Boost Your Top Line to Boost Business Value
February 18, 2025
Phil Krone
Here’s how to do it. Productive consultative sales training and process development can make the difference.
Do you know IRV? If you’re a business owner or senior executive, you should. Why? One thing small and middle-market businesses are all about is increasing their value. And IRV is a straightforward way to use sales to increase that value in three ways—and to track it.
Companies that invest in sales training and sales process development expect revenue to increase. That’s basic. It’s why they invest in improving their sales team’s persuasive selling skills and processes. They can expect a lot more if the training and process development is customized for their business creating long term results.
What advantages does a business with a higher valuation have?
Sales are measured as “the top line,” which is of course an easy way to see results, good or bad. But how else can a stellar top line improve your business? One way is to increase the valuation of your company. A higher valuation can help you not only with longer term strategy, if you plan to sell, but also shorter term: Banks like companies with higher valuations because it reduces their risk. A proven, predictable sales process reflected in the top line makes your business more attractive to any investor or buyer.
How does it work? Say hello to IRV.
The IRV formula is the foundation of how professional M&A firms value a company, a first pass in effect. Professional valuations take a lot more into account, of course, and use more sophisticated math. But IRV is a good friend because the numbers are handy and the math is straightforward.
It can also be used to show the results of investing in sales process improvement. As you will see, the investment can increase revenue and reduce risk to increase corporate valuation.
V = I / R-g
IRV’s numerator is I, which = Income—that is, some representation of earnings. The simplest number is the topline, but more typically adjusted EBITDA is used or seller’s discretionary earnings.
IRV’s denominator is R – g, where R = Risk, or the discount rate, and g = Growth. Typically, g is the long-term growth rate of the company.
V stands for Value, which increases when an effective, formal, and customized sales process is in place. Here’s what happens:
- Income increases as the success rate in winning more business increases, both from more, smaller pieces of business as well as larger ones. That in turn helps to retain your best salespeople and other business developers.
- Risk decreases.
It’s clear how better consultative selling skills can improve income. But how does coupling skills with process reduce risk and so make the denominator smaller? A consultative sales process developed in our popular FOCIS® sales training course does several things, among them:
- Your best salespeople get better—and tend to stay with you.
- Or, if they do leave, your sales process does not go with them. In other words, you have a corporate sales process in place whose success doesn’t depend on one individual’s capabilities and personal sales process. This also reduces risk.
- Penetration of larger customers goes deeper, which means their switching costs are higher.
- Your differentiation—why you’re better than your competitors—is communicated more clearly and effectively. Your customers know why they chose you, and prospects learn why they should choose you.
- The capability to close larger sales increases. (After taking FOCIS® one of our clients closed a sale eight times larger than its previous largest.)
- Access to decision-makers becomes easier.
- The gap between the top producers and the rest of the team shrink.
Also, outside variables—a pandemic, for instance—won’t have the same impact because a strong sales process is as effective on-line as it in face-to-face meetings.
Key Point: Transactional selling just doesn’t travel well in an on-line environment. It depends too much on the interpersonal dynamics of the sales representative. Transactional salespeople too often rely too much on their personality to do the job. But that doesn’t work nearly so well on-line—or as well as creating value for the prospect in any environment. Creating value is what successful consultative salespeople know how to do. To create value, you need skills and process, not personality.
- The long-term growth rate begins to rise year after year, decreasing the denominator even more, because a stronger sales process results in increasing levels of revenue (leading to growth) and reduced risk.
Try plugging some numbers into the formula from your business. See how much valuation changes not only when income increases but also when risk decreases and the long-term growth increases by just a point or two. We have seen clients significantly grow the value of their businesses by investing in sales process improvement.
“As a valuation expert, my knowledge of IRV combined with Productive Strategies FOCIS® sales process allows me to easily demonstrate the ROI of my services,” explains Jim Bates, a partner at Jackim Woods & Co., a leading middle-market mergers and acquisitions advisor. “This shortens my sales cycle and increases my closing rate. But the best part is that every client becomes a success story.”
Bates is also a partner at a boutique M&A company, Sports Club Advisors, a sister firm of Jackim Woods. Sports Club focuses on the sports, fitness, and leisure industry. He is the co-author of Business Valuation for Dummies in the popular series.
If you want to learn more
about how we can help you increase the value of your company, just give us a call at 847-446-0008 Ext. 1 or e-mail me directly at pkrone@productivestrategies.
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Are you selling business to business or business to government or both? There are similarities but also differences that need to be recognized to optimize your results.
Last year after a talk I gave at the Small Business Expo on Business to Business Selling (B2B) , a woman asked for my card because she wanted to meet to tell me about her business and learn more about mine. When we eventually got together she shared that her start-up company’s goal was to console consumers who had suffered the loss of a loved one directly, as she had. But my talk had inspired a new idea: assist funeral homes to improve their services by showing more empathy to their customers who were struggling as she was. I sensed that my talk gave her confidence that, despite the challenges, her business could succeed. What I didn’t realize was that this small assignment for a start-up would eventually have such a big impact on her business as well as an industry.
To date we have covered the Sales, Information, Tactical, and Marketing Plan Levels. Although the fifth level is the last to be discussed, it is often what sets a business in motion when it is founded. Today we will illustrate marketing to support a vision by discussing two very successful businesses.
As a reminder, the Five Levels of Marketing are (1) Sales, (2) Information/Data/Analytics, (3) Tactical or Campaign, (4) Marketing or Program, and (5) Vision/Strategic. We’ve explored each of the first three levels in separate columns in August, September, and October. They are available on our website's Productive Insights collection.
Using intelligence from prior levels leads to revenue-building sales campaigns on the ground in real time.
Tracking key types of data each month provides insights that can build a highly productive marketing plan.
The Five Levels -
Sales: Prospecting, qualifying, discovery, presentation, demonstration, proposal writing and closing; Information/Data/Analytics; Tactical or Campaign; Marketing or Program; Vision/Strategic
If you believe you have ADHD, you can be more successful by scheduling fewer first meetings and spending that time on more second and third meetings with qualified prospects. For our client, that meant cancelling half the medical CFO conventions his sales rep was planning to attend and investing more time following up with the CFO prospects he had already met. When your discovery is not productive, step back and restart at the point the discussion began to be about whose system is better. That’s an argument you are not going to win. Don’t waste years in prospect meetings in which you ask the same questions every time and get the same answers. Either decide that your product or service isn’t right for this prospect and move on—or broaden your discovery to find a need behind the need. In this hospital case, the hidden need was a fear that because no outside vendors had audited their system they might be in violation of regulations that an outsider would spot right away.
Several years ago, I helped a Wisconsin piece-part manufacturer compete for a multimillion dollar opportunity. They asked me who I wanted to take along from their company, and I said the chief engineer, the head of quality control, and a production representative. Day 1: On the plane ride to the East Coast, I let everyone know we were looking for information that would give us a competitive advantage. Without it our odds of winning would be one in three or one in four, depending on how many competitors we were facing. The prospect organized a get-to-know-you cocktail event that evening. There we learned that the project involved a complete redesign of a common household appliance. The prospect’s people were excited because they had already received a large Christmas order from a major retailer. Our team debriefed later. Despite getting to know each of our counterparts from the prospect, we had not learned anything that would give us a competitive advantage. Day 2: We met with departmental leaders, including purchasing. Before the meeting our head of quality assurance had breakfast with his counterpart. He had learned that a design issue had not yet been resolved and was causing intermittent failures in the prototypes. Our prospect’s quality assurance head explained that just before going to one of the vice presidents for budget approval, he and his colleagues were playing with a prototype that failed to function intermittently. They went to the meeting and did get the approval. But just as they were heading out the door the VP asked, “Do we have a working prototype?” The engineers said yes, pulled it out of a briefcase, and handed it to him, holding their breath. He tested it, and it worked fine. “Let’s go,” he said. When I heard that, I knew we had learned something that could help us win the business: our competitive advantage. We started the meeting with the buyer’s procurement team by asking what the project we were bidding on would mean to each of them. We heard a range of responses: • “This project has the potential to help me be promoted from a line manager to production manager.” • “There should be so few quality issues I might be able to go on vacation this year.” • “The bonuses will help me pay for my kids’ college expenses.” Clearly, the success of this program was important to everyone on their team. More Stories about Winning the Business Read similar stories in my new book, B2B Selling: Business-to-Business Marketplace Insights and Observations, which is available on Amazon . We asked about what might derail the project. Despite soft questions from us, nobody brought up the problem of intermittent failures that we knew about. Finally, I did bring it up without revealing how we knew about it. The discussion then turned more serious. Not only did the appliance not work, but to make the delivery promised to a major retailer for Christmas, the tooling construction had to be started immediately. But before that the design issue had to be fixed. We said we would like to spend the afternoon addressing the design problem and come back the next morning with a solution, if we could come up with one. Day 3: We were sitting in the buyer’s office waiting for the morning meeting to begin when our competitor called the buyer to see “how he looked” on the program. (We could hear the buyer say, “I don’t know how you stack up. I haven’t made the spreadsheet yet.”) This was a really interesting response for two reasons. First, adding up the piece price and the tooling amortization figure for three or four potential vendors in a spreadsheet would take five minutes, so the spreadsheet probably existed already. Second, and more important, was that even though the person calling was a current supplier the buyer did not tell him about the design issue. The company did not want a lot of people to know about the problem until they had fixed it. We knew about it because we were there. We had shown up. At the meeting with the procurement team, we reviewed what we had learned about their objectives for the project and the need to address the design issue. Before sharing our solution, I asked what would happen if they delayed the project to reengineer the product and missed their Christmas commitment to the retailer. The answer was that they would have a hard time getting an order for the following Christmas. I then asked what would happen if they went ahead and produced the product knowing there would be intermittent quality issues. The answer was that not only would this product have a hard time getting shelf space in the future, but the retailer might also reduce shelf space for other legacy products our prospect supplied. Of course, I wasn’t suggesting they do either of these things. I just wanted them to state the cost of the status quo out loud to emphasize the consequences of not resolving the issue. That in turn would emphasize the value of our solution. We then presented our solution to address the “have to start . . . can’t start” issue. We proposed starting the tooling immediately but staying away from the gear centers, which we believed were the source of the design issue. We also proposed building prototypes with different gear centers to resolve whatever issues there were. The prototype experiment would produce an optimal design in time to keep the tooling on schedule. Everyone was happy, and they asked us to drop by the next morning to pick up the order. Day 4: When we walked into the meeting, we could see something was wrong. We learned that they couldn’t award the contract to us because the approved project plan required them to use a current vendor to reduce risk. Why had we been asked to bid at all then? The plan also called for them to get three bids and one of their current suppliers had declined to bid. Key Point: When this kind of roadblock comes up, it’s important to stay calm and to focus on how to get the ball back in your hands. Before asking them if they could change the plan, I went over everything we had covered since day one: The importance of the success of the project for each person on the team, including what it meant to each of them personally; the importance of meeting the retailer’s demand for delivery in time for Christmas; that we were the only ones that knew of the design issue, and, most important, that we were the only ones with a potential solution. Then I asked if they could modify the plan. They had of course thought of that, but the VP who had approved the plan was out of the country. When this happens it is important to just ask the question that can bring the businesses back to you, in this case: Can we call him to see if he would approve the change? They made the call on a speaker phone so everyone could hear. His response wasn’t surprising. He was first of all unhappy that he hadn’t learned about the design issue sooner and that the vice president wasn’t told before approving the capital budget. Then he summed up the situation: “So what you’re telling me is that, first, we have a design problem none of our current vendors even know about let alone have a solution for. And, second, that you have a potential vendor on the spot who does have a solution and who can make the Christmas delivery date. Is that right?” After a pause, he said, “Change the plan!” We flew home that afternoon with the order. Here are the major takeaways: 1) The best way to gain an information advantage is to show up and do discovery in person. 2) If you can build bridges in addition to sales-to-purchasing, such as quality-to-quality, production-to-production, and engineering-to-engineering, you have increased the odds of learning what you need to know to gain a competitive advantage. 3) When told the business is not coming your way, but you know an order hasn’t been placed yet, keep asking what it would take to bring the project back to you. 4) Make sure your presentation is “prospect-centric”—that it is about the customer and his issues—not “seller-centric” and only about your capabilities. 5) If the program is large enough, or important enough, hiring outside resources to get the win can be a sound investment. 6) When following up on a submitted proposal, don’t ask “how do we look?” That reduces the discussion to price. Please get in touch with us directly at 847-446-0008 Ext. 1 or pkrone@productivestrategies.com .
When I was president of a manufacturing company, a colleague and I flew to Little Rock, Arkansas, to compete for a contract for a new U.S. Army rocket program. It was a major piece of business with a multi-year contract as the prize. The people seated in front of us on the flight were talking loudly, and my colleague and I gave each other a look that said: “This is our competition.” We got their attention and suggested they might want to keep their discussion to themselves. (Why didn’t we just keep quiet and continue to listen? Well, spying—intentionally or unintentionally—wasn’t the way we conducted business, and it still isn’t.) And we did win the business. The upshot, of course, is that it’s a small, small world, and you never know who is listening, so be careful what you say. On the other hand, sometimes holding key information close to the vest is not the right strategy for the greater long-term good. When customer relationship management (CRM) software came on the scene, many salespeople resisted loading their contacts and other business intelligence into the corporate database. The thinking was twofold. First, it’s “my” hard-earned information. Second, if I’m the only one who has it, the company needs me. Keeping critical information in “my” little black book would make it harder for the company to lay me off. Clearly, this thinking was wrong on both counts. Unless you’re an independent sales representative, that information belongs to the company and even then be sure to read the fine print. And, of course, if you’re not performing or if larger, structural issues come into play, a little black book won’t save you. Companies must insist that salespeople keep the CRM database up to date and hold them accountable. Especially when used in concert with data from other sources, including other sales reps, that information can be leveraged into knowledge that leads to larger sales. You still don’t want the little black book information to walk out the door when a sales rep moves on either on their own initiative or yours. While not all companies think about another, perhaps more subtle component, great leverage also comes in the form of a proprietary sales process that all salespeople should be trained in. That way if a top performer leaves, the process doesn’t leave with them. (Ask us about our popular consultative sales training course, FOCIS®, which helps our clients build proprietary sales processes and trains business developers to use them.) Are your salespeople presenting your company’s product or service accurately? Two examples. We once worked with a company whose people told prospects that they were in the oil business. No, they were not. Their highly effective service was helping to absorb oil off shop floors and disposing of it. The shortcut explanation made it sound like they were in the oil exploration business. Not even close. And not only was that description confusing, but it also called the reps’ competence into question. Another instance that’s perhaps a little more subtle comes from a networking group I was in. Whenever one of our members gave the elevator speech version of his product, he said he provided sexual harassment training. No, just the opposite. He provided sexual harassment prevention training. He was not offering training in how to harass people. Protecting how you’re different from competition can be a valuable investment. For the Lettuce Entertain You restaurant group, restaurant design is a key differentiator. Before launching a new concept, the design is top secret, down to details like the tablecloths and the kind of wood that provided the concept’s style and personality. These things were protected with the help of intellectual property (IP) attorneys. At one point we trained the business developers of the company that supplied the wood elements for a Lettuce Entertain You restaurant design—in this case, Maggiano’s Little Italy. The specific elements that made up the various woods themselves as well as how they were incorporated into the design were extremely detailed. You don’t have to be in the restaurant business to take away a key lesson here. We’ve found that too many business owners and executives assume that what they do is not different enough from what their competitors do to set their businesses apart. In some thirty years of working with myriad B2B companies, we have never come across a business that didn’t have important points of differentiation. Your business is different, whether you think so or not, and that difference can be invaluable not only in marketing but also in sales. Keep in mind that information can be discovered and developed in many different and imaginative ways. For example, Subaru reportedly identified a new color for its cars—Cool Gray Khaki—by tracking trends in ski jackets. The insights improved targeting of at least one marketing segment for cars—young, active people—by better understanding what trends they were buying in other areas. In 2018, 18 percent of all the cars Subaru sold were Cool Gray Khaki. Finally, while we all know this cyber information safety tip, it bears repeating—at least from our own experience as well as that of others. If you’re too eager to come up with new insights, you can put yourself in harm’s way by clicking on email links or attached files whose sources you don’t really know. It’s especially important when their appearance mimics trusted sources you do know. We all also know the solution. To determine a source’s validity, call, text, or email that source separately. Some forty years ago, futurist and author of the mega-bestselling book Megatrends, famously said: “We are drowning in information but starved for knowledge.” That statement might or might not still be true. One thing that is true is that we’ve learned a lot more about how to turn information into knowledge, which makes the information we can absorb without drowning all the more valuable. To learn more, please call us at 847-446-0008 Ext. 1 or pkrone@productivestrategies.com .