Gerry Tabio has 35 years experience in helping media companies grow revenues.  Last week Gerry talked about the 80/25 rule of advertising revenues.  Today he talks about the only 2 factors that contribute to reliable sales growth.

You’ve said that there are only two factors that contribute to year-over-year media sales growth.  What are they?

The research reveals that there are two factors that stand above all others in predicting year-over-year growth.  Those two factors are, first, the preservation of the revenue from the company’s portfolio of Key Accounts at the end of the prior year and, second, the creation of New Key Accounts during the current year.  Let’s define them one at a time.

(1)  If the Key Account Portfolio Attrition Exceeds 13%, Growth Becomes Almost Impossible.

The single biggest predictor of year-over-year growth is the attrition experienced by the company’s Key Accounts in the aggregate. If the Key Accounts, as a group, experience 13% attrition or higher, it becomes almost impossible for the business to grow over the prior year.

To explain this phenomenon, let’s imagine a medium sized out of home company that, in 2023, billed $3 Million from 250 active clients. The top 25% of the clients – the largest 62 accounts – will be considered Key Accounts for all of 2024. From experience, we know that those Key Accounts will have generated roughly 80% of the dollars, or $2.4 Million.

Now, identifying the top 25% of the list and labeling them “Key Accounts” is the easy part. To manage them for growth, they need to be organized in a way that allows management to monitor their total spending as a group. For this purpose, we developed the practice of creating an annual Key Account Portfolio (KAP).

A company typically identifies its Key Accounts in January, once the books are closed on the prior year. As soon as the Key Accounts are identified, we recommend that they be locked into a KAP from which no accounts can be removed and to which no accounts can be added.

In the case of our example out of home company, their KAP would have a value of $2.4 Million on January 1. From that point on, the KAP is managed very much like a mutual fund. As each month closes, the company calculates the KAP’s attrition in the aggregate and for each of the 62 clients in the portfolio.

The thing about the KAP is that it can put you behind the eight ball fast if you let it experience too much churn. At 13% attrition, that $2.4 Million shrinks down to almost $2 Million. As attrition rises, it creates an ever-increasing hole the sales organization must dig itself out of.

(2) To create New Key Accounts, pivot from traditional new business to a Target Account effort.

Just like Key Accounts were the top 25% of active clients in the prior year, New Key Accounts are either brand new clients or existing small and medium-sized clients that grow large enough to end up in the top 25% of the list in the current year.

So, if the revenue the company preserves from the KAP is the base for the current year, the company needs to create enough additional revenue from New Key Accounts to mitigate any remaining KAP attrition, plus whatever growth the company is hoping to create.

But where do we get those New Key Accounts from?

Well, traditional new business efforts are designed for volume and not to create big accounts. That’s probably why, on average, only seven New Key Accounts are created out of every 100 new clients the sales organization brings in.

Target Account efforts, on the other hand, have only one purpose: To produce New Key Accounts, which are the only new clients that contribute to year-over-year growth.

How do I set up and run a Target Account effort?

Set a Rational Target Account Goal – Every Target Account Effort is built around the accomplishment of a rational, clear and memorable revenue goal that every Target Account must reach.  The goal should be low enough for the sellers to feel like they can attain it and high enough that, when the account reaches it, it has a good chance of ending the year as a New Key Account.

The simplest way to set that goal is for the sales management team to go back to the most recent account sort (in this case, it would be the 2023 sort) and identify the revenue spent by the smallest Key Account. Then, add 30% to that number and, if necessary, round up to a number that is easy to remember.  For example, let’s say the smallest Key Account spent $30,000 last year (Target Account Goals are annual). Adding 30% would peg the minimum Target Account Goal at $39,000. The sales management team wants a number that is easy to remember, so they round up to $40,000. From that point on, it becomes the job of the sales organization to grow Target Accounts to at least $40,000 by the end of the year.

We like to think of it as a simple game of growing accounts over a fence. The height of the fence is determined by the Target Account Goal. The game then becomes how many accounts can the sales team grow over the $40,000 fence by the end of the year regardless of how much they spent last year.

To learn more visit creativeresourcesgroup.com or email sallybeamer@creativeresourcesgroup.com and gerrytabio@creativeresourcesgroup.com.

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