How to Generate Expansion Revenue From Existing Clients
The most-read blog post on Collective 54’s website is How Selling Professional Services is Different Than Selling Products. It introduced The R Technique, which teaches small service firms how to win new clients. Collective 54 members who have adopted The R Technique report improved win rates, larger deal sizes, and shorter sales cycles.
Fast-following Hollywood, I present a sequel: How to Generate Expansion Revenue From Existing Clients. This sequel reveals The Expansion Method, which teaches small service firms how to increase revenue through a clients expansion strategy.
Generating expansion revenue represents a bigger opportunity for boutique professional service firms than winning new clients. The reason this opportunity is large is that selling to existing clients is a lot easier than winning new clients. Existing clients already trust you. However, expansion revenue does not just magically appear. Firms need a methodology to turn sporadic expansion revenue into repeatable and forecastable expansion revenue.
The 6 Types of Expansion Opportunities
Generating additional revenue from existing clients starts by understanding the different types of expansion opportunities.
Extra revenue is more of the same kind of work with the same person in the account. For example, a systems integrator is working with a client to integrate two SaaS applications and a third application gets added.
Broaden revenue is different work with the same decision maker in the account. For example, a marketing agency is working with a marketing director to generate leads via social media advertising and gets hired to produce content.
Enlarge revenue is more of the same kind of work you are doing but with a different buyer inside the existing account. For example, a management consulting firm is doing a competitive strategic review with a GM in business unit A and the GM in business unit B asks to be included.
Spread revenue is new work inside an existing account but with a different buyer. For example, a private equity firm is happy with the work you did in one of its portfolio companies and introduces you to another portfolio company.
Advance revenue is work you have never done before but with an existing buyer inside an established account. For example, a custom software development firm built an ecommerce application for a client and was then asked to build a custom CRM tool. The firm has built many ecommerce applications before but has never built a CRM tool.
Pioneer revenue is work you have never done before with a buyer you have never worked with before, inside an existing client. For example, an HR consulting firm is working with the CHRO to redesign the org chart. This is work the firm has performed many times. And then, the CFO asks the HR consulting firm to redesign the compensation program. This is work the firm has never done before, and it is work with a buyer, the CFO, who they have never served before.
Listen to how one founder successfully utilized their expansion opportunity.
The six types of expansion opportunities should be easy to generate, but they are not. How come?
Boutique professional service firms run into several challenges when trying to secure expansion revenue. First, “farming” skills are non-existent. Boutiques grew up winning new clients and have not developed the farming muscles yet. The second is role corruption. Who owns the accountability of expansion revenue—sales or delivery? Third, the illusion of the referral. Boutiques think an executive in an account will happily refer them to another executive in an account, but it almost never happens.
Executives in an account compete with one another. You are their secret weapon, and they do not want to share you. Or referring you will be risky for them. If you screw up, the political blowback could be harmful. And, of course, most accounts work in silos, and your sponsor might not have access to the people you want to meet.
To successfully expand revenue under these challenges, you’re going to want to have The Expansion Method in your tool belt.
The Expansion Method, Step by Step
The steps to The Expansion Method are:
Know where you have earned the right to expand through a tiered client expansion strategy. Rank your clients. Expansion revenue starts by understanding which clients are thrilled, enthusiastic, happy, and satisfied. Thrilled clients view you as a remarkable, one-of-a-kind service provider and should be the first set of clients you try to expand. Enthusiastic clients had a wow moment with you and should be the second set of clients you try to expand. Happy clients feel good about hiring you and should be the third set of clients you try to expand. And satisfied clients should not be targeted for expansion. You have not earned the right to expand with these clients. Trying to expand satisfied clients is a waste of resources.
For each account in the thrilled, enthusiastic, and happy categories, decide which of the six types of expansion opportunities you will pursue: extra, broaden, enlarge, spread, advance, and/or pioneer.
Successful account expansion starts when you manage the account as a team, not as an individual. Expansion revenue requires an account team that has four characters:
a. The Celebrity. This is the thought leader who the client feels is an industry leader. Periodic visits from the Celebrity to review the future of the industry generates expansion revenue opportunities.
b. The Founder. This is you. Visiting with the client at certain moments and asking, “How are we doing?” often leads to expansion opportunities.
c. The Peer. This is one of your clients in the same role who is doing something cool with you. A well-timed peer conversation can lead to expansion opportunities.
d. The New Genius. This is your new star recruit. Introducing your new talent to a client signals you are growing in exciting new ways and can trigger expansion opportunities.
Eavesdrop. There are expansion opportunities all around you, but you often miss them because you are not listening. Incentivize your account team to have their ears to the ground and listen for opportunities. Pay special attention to emergency needs, obstacles, goals, and new visions.
Asking a client to consider an expansion opportunity requires skill, and you should train your account team on how to ace the ask. For example, the client will wonder, “What’s in it for me?” It will be obvious to the client why you are asking for the expansion, but it will not be obvious to them why they should care. Arm your team with the necessary tools. For example, telling stories with case studies and testimonials can be very helpful.
Pulling in the Basics: The R Technique for Client Expansion Opportunities
The Expansion Method generates new opportunities inside your accounts. These opportunities need to be managed with care and, ultimately, closed. The R Technique is the opportunity management approach used to win new clients, but it’s also key to helping close your new opportunities from The Expansion Method. To do so, it needs to be adjusted when pursuing those expansion opportunities in the following ways:
Step 1: Resting
Definition: when a prospect is not in the market for your service and does not know you exist.
The effort in the resting stage when pursuing expansion is to spread your brand inside the account to as many executives and business units as possible. Everyone inside the account should know who your firm is, the work you are doing/have done, and the results of the project(s). For instance, get as many people inside the account as possible subscribed to your newsletter.
Step 2: Receptive
Definition: when a prospect becomes aware they have a problem and are receptive to hearing about different solutions.
The job to be done in the receptive stage when working with existing clients is to make sure the account understands the full breadth of problems you solve and the solutions you provide. For instance, hold lunch and learns, webinars, and other educational sessions with the account outside of the current scope of work as part of your customer expansion strategy.
Step 3: Recognize
Definition: when a prospect recognizes who the service firm is, what they do, and how they do it.
The achievement to focus on here is relationship building. Land and expand means to enter an account and then spread. This means proactively building relationships with new executives long before they are needed. For example, sponsoring an account’s event or participating in a charitable fund-raising effort is a way to get to know executives in an account.
Step 4: Relevance
Definition: when a prospect decides if he/she should spend time with the service provider based on whether they are relevant to their needs.
The exercise in relevance is to show how the work you are doing for the client benefits others across the client’s business. For example, when a problem is solved for one department, it can have positive downstream effects in other departments. Do not assume these benefits are understood and are attributed to your work. Make sure the executive who heads the other department knows how you contributed to the firm’s success.
Step 5: Regard
Definition: when a prospect reviews the track record of a service provider to determine if they should be well-regarded.
The effort in this stage when aiming for existing account expansion is to earn credibility with the other executives in the account and business units. For instance, reference sales inside an account by having a new executive speak to an executive you have done work for.
Step 6: Rely
Definition: when a prospect is willing to take a leap of faith and rely on a service provider to get the job done.
The focus here is on getting the new buyer to believe you can be counted on to get the job done. For example, do a post-project review with the new executive. Show them how your previous projects were on time, on spec, and on budget.
Step 7: Resourceful
Definition: when the prospect gets the resources, budget, and organizational support to move forward with the project.
In this instance, help the executive secure the resources by preparing a cost-benefit analysis or by constructing a compelling business case. Because you are inside the account, you can do this for them.
Step 8: Ripe
Definition: when a prospect decides now is the right time to move forward, they are ripe for change.
You can help an existing account marshal support for the initiative. For example, you can do this by connecting the work to previous work you have done and showing that it is the logical extension of a successful project.
As you can see, the expansion opportunity should be managed with The R Technique, but the actions in each step are slightly different. The Expansion Method helps begin the process, but The R Technique seals the deal.
If you are wondering how much of your revenue growth should be coming from existing clients, this benchmarking data serves as a great comparison to see where you are versus where you should be.
Poll: How do you compare to these benchmarks?
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