EBITDA and The Growth Mindset
Olympic athletes consistently work to shave fractions of seconds off their times in order to set new world records. These athletes demonstrate a growth mindset by fine tuning their skills through consistent practice and pushing themselves to always become better. Their coaches review every step they take to find the small adjustments they can make for improvement. They practice with their coaches to implement these small adjustments to produce outstanding results. If they had the mindset of “I don’t need a coach”, “I know how to run”, or “I know how to jump”, there would be very few, if any, records broken. So, how does this translate to business metrics?
One major KPI (Key Performance Indicator) for CEO’s is EBITDA. This is an assessment of an organization’s Earnings Before Interest, Tax, Depreciation and Amortization. There are many factors that go into driving the EBITDA of an organization. The CEO is tasked to make sure the execution of the organization’s business strategy drives growth for higher financial performance. One of the fastest ways for a CEO to drive up EBITDA is through growth of revenue and profitability.
Revenue and profitability are often reviewed from the sales perspective. An increase in sales produces more revenue and higher margin deals produce more profitability. That being said, and thinking of the growth mindset, it is interesting that some CEO’s are not willing to invest in training the sales team. They feel that sales people are well paid, so they should know how to sell. Seasoned sales professionals are often in agreement as they feel they “know how to sell.” Thus, in both these cases, the CEO and sales person miss the key ingredient for success…a growth mindset.
The CEO could increase revenue and profitability by simply training the sales team to perform at a higher level. According to “CSO Insights” the average sales person going through a highly rated sales training will see a 10% growth in their win rates. So, an organization with a 20-person sales team with $1,000,000 individual quotas would see an increase of $2,000,000 in revenue to the organization. Top sales training ranges from $1,800 – 2,800 per person. If we use $2,000 per person as a round number, the return in one year would be ($2,000,000/$40,000) = 50 x Return On Investment assuming only one year of increased sales! Where else can a CEO find an ROI like that? From the example above, when a sales professional learns to handle objections in a way that results in the elimination of discounts or uses an effective sales process that produces more sales, it can have a dramatic increase on the revenue and profitability of the organization’s EBITDA.
Likewise, when a seasoned sales professional has a growth mindset to learn, practice and hone their skills, it produces substantial personal results. A sales professional with growth of 10% and an $1,000,000 individual quota would see an increase of $100,000 in individual production. If we use the same $2,000 per person for training, and assume the sales professional was making 15% commission, in one year they would get a $15,000 raise in income ($100,000 X .15). It’s an easy way to get a nice raise.
In today’s competitive world, the EBITDA of an organization can depend on the growth mindset of its team. Sales professionals must have a growth mindset to never be satisfied with their current performance because they should want to be at the top of their game. The CEO must support their sales team with effective sales training processes that help fine tune their skills, so they too can set and achieve new EBITDA records. Like the Olympic athlete who utilizes the expertise of coaches to set and achieve new records in their performance, the same should be sought after by the CEO and the sales professional.