Fast Growth in a Slow Economy

Let’s first understand the pretty simple growth equation….

In practice, growth looks like this…

How Distribution Co. achieved fast growth in a Slow Economy

Distribution Co. is in the 3PL industry (Third Party Logistics); they provide warehousing and distribution services to clients across the country. A few years ago  Distribution had hundreds of perfectly “fine” buyer relationships. 

Back then, Distribution Co. had $16 million in annual sales. Their goal was to grow another $4.0 million to $20 million (a very aggressive 25% growth target).

But the evidence shows that growth doesn’t look like that for Distribution Co.; given the state of their current buyer relationships, growth really looked more like this: 

When we began working with Distribution Co., they had an 85% retention rate, meaning that 15% of their clients didn’t buy from them the following year. In other words, on $16 million of current revenue they were going to lose $2.3 million in existing revenue – revenue they had already spend money to acquire – that was going to walk out the door and go to a competitor. Expanding their relationship via cross-selling additional services to their remaining client base historically would net them another $0.2 million in revenue, leaving them in a $2.1 million hole before they even started selling! So, to achieve their $20 million growth target they would actually have to acquire $6.1 million in new buyers, not $4.0 million. That’s 50% more than they originally envisioned. That’s like trying to fill a bathtub with the drain open. 

For years Distribution Co. had been a perfectly “fine” transactional vendor to their clients. They delivered a fine service at a fine price, clients were satisfied, NPS scores were high, but after doing the math with us they realized they could achieve much greater (and faster) growth by redirecting resources towards RXA. 

We showed them how improving their retention ratio to 96% would not only help them “grow by not shrinking”, but that they could also dramatically expand their existing relationships by an additional $2.5 million. Under this scenario, they would only need to sell $2.1 million to hit their $20 million target. That’s 66% less work required to reach the same goal. 

Moreover, we asked them “What if Distribution Co.’s sales teams could actually sell the originally-required $6.1 million?” What would happen? They’d blow past their targets and finish the year at over $24 million in revenue. That’s 50% growth. Imagine the ensuing commissions, bonuses, and accolades. Needless to say, they were eager to give it a try.

The result was that by practicing the techniques and method described in this program, Distribution Co. exceeded even those optimistic projections. They hit $28 million (75% growth) in the first year, including expanding their revenue from one large client, increasing four-fold, and found themselves featured in an Inc. Magazine story on “Fast Growth in a Slow Economy.” 

Equally impressive, Distribution Co. continued this growth trend the following year, hitting $36 million (another 40% growth) and are on a pace to surpass those lofty results again this year – hitting over $60 million. Today they have hundreds of clients mutually investing in their shared success as Distribution Co. continues to focus on RXA strategy.