A common thread in all of the previous epiphanies is the focus on the fundamentals and root causes. Focusing on the fundamentals and core strategies is crucial for any company seeking to enhance profits and generate long-term business value. Even the most experienced manager with extensive knowledge of generating business value and growing a business often loses sight of the fundamentals, and failure to monitor and optimize them can be catastrophic for the company.
In Epiphany 11, Building a Winning Agency, I mentioned our growth, and a recent reader asked me to provide more detail about it and offer examples of its application. This is a printout that I had on the wall next to my desk, which I reviewed when making any significant business decisions. For the first 4 points, I could add a prefix of “does it” or “will it” when considering an action. The last two were more strategic actions that helped maximize the benefits of the previous four.
- Increase prospective leads or revenue performance by at least 10% YoY.
- Improve team performance through training, automation, and empowerment.
- Utilize capital efficiently by monitoring receivables and payment terms and maximizing the return on investment (ROI) for projects and tools.
- Uplift margins by moving clients through the Search Maturity Lifecycle (SML).
- Divest low-value clients that dilute focus and drain morale.
- Focus on SML Phase 2 & 3 clients ready for strategic search marketing.
Revenue Growth
Revenue growth focuses on expanding sales through increased volumes, new products, or price increases that directly boost profits and owner/shareholder value. In Epiphany 11, I mention several drivers where we focused.
Client Fit – identifying those prospects and existing clients that scored high on our Customer Value Model. This model weighted variables like cultural fit, future potential, anticipated friction, reputational value, and ability to utilize our broad portfolio of solutions.
Reputational Value Proposition – We had a sign that reminded the team that the more successful a client is working with us, the more long-term value we gain. We focused heavily on ensuring their success, which drove client loyalty and budget increases. GSI’s average client tenure was 3 to 5 years, with many clients at 10 years and others nearing 20 years, each experiencing at least 10% year-over-year growth. Having loyal Fortune 100 clients with real examples of revenue generation is the best marketing tool you can have.
Sustaining Competitive Advantage – Maintaining differentiation, innovation, and customer loyalty ensures long-term profitability and value.
- Reaching more customers through geographic expansion or improved marketing.
- Refining pricing strategies, such as offering tiered pricing or bundling products to encourage larger purchases15.
- Adding complementary products or services to increase sales per customer15.
- Doubling down on the most profitable customer segments and acquisition channels3.
- Innovating with new offerings or entering untapped markets
Revenue growth focuses on expanding sales through higher volumes, new products, or price increases that directly boost profits and owner/shareholder value.
Sustaining Competitive Advantage: Maintaining differentiation, innovation, and customer loyalty ensures long-term profitability and value.
Operating Effeciency
Operating efficiency, also known as Operating Margin, focuses on improving efficiency, optimizing processes, and cutting costs, ultimately leading to higher profitability from existing revenues. In other words, the company retains more profit from each dollar of revenue.
I find that many companies, especially those run by individuals with an MBA, have an overemphasis on cost reduction to the point of obsession. Yes, you need to manage and reduce costs, but the benefits of doing it more quickly have greater advantages. Another post-acquisition battle was on cost reduction. We were given a list of costs to reduce immediately that would have an immediate impact on our profit margin. The problem is that cutting costs is often linked to a reduction in quality or an increase in the time required to complete the task. Using junior analysts or strategists created problems with complex deliverables not meeting expectations or not identifying signals for additional opportunities. If you have to lower prices or fail to win new projects, this decrease in revenue defeats the purpose of the cost cuts. Our mission statement focused on delivering economic value and maintaining a reputation for high-quality strategic thought, which, if not upheld, would damage the reputation and perception of our brand, potentially leading to declining sales volumes and eroding market share over time.
Costs and Revenue Optimization
Auditing Expenses and Time Allocations – you can reduce operating costs by auditing and monitoring expenses, optimizing processes, and automating repetitive tasks.
Upselling and cross-selling were the primary objectives of moving clients up the Search Maturity Lifecycle – we could offer higher-margin solutions to existing customers, increasing revenue without incurring proportional cost increases.
Focusing on high-margin products or services – By focusing on strategic services, we could use fewer people and charge higher rates. Following the SML’s focus on transitioning clients from project work that requires more low-margin offerings to workflow optimization, international, and omnichannel integration, which requires fewer contributors but more time from high-value strategic team members.
Process and Efficiency Optimization
It is hard to argue with the fact cutting costs means it doesn’t cost you as much to make and sell your products. Depending on the significance of your fixed expenses, you may only see a 2 to 3 percent increase in operating margin from cost-cutting, which is excellent for meeting quarterly targets. However, we found that improving our process and working more efficiently would both free up new billable hours and reduce variable costs, resulting in an 8 to 10 percent margin increase.
Automation and process improvement – were our secret weapons. We were always looking for ways to scale output without adding headcount by focusing on what was needed and centralizing tasks such as keyword research, report building, and technical audits within a core team. We leveraged multiple internal tools and workflows, enabling each activity to be scalable. Everyone contributed to the process, and if any friction was identified, we collaborated on ways to minimize or eliminate it.
Optimal Equipment – I don’t have a better name for it, but we ensured that people had the necessary equipment to perform their jobs effectively. I’m not sure if it was growing up as the son of a mechanic or the pain and suffering of antiquated equipment in the Marine Corps, but I couldn’t tolerate inferior tech. We had a cascading computer rotation process, where those who needed computing power always had access to the latest machines with the necessary resources. As a result, their machines would be upgraded, and the process would continue, ensuring that everyone had a decent machine to perform their jobs. As we used standardized builds and software, it was relatively easy to hand over the computers. I am not advocating spending all available cash on the latest laptops for everyone, but you better ensure anyone working with data and analysis has the CPU and storage they need.
This was one of the first battles I had to fight after the acquisition. The Ogilvy IT team felt there was a better use for of our new hardware, so they sent us a crate of outdated desktops and a few laptops from their junk closet with a requirement for us to send all of our hardware to them to “update to their build guidelines” with no plan to send it back.
Capital Effeciency
Capital efficiency focuses on how well a company utilizes its financial resources to generate revenue and drive growth. When companies effectively utilize existing assets and capital, such as optimizing asset utilization and making informed investments, they can maximize returns on investment.
Effective capital allocation moves investments towards high-return projects, such as tools or process improvements, enabling greater performance from your teams. It is also managing risk and focuses on sustainable value creation.
Prioritize Investments that drive revenue growth – This is what I rant about in terms of economic value. How and what are you using those scarce resources for? A new hire who can manage and grow a new enterprise client, a company-wide subscription to AI tools, new computers, or attendance to conferences all need to be evaluated for their potential return on the investment.
Staff Utilization Rates – ensuring that the time you have paid for us is being used effectively. No one wants to fill out time sheets, but it is precisely how you can monitor what people are doing and how much is billable I give examples of the benefits and challenges of staff utilization in my article on Mission First, People Always.
Generating Strong Cash Flows: In the current environment of complex payment terms and local payment cycles, it is critical that your team is on top of billings to maintain a positive cash flow. Using existing cash rather than relying on credit cards or short-term loans reduces borrowing costs and enables reinvestment in the business, supporting value growth.
Understanding and Managing Payment Terms – Companies want to push paying their vendors for as long as possible, just as you want to get paid as quickly as possible. This involves negotiating the payment terms. The longer they are, the longer you need to cover the cost of paying your staff until the agency is paid.
Many companies that use enterprise payment systems often employ an EOAP, or end-of-accumulation period, which means the company holds invoices for the specified accumulation period and then pays them all at once, typically after a specified number of days (e.g., 45 days) from the end of the accumulation period. For example, if the accumulation period is from the 15th of one month and you submit the invoice for that month after the 15th, then you need to wait until the next cycle and then wait the 45 days of term. This means that when you expect to receive payment after 45 days, you won’t receive it until the 72nd day. This is why it is crucial to monitor billables and ensure they are submitted within the optimal timeframe to minimize the wait for payment.
Investing in employee training is a powerful lever for improving capital efficiency. Well-trained employees are more productive, make fewer errors, and adapt quickly to new technologies and processes, all of which help the company do more with less. Multiple research reports have shown that companies that invest in comprehensive training programs generate higher profit margins due to significantly higher income generated per employee
Closing Thoughts
It’s clear that the path to sustainable business growth isn’t paved with shortcuts or flashy tactics but with a steadfast commitment to business fundamentals. The most successful organizations, regardless of size or industry, are those that relentlessly focus on the core levers of revenue growth, operating efficiency, and capital efficiency. These fundamentals are not just theoretical concepts; they are practical disciplines that, when consistently applied, drive real, measurable results.
By prioritizing fundamentals, you create a resilient business that can weather market fluctuations, outpace competitors, and seize new opportunities. Whether it’s investing in your team’s capabilities, optimizing your processes, or making disciplined decisions about where to allocate resources, these actions compound over time to generate lasting value. As the business landscape evolves, the fundamentals remain your most reliable guide. Embrace them not as a checklist but as the foundation and engine of your growth. In doing so, you’ll position your business not only to survive but to produce meaningful value for your customers, your team, and owners for years to come. This is especially critical if you have an eye to being acquired, as these metrics will be key tools used to evaluate the value and potential of your business.
