having two different channels to attract new accounts will provide greater opportunities, but requires a nuanced approach and clear focus to develop each channel to maximize growth. Ensuring you have rigorous processes in place to measure performance for your direct and indirect teams is critical for both channels to be successful.
A happy investor is one who can see a clear path to organic growth through equal parts Renewals, New Business and Upsell. A commitment to rigor and discipline around these growth levers will not only make your investor relationship successful; it’s one of the greatest investments you can make in the in the overall health and longevity of your business.
If you have feedback, questions or best practices you would like to share; we would love to hear from you. Share your experience in the comments below, or contact us to learn more.