Transformative Growth Goals Based on Key Ratios (Magic Number)


diagramIf your business grew by 5% last year, should this year’s goal be 6%? If your segment of an industry has been shrinking by 8% each of the last 3 years, should you scrap your growth goals and only focus on cost cutting? Or are a series of sub goals related to increased productivity, product improvements, and targeted marketing campaigns behind your growth goal?

Our best results have been achieved when clients have embraced transformative goals.

It is much more rewarding to intentionally create a company that is designed to be profitable than arbitrarily incrementally reactively grow into an awkward less profitable size.

When you truly know what drives the profitability of your business, you know to look for more of that. For example, operational excellence can drive profitability.  One service oriented business may have operational excellence when it has a 1/2/6 ratio of account executives/project managers/ associates. That company’s growth goals could be based on maintaining that ratio. The question becomes how do we create a company that attracts gross revenue that fuels 6 account executives, 12 project managers and 36 associates?  Operational excellence for a distributor might be realized through a 1/6 ratio of hubs to branches or always hitting a specific return on total assets (ROTA).

One of the many responsibilities of an accounting department is to track key ratios.  The best CFOs know how to identify and recommend a few critical key ratios that are closely related to what drives profitability for the specific company.  And their choice go much deeper than simple gross profit.

The attributes of the sales people can simultaneously be the optimizing and limiting factor when profitability is driven by consultative selling. The sales department may track average order size, closing rate, gross profit, orders per month, orders per sales professional, etc. They may even track the time from lead to close (buying cycle).  I’ve seen powerful transformative growth goals result when the VP Sales and CFO confer and create combined ratios (magic number) like Average Order Size X Closing Rate/Length of Buying Cycle. Maybe the optimum Order X Rate/Cycle value is achieved through a specific combination of experienced and new sales people.  Maybe the value of their “magic number” goes up when each sales professional has a book of 50 targets instead of 200.

Do you really know the most critical numbers behind what drives your profitability?  Could you generate a transformative goal based on a “magic number” created only for your business?

About Aldonna Ambler:
Known as The Growth Strategist®, Aldonna Ambler built and grew a suite of companies to help midsized B2B companies achieve accelerated growth with sustained profitability® A Certified Speaking Professional (CSP), Ambler has addressed over 2000 audiences and hosted a syndicated online talk show about growth strategies for 9 years. As a growth financing intermediary, Ambler raised over $1 Bil dollars for midsized companies. The winner of over 2 dozen prestigious national and statewide "entrepreneur of the year" awards, Ambler is available to speak about “profitable growth during any economy” and/or serve on the board of a growth-oriented privately-held company.

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Aldonna was positive and upbeat to my negative outlook on my business and the economy. I called myself a "reluctant business owner" and she gently replied that most business owners out there were just that, "reluctant."

Caroline Shelly, LEED AP
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