Hitting Your Home Run — Step 2
The Gameplan
I’ve had the great fortune to be part of amazing teams in three different chapters of my career — Fortune 500 companies, startups, and Private Equity. All three have helped me hone my value-creation playbooks. These playbooks can help you triple the value of your business.
This series of posts will step you through the process of setting goals, creating your plan, executing it, and realizing the value you create.
Part one covered the foundation of the plan — goals, vision, and growth levers. This part is about narrowing down your team’s ideas to build a solid growth plan.
Set your lever leads
When you finished part one, you had a prioritized list of potential growth levers. Now, you need the team to fully evaluate the top three (to five) and commit to delivering results.
Review your potential levers and think about who on your management team should lead that evaluation. Who has the most relevant experience and skills driving similar initiatives? Who has the necessary functional expertise? You may need to reach deep into your team or bring in outside help that has “been there, done that.”
Establish a regular team cadence of checkpoints with a deadline to complete their analysis. They should be working with Finance throughout the process to estimate the ARR and EBITDA impacts of their lever for the next three years.
Size the levers — Company
Your leads must fully explore the growth levers, their potential, and requirements — people, processes, and technology/systems. While you should analyze the current financial and operational data, one of the best resources is the team’s perspective—interview as many employees as possible to understand where the opportunities and potential pitfalls lie.
Discussion Guide
Introduction
- The process and what we're after
Employee background
- What is your role?
- How is it measured? How do you spend your time?
Growth opportunities
- What are your biggest growth ideas?
- How could we achieve [x]?
- What's already working that we could accelerate?
Growth limiters
- What's holding us back?
- What would break if we achieved [x]?
Final thoughts
- What didn't we ask that we should have?Size the levers — Customers and Competition
Your leads need to ensure they have a realistic view of the market. They should review market studies, customer references/interviews, and sales results including churn reasons. This is also a good time to mystery shop your company and competitors to get a realistic view of where you are.
Size the levers — Backcast (KPI trees)
The last ingredient is an activity backcast which helps identify gaps and builds a foundation of Key Performance Indicators (KPIs) to monitor. The process is to work backward from the objective to the underlying activities, identifying KPIs that the team will own.
The critical aspect is the feedback loop. For example, if you’re doubling new logo bookings with the same conversion rates from step to step up the funnel, where will you get twice the leads? And even if you have the resources to do it, are there enough prospects in the market?
Wrapping Up the Plan
At this point, each lead built a complete plan for their levers that details the why, what, and how behind it. You’ve all tested it through the process and built a commitment to deliver on it. There are three key deliverables that you need to extract from each one to drive forward.
Impacts — Why
Summarize the impacts of each of the levers and compare them with your overarching objectives for run-rate EBITDA and Annual Recurring Revenue (ARR). Taking the example of a business growing steadily at five percent with twenty percent EBITDA margins…
The goal is to triple the business to a $60 million EBITDA run rate by the end of the third year. That’s $40 million more than the current run-rate.
- Split that $40 million goal into a 1–2–3 ramp over the three years.
- Stack up your levers and steady-state growth. Ensure that your total is at least 2x the goal to address unknowns.
- Work backward from EBITDA to ARR, comparing your current and future growth rates and their alignment with your valuation objectives
- Narrow to as few levers as you can while still ensuring you’ll overdeliver on the your objectives
SMART Goals — What
You need a ‘big rock’ plan from your leads to deliver on their levers — SMART goals for each of the three years. You want the minimum set of relevant tactics to monitor.
This is a general approach to annual goal setting. I’ll get into your operational cadence in the next part including using the EOS Vision/Traction Organizer or Objectives and Key Results (OKRs) like Google.
Using the example of the Sales Acceleration lever above, some tactics should be translated into SMART goals — double lead generation; enhance Discovery; and win more, bigger deals.
To be effective, the list must include any gaps in people, processes, or technology that you’ll fill. For example, you may include “Recruit a CRO” or “Build out a world-class sales process” in Year One as you establish the lever. Limiting your SMART goals to five per year helps ensure you maintain just the right level of focus and accountability. Ensuring you cover your gaps helps drive greater success.
KPI Tree — How
The last item is a detailed list of the KPIs you’ll monitor to drive the levers’ success. Each lever team should identify a relevant list of five to ten metrics to track.
From the Sales Acceleration example, you’d include:
- Handoffs
- Calls & emails
- Meetings set
- Average meeting score
- Opportunities created
- Closed won deals
- Average selling price
You’ll refine this list and reporting frequency as part of your scorecarding in part three.
Congratulations on assembling the key pieces of your plan:
- Growth levers
- Leaders
- Impacts
- Tactics & SMART goals
- KPIs
You and the team have a running start at success with a firm foundation in the market and your company’s capabilities. Achieving the plan will take commitment, dedication, hard work, and maintaining accountability. In the next part, we’ll build scorecards and a performance cadence to help you drive results.
Jon Sonnenschein has been an Operating Partner for Bregal Sagemount, a mid-market Private Equity firm, since 2017. Prior to Sagemount, Jon achieved six successful exits in Silicon Valley, including one as CEO. Jon earned an MBA in Marketing and Management Strategy from The Kellogg School of Management and a BA with Distinction in Economics from The University of Michigan.
