By Larry Walsh
Former pro ice hockey player Wayne Gretzky famously said, “You miss 100% of the shots you don’t take.” Applied to the business strategies of channel companies, we could paraphrase that to say, “You miss 100% of the growth opportunities you don’t seize.”
It’s important for the health and prosperity of any business to have a strategic plan for growth. Just keeping up with growth of the national GDP is a must for any company that wants to remain viable in the market. And keeping up with the competition is crucial as well to avoid being squeezed out by bigger rivals. But simply treading water in your market isn’t enough.
Truly vital companies have ambitious growth plans in place—but not too ambitious to be practically unattainable.
Solution providers should take note of the fact that an increasing number of their peers are aiming for more growth than ever before. As part of our regular surveys of channel companies, The 2112 Group tracks what those firms report as their “acceptable rate of growth,” or ARG, which is defined as “the minimum positive change over the previous year in gross sales and revenue” for which they’re aiming.
We’ve tracked this metric for four years now, and in our 2016 Channel Forecast report, we note that the average ARG for this year was 16–25%. That’s up from an average ARG of 11–15% in the previous two years. What’s more, almost one-fifth of solution providers set their 2016 ARG at 26% or higher, a 25% increase over the prior year.
Why are more solution providers setting their growth goals higher these days? For one thing, many are finding that by setting more ambitious goals for their companies, they’re naturally under more pressure to put in place the systems and instruments that can help them attain that growth. Other reasons for a rosier outlook on growth in the channel this year might include perceptions of more robust macroeconomic growth in 2017, friendlier regulatory climates in solution provider markets and good signs ahead for the technologies in which they specialize.
Another big reason why solution providers are committing to aggressive growth plans is that they’ve experienced more actual growth in recent years than they imagined possible. In fact, as 2112 CEO and chief analyst Larry Walsh notes, our research over the past several years has “found that solution providers typically underestimate their growth potential, and actual growth is sometimes 50–100% greater than ARG.”
That tendency for companies with ambitious ARG forecasts to often greatly exceed their minimum acceptable growth goals is reflected in another tidbit we convey in the 2016 Channel Forecast report. Of those solution providers that said their ARG is 16–25%, 13% expect an actual growth rate of 26% or more; and 11% expect actual improvements to top 20% over the previous year.
Of course, shooting for the stars doesn’t mean you’ll actually get there. Wayne Gretzky took a whole lot of shots at net in his 20-year hockey career, but even the superstar didn’t make 100% of them. Companies that are truly committed to strong growth put in place key systems and tools for attaining it, including setting staff goals, conducting performance reviews, implementing strategic long-term planning, practicing disciplined day-to-day operational planning and governance, and building talented teams to execute sales and marketing strategies.
Solution providers on a growth trajectory also tend to take advantage of the array of sales and marketing enablement tools and programs offered by their vendors. There are many different strategies for working with vendors—from setting up shop as an extended sales force for just a few key vendors to playing the field and not tying the business too closely to any one vendor. But no matter their vendor strategy, the most successful solution providers run a tight ship when it comes to vendor relationships, carefully selecting the most promising programs to participate in and committing the resources to get the most out of them.
The upshot: Any solution provider scoping out the competitive landscape in 2017 had better be aware that if they don’t plan on grabbing a bigger chunk of their market, there’s a very good chance that someone else out there will.