Industrial Manufacturing: What Growth Leaders Are Doing Differently

John Drosos: All right, so welcome, everyone, to this webinar. We’re very excited to host today. Jim and I will be leading you through some very fascinating findings based on some research we conducted. Extensive research last year, and also we pulled in some of our work, case studies, to show that research in action. Please feel free, if you have any questions, to send them to us via the chat. We’ll respond in real time.

So the topic for today is what are growth leaders doing differently in industrial manufacturing? We conducted some research, which we’ll walk through, and we saw that there are some companies out there, about 20% of the pool that we looked at, that are growing rapidly, plus 10%. Others are seeing medium growth of about 5%. We were interested to see: did they do anything specifically different other than being in the right market or having a nice product? Was there anything on the commercial side? Was there anything from a strategic perspective that they were doing that differentiated them? Short answer is yes, and we will walk through that throughout this presentation.

We’ll give you a quick introduction of who we are, Blue Ridge Partners, what we do. We’ll discuss some of the numbers and some of the interesting correlations that we see. We’ll walk through a couple of the in-depth case studies, and then leave a little bit of time for takeaways and questions.

Blue Ridge Partners, we’ve been around for 20 years. We are heavily focused on commercial growth. That includes growth strategy—what customers you’re going after, how big your market is, and whom you should be prioritizing—and commercial effectiveness, a lot of what we’ll talk about today. Pricing optimization that also fits in with that commercial effectiveness bucket. And then, more recently, AI and data analytics, which is rapidly changing the landscape. We won’t be talking a lot about AI today, but it is definitely a topic that we can provide more information on. If you’re interested, we also do an extensive amount of research in that regard. From an industrial perspective, areas where Jim and I are heavily focused, we’ve done I think close to 500 projects at this point, 400 plus as of a couple of years ago. We cover multiple sectors, including manufacturing, which will be the focus today, as well as distribution and industrial services. Jim, you and I, between the two of us, have probably covered all of these subsectors here, and then a few more.

Jim Ettamarna: Yeah, and John, I’m glad you put this page in here regarding the different sectors within industrials. And I use the term industrials in air quotes, because, of course, you and I would have never described ourselves as industrials people, it’s packaging, it’s manufacturing, it’s industrial. I’m just watching the chat here of our participants. If anybody wants a deep dive into a particular topic or sub-area, John and I are happy to, when we get into the Q&A, address very sub-sector-specific topics.

John Drosos: Yeah, absolutely. All right, so who are we? I think you can maybe see our faces, but I’ve worked in growth consulting for 20-plus years, probably led over 150 engagements. Half or more of those in the industrial space, and I lead our industrial manufacturing research, or actually industrials research in general, a topic I’m very much interested in, and spend a lot of time pulling this data together and trying to tease the insights out of it. Jim?

Jim Ettamarna: Yeah, thanks, John. And just a quick comment, too. Aside from John and me, there are a number of us across the globe. My own background, similar to John’s, big company consulting, we actually worked in real companies. I think that’s something that makes Blue Ridge Partners unique and distinct, is that the people at Blue Ridge come from the big consulting firms, but we have all had real jobs, as I would say, and we see, we see things up and down the value chain and supply chain. We do a lot with private equity-sponsored companies, but we also touch different big public companies and, see, again, a broad range of issues and companies and value chains.

John Drosos: That’s very important to note. So the companies that we did this research on, they span private and public companies. We did have some parameters on them where we’re not looking at really small companies or anything under $25 million. I think $50 was probably our threshold here. Or any really big companies that have some more complicated dynamics, $5 billion and above. This covers a lot of ground here, both on the public and the private side of things. All right, a little bit of background into the research we conducted. So we looked at over 150 industrial manufacturers. These are just manufacturing companies in the industrial sector. We excluded pure commodity players. We excluded the consumer side of things. So these are, heavy-duty industrial manufacturers in a number of different subsectors. We looked at financials, cost structures, where are they investing, what margins are they getting, how are they growing? We looked at organization and roles, particularly in the sales model and on the marketing side, headcounts, role types they’re using. We looked at compensation and quotas, productivity, how are they paying reps, what measures are they using, and then more broadly, programs and trends, pipeline management, RevOps. Are they using RevOps? If so, how? And then we also sprinkled in some information that we have from a number of other studies that we do that cross verticals. Pricing strategy, tariff impacts, AI. We’ve done a good deal of AI research recently. Some of that you might see in here, but for the most part, this research is based on these 150 industrial manufacturers.

Jim Ettamarna: John, you and your team research-wise went pretty broad in terms of looking at a number of drivers of performance and growth input and output metrics, and you went pretty deep, it seems.

John Drosos: That’s right, yeah. So there are a couple of reasons we did this. One, this is very valuable for our projects, everyone asks us, what’s a good cost ratio? What margin should I be going after, and things like that. So it’s very useful just from our perspective. But we did something interesting where we took a look at it and said, okay, we got all this data., are the companies that are doing better, just on a pure growth metric., companies that are, 10%, 15, we isolated a certain number that were doing well, ones that were in the middle, and ones that weren’t doing so well. And we said, is the data going to tell us anything interesting? And in fact, it told us a lot of interesting things that we’ll walk through today.

There are some strong correlations between what companies are doing strategically and what they’re doing from a commercial investment perspective. Now, not every single case, it’s not a 100% guarantee, but there’s some clear alignment between what top growth manufacturing companies are doing versus the middle of the pack and the laggards. And we’ll go through that in detail. So after this session, everyone participating will have some very good insights into what really drives growth in manufacturing.

All right, so what does drive growth in manufacturing? What separates the leaders from the laggards? Well, taking a look at the leaders, they’re all at over 10% growth. So these are companies, we ask them, how are you growing? How do you expect to grow next year? Which next year is essentially this year. Top growth cohort, about one-fifth of the respondents are growing, or grew at 13%, and they expected even faster growth this year. I know this is a question that Jim has asked before. Did industry sector matter? Did size of the company matter? Not much. No, we did not see a huge differential between companies that were, in different industries. The only industry that really popped out was automotive, where we did see some lower margins, and we did see some average growth, not necessarily low or high. But other than that, there were, packaging companies, there were electronic component manufacturers, there were, chemical, advanced polymer and material companies that were growing fast, and there were others that weren’t.

Jim Ettamarna: John, interesting point you mentioned there on automotive. And I’ll tell you, I was just at a private equity client’s leadership conference this week talking to one of their machine shop portfolio companies that is going deep on medical devices. So think implants and things like that for, so machine shop working in some high-end metals. And what they’ve told me, number one, they’re gaining share from some of the technology that they’re employing, but also they’re having competitors enter the market from automotive. So prior automotive-focused companies that have now changed their focus and are going into some higher margin, higher growth potential areas. So it’s interesting when you look across the manufacturing landscape and whether it’s injection molders or machine shops or whatever the manufacturing company might be, you can see how they’re targeting different end markets to go to where the, the old Wayne Gretzky quote of I skate to where the puck is.

John Drosos: Yeah, and I think we see some of that in here, in the data, in that the companies that are growing faster, and I think this is the next, or, a little bit after this, is they’re getting higher margins, moving into directions where, there are higher margin products, there is more value added, we do see a correlation to growth. It could be that in automotive, you’re going to get a certain amount of growth, there’s maybe pricing pressure, and that, maybe it does make sense to think about who else I can sell to, and can I get more than 25, 30, 30% margin, in other sectors?

Jim Ettamarna: Yep.

John Drosos: Second point here, from a strategic perspective, the top growers, they’re focused in a lot of different growth areas, so they are more likely to get more revenue from strategic or large accounts. They are more active internationally. again, there is no correlation with size here. $100 million manufacturing firm, billion-dollar manufacturing firm, the one, the ones that tended to be more international, it wasn’t really related to the size of the company. They also use independent reps. We won’t talk about this too much, independent reps. They’re not, 100% focused on independent reps, but again, they’re using different channels, different areas to grow. They’re very strategic about where they’re getting their growth. Jim, you mentioned, profitability. Our top growers, they’re not knocking it out of the park with 60, 70, 80% margins, they’re not, super niche, in super niche areas, but they are getting better margins, and we will show you, the other groups. The other groups can’t crack a 40% margin, but top growers, they’re getting 40, 45, 50% margin, so they’re growing, and they’re growing profitably.

Jim Ettamarna: John, if you find a company that’s got 80% gross margin, is growing quickly, please let me know, because I want to let my deal partner friends understand that. And all joking aside, we see some good spots, but I would love to find a company with those kinds of margins growing, really, really high.

John Drosos: Yeah, well, we didn’t have a large enough N count to tease that out, but we did see this correlation here that, and there are reasons for it, we’ll discuss it. if you’re sub 30, you’re going to have some challenges with growth, and part of it is just funding that growth, and part of it is, maybe you’re in a very competitive space. There’s not much to differentiate a 25% margin product, so, there are reasons why you might want to go up that value chain, and maybe not 80%, but 40-50 is definitely doable in a lot of these sectors. All right, but what was really interesting to us, because we love growth, but we are also very focused on commercial excellence,, what makes a sales or a marketing model effective, how can you invest in it, what are all the levers. We’re very familiar with those, and it seems that, obvious here that top growth companies are also very familiar with these levers. So this is probably, for me, one of the most fascinating findings. Top-growth companies are focused on six commercial growth levers. That doesn’t mean they neglect the rest, and we’ll talk about what those are. The mid-tier and the lower growth companies, they’re only focused on two. So this is just a stark difference. They’re like, there’s two things I’m going to, bet the farm on. Whereas the top growers are saying, there’s a lot more than two. There’s a lot of different ways to grow if we focus on the commercial function, and, they’re tripling the number of programs and focus areas compared to those lower growth companies. fascinating, and we’ll show you what those are, and we’ll actually show you a case study where we help companies put several of these Growth levers into action.

All right, so I’ll leave it at that. Any questions, happy to answer them, but we can also, just keep going if not. All right, let’s walk through some of the data. We talked about margins, and what’s fascinating here is there is a stair-step increase in margins for these, these companies as they move up the growth chain, right? low-growth companies, sub-30 margins. Mid-growth, mid-30s, and then we hit the 40s and above with high growth. What’s really fascinating here, though, is that when we look at the low growth and the mid growth, companies, they’re trading off. The low growth companies, are investing a bit in the commercial model. Their commercial expense is eating up about 40% of the margin. Mid-growth companies are investing more, they’re getting more growth, they’re investing more into the sales model. But they’re trading that off, right? So they’re losing about 3 points of that margin to get a little bit of extra growth. High growth companies can do both, right? They are investing more and they are getting more growth. So they are actually spending less of their margin on the commercial function. Truly fascinating. So they’re able to invest more, but they’re able to invest less as a percentage of their gross margin.

Jim Ettamarna: Hey John, I’m scanning our feedback from participants here, so question, was there any overlap on commercial programs that companies are driving? Did we see any themes or, key? You mentioned that before about some of the key drivers, but any overlap on what they’re driving and doing?

John Drosos: I wanted to keep some suspense, but there is. Yeah. So there are two programs everyone’s focused on. So pricing and talent. So that’s almost table stakes. So pricing and talent are the overlap, and then there are 4 others that we’ll talk about. So there is that overlap, so everyone’s saying, these two are important, we’re focused on them. But the top growers are saying, yeah, they’re important, but so are four other things.

Jim Ettamarna: Perfect. We’ll come back and dive into that when we get to the right point. And then the other question from the interwebs here is, does growth slow down at some point? So with high margins, do we hit a point where growth starts to peter out and asymptote? I imagine, devil’s in the details sometimes, but back to your point on if you’re strategically going in the right markets and you’re driving the right things from a commercial execution point of view. There’s headroom to keep margins up and to go gain share, to create the size of the pie, but then take share from competitors. Any reactions on that from your findings?

John Drosos: Yeah, a couple things. I think that, if we’re not talking at that real high mark,, 70, 80, very niche products, if you’re, in that 40, 50, even 60% range, I don’t think there’s any impediment to continuing to grow. I think there might be an impediment to saying, look, we’re going to go from 40% margins to 50 to 60 to 70., what this is telling us is that companies in that 40, 50 range, as long as they’re not too niche, can keep growing. The other thing we saw is we do have a pretty wide set of companies here from 50 million to 5 billion. Most were in that 250 to a billion range. So there’s probably,, once you get 5 billion, 10 billion, there are not a lot of companies in that, in that range of growth. But if you are below that billion-dollar threshold—or even $2 billion—you can keep growing. Well, we can’t really say, once you become a, behemoth, like, GE, which you’ve worked at, the dynamic might change a little bit. yeah, if you’re in that 100, 200 million range, you have 35-40% margins, I don’t think there’s much of a ceiling on the growth that you can achieve.

Jim Ettamarna: Yeah, yeah, thank you for the G shout-out. It was a lot of big numbers, right? Sometimes when you’re big, it’s tough to keep that growth going, which again, gets into that, the from a growth strategy point of view, which we do a lot of growth strategy, it’s finding the right, products, the right, segmentation, the right segments to go into, and then driving that. It’s funny, I’m looking at this chart here, John, I think, when I see low growth, the lower margin companies being lower growth, the higher margin companies being higher growth, in some ways, there’s some interesting things to tease out of that, and I wonder how much of this is about, again, making the right decisions around what specific product or value proposition in my offering, to the right segment. If you think about what Blue Ridge Partners does, we start off with growth strategy. You start with a strategy, but where do I want to, what’s my value prop, where am I hunting, and then driving the execution of it correctly. And I think it really gets into a fundamental strategy thing. So a lot of manufacturers that are small are sometimes overwhelmed by, I’m a $200 million machine shop. Now, where do I hunt? There’s so many places to hunt, so how do I figure that out first and then execute against that? So I wonder if that’s what we’re seeing in the data here.

John Drosos: I think we are, and I think there are two areas that we can point to specifically that the data also teases out. We can’t say, strategically, all this other stuff is driving, but that’s actually a good segue, and I think the next slide. So one area is international, right? the higher growers and again, we didn’t find a correlation here to just, going to this data between, like, you have to be a $200 million company to expand internationally. A lot of companies, 50 million, 75, 100 that are in Mexico, Latin America, Europe, it’s not as difficult to expand for manufacturing internationally as they might think. It might require M&A, it might require some partnerships and things like that, but interesting here, they’re growing, they’re more strategic, and one of those avenues may be international. They may think, look, I got a great product here in the U.S.; this will fit well in X, Y, and Z markets, if they do the analysis strategically, this might be a great product for Brazil, or we need a China and India play. So we do see that. They, you just go up, though. The ones that grow, are more international. And one fascinating thing about that is it’s not just, I found a new market, I can grow. I’ve seen this in my own experience. It’s also this feedback loop. There are tangible benefits here that we show here in innovation and supply chain resiliency. Someone in Europe may be doing something better than you, and you can actually import that back into the U.S. and grow. Or, you have a more resilient supply chain something happens, as we’re seeing today, in one market, but, you’ve got production facilities in a number of markets. So there are a number of reasons why being more internationally oriented, being strategic about what markets you’re in, can feed this growth.

Jim Ettamarna: Yeah, John, it’s a great point you mentioned on supply chains and just what I’ll call geopolitics, right? So if you see, if you look at what’s happening in the oil markets with certain constraints around the Strait of Hormuz, for example, some of the refining capacity in the US versus Europe, there’s a significant bottleneck there. I was talking to a machinery supplier that’s looking at helping to, let’s just say, expand capacities in certain areas. So it’s just there are supply chain disruptions that are causing issues, and so that creates opportunities for companies that provide the products or the services to increase So watching, watching those dynamics, but then how do you go execute against that? Right? You see, in the data center space, for example, there’s a massive push to build out data centers. So I had a sheet metal client that was making products for certain data center cabinetry and things like this. so spotting that opportunity where you see that demand shift and then going after that is where the devil’s in the details of how you go execute against that. How do you execute against some of that?

John Drosos: Absolutely, absolutely. All right, the next, bucket here, and there wasn’t a huge difference here, but it was material in that the top growers are going, are more likely to get more revenue from strategic or large accounts, so why is this important? So one is, look, materially, if you win a bunch of SMB accounts, it may not affect your growth rate that much, right? You bring in one whale, you bring in a large, you have a strategy like, we can supply this large customer, then you can see 5% growth right off the bat, right, with one customer win. The other thing is that these customers also are the ones that are growing, right? the small customers are small, maybe small for a reason. The bigger, more strategic customers are probably going to get even bigger and more strategic., it’s good to have a strategy to be able to, to be able to align with these larger customers. And from a commercial perspective, there’s a lot that you can do to be better and more strategically aligned to large customers. Well, actually, our case study will walk through that. Any thoughts on this one, Jim?

Jim Ettamarna: No, it’s, like you said, it’s about strategy. Sometimes you get these big customers and you got to retain them and build them. And then, and sometimes, for example, depending where your capacity is, you can make some money on the margin filling up your capacity. So I think your point there about you get your big anchor, right? If you’re a shopping mall, you would have your anchor tenant. So sometimes as a manufacturer, you have your anchor clients and then you make a lot of your margin sometimes. on the longer tail. But there’s no one size fits all answer. There’s no right answer. It gets down as you started with the strategy and then figuring out how you make money and then driving the revenue and the commercial actions that relate to good operational decisions to maximize the profitable revenue and the operating cash flow that comes off of your assets.

John Drosos: Absolutely. All right. Again, it gets even more fascinating. When we look at cost structure, so we mentioned this a little bit earlier, but the low-growth companies, they’re lower margin, they’re spending less on the sales function, right? This is just something I’ve seen throughout, my career that look, you got a low margin business. You can’t lavish too much spending on the commercial function. You got to be careful with your spend. Mid-growth and high growth? About the same, about 9% or so. And again, this is not universal. If you’ve got, heavy distributor relationships or heavy OEM, your costs might be lower. But in general, this tracks pretty well with what we’ve seen. mid-growth, high-growth, about the same. Low-growth, we see a gap. What’s interesting, when you get to marketing, both mid and high growth are spending a lot on marketing, and some people may ask, or commercial leaders in manufacturing may ask, why even spend on marketing? Well, there are a lot of good reasons to spend on marketing in commercial manufacturing in specific areas of marketing, and this is an area where we see, specifically, low-growth companies just are at a disadvantage. They just don’t have the margin to spend. And it’s something that a lot of them neglect. So in this case, 3.5%, some don’t spend anything at all. But it is important, even, you might think, I’m just a product shop, I create stuff, why do I need marketing? There’s a lot of important reasons why marketing will help you grow if you do it right.

Jim Ettamarna: You got to wonder sometimes if it’s chicken or egg., priming the pump, right? Sometimes you have to spend the money to get the flywheel going. I will observe that I wonder if we’re at a bit of an inflection point now. When you think about digital commerce, John, you and I are both Gen X. If you look at Gen Z buyers out in manufacturing companies that are buying equipment, or buying components or parts, do they use AI to make their purchasing decisions? From some of our other colleagues’ research, I think we’re starting to see more of that flow through. And so I wonder how much of the right commercial model, especially if you’re a lower, more of a commodity-like product, or a less differentiated product. I wonder how much of this will come to using digital commerce, AI-informed commerce, to help get the message out there. And I assume we’re probably too soon to see this from your research, but I think, at Blue Ridge Partners, it’s something we’re going to watch very closely to see how industrial and all the different subsectors, how digital commerce and AI-driven commerce factor into helping to grow and how people are making purchasing decisions?

John Drosos: Yeah, so one thing we did see that didn’t come out here was that a lot of manufacturing companies see AI, digital, they see that as an advantage. They see that as a growth advantage. And what I see here in the data, and what this tells me is that the ones that have marketing functions, that the ones that are moving ahead and progressing and know a little bit of marketing already. They’re going to have even more of an advantage with AI and digital. The ones that aren’t spending at all, it’s going to be, they’re going to have to, they’re not even doing the basics, right? I think from what I see and, what I can tease out of this data is, like, you’re better positioned if you’re already a little bit more sophisticated, if you already have stood up a marketing function to pivot more into AI and digital marketing.

Jim Ettamarna: Yep.

John Drosos: All right, let’s get to the, again, I think this is the crown jewel here of the research, and it’s very exciting if you’re into SFE growth, and you tell clients that this stuff is important. Well. here, manufacturing leaders are telling us that, yeah, it is very important, and it is a big differentiator for growth. So low- to mid-market commercial growth pillars. What we did, we asked companies, we gave them a list of about, 12, 13 commercial programs, investment areas, and said, which ones are you really focused on? Which ones are important? And we gauged importance by pretty high market. It had to be close to a 9, like. Yeah, this is really this is something we’re really focused on and investing in. So when we asked the low to mid-growth companies, most of the pool, they said they really just got excited about pricing strategy and sales talent. So again, very important. You’ve got to get your pricing strategy right. Sales talent is critical, so we’re not downplaying this, but these are the only two focus areas that they really, overall, as a group, were excited about. Yep.

Jim Ettamarna: Yeah.

John Drosos: When we look at high growth, they also think pricing and sales talent is important, but they also think that new logos are important. Cross-sell and upsell is important. Lead generation, which gets us back to marketing. To do good lead generation, you need a good, you need a good marketing function and more sophistication. And then what’s really fascinating is, how do you tie this all together? Well, RevOps, right? Part of the problem that some leaders have, or commercial leaders, is Look, how did,  Lead generation sits with marketing, pricing sits with finance, sales talent sits with HR, how do I pull all this together? Well. You can pull it all together with a good RevOps function, right, that can tie it all together, it can integrate these teams and pull things closer to you as a sales or commercial leader versus keeping things very isolated and siloed. I think for me, that is the glue that if you can get this right, if you can get a few good resources and get a good charter for RevOps, you can start doing a lot more than just pricing and sales talent. And you can do sales talent and pricing better.

Jim Ettamarna: Yeah. John, quick question or quick comment for you. Pricing. I love pricing, right? Because, especially in industrial businesses, it’s just like, a 4% price increase net-net, drops significantly to the bottom line, right? Because, just the way pricing works. A couple comments, just sharing from a more recent client example. Oftentimes, people look at the wrong metrics, I’ve found, right? Sometimes people look at gross margin as a percentage, and I had a client CFO was like, we have to focus on gross margin dollars. And what we were looking at is, if you look at an account over time, people were making bad decisions. They were looking at decisions for how we price particular SKUs, and are we getting enough gross margin for the particular SKU, when really, they should have been looking at the account over a period of time. Because sometimes, some purchasing people have a set of products that they look very closely at, and aha, but yet we sell them, there might be 5 products that they look very closely at, and another 100 that they don’t really look at that closely. That was a big insight. And I think the other big thing, and I started my career in finance, I don’t want to go too far down the pathway here, but sometimes people look at fully loaded costs, when they should be looking at variable costs. For example, if you’re in the chemical space or things like this, if, let’s say, you’re a label manufacturer, and you have a bunch of expensive equipment that’s running, printing your labels, if you do a fully loaded cost, well, really what you should be looking at is a variable cost for the materials and the printing time and not loading in a bunch of depreciation for the assets on your bill of materials, for example. We had a label printing customer that was trying to make some pricing decisions, and they were making the wrong decision. They were making value-destroying decisions because they were looking at their costs wrong relative to how to go and sell. Long story short, it was a surprising insight to say, we should lower our cost, lower our prices here to go get more volume, but net, it drove a lot more operating cash flow for the company, is the point I want to make, and it can get tricky, and the integration between, operations side and commercial side, pricing sometimes brings all that together, but you got to do the work very thoughtfully.

John Drosos: Yeah, it works best, and, we pat ourselves on the back here. I think we have an advantage when you pair pricing strategy with commercial strategy, right? It’s just you don’t isolate the two, and that’s probably what happened. I chuckled because I had that exact conversation with my brother, who’s in the hotel business a while back, about variable, and he was really angry. I’m like, well, if you can make a few bucks and you have capacity. And he got really mad, but then he called me back a few days later, he’s like, John, you were right!

Jim Ettamarna: So, you’re launching the Blue Ridge Partners Hotel practice. That’s good. Good for you.

John Drosos: We just had an article out, actually, I sent it to him. All right, so let’s get into some case studies here. Jim, I’m not sure if you’re familiar with these, but these are fairly recent, actually, and just go to show how you can apply strategy and commercial levers in particular to drive growth. So, I won’t go into too much detail here, but essentially, we had a client that was in the aerospace and defense component industry, roughly $50 million to $200 million company. They actually were growing. They were doing well, from a growth perspective, but they had a lot of risks, and the PE sponsor of this company, realized that, look, they weren’t popular. They had some very big customers that they were probably on the verge of losing, so they brought us in and said, look, I think we have some significant issues in our commercial model. Can you help us fix it? And those issues, I won’t go into too much detail here in the interest of time, but, we see these in other areas. They were very engineering focused. They had issues, they were disjointed and disconnected, someone would take a call for a delivery., someone else in operations wouldn’t really care or think about who was prioritized for parts deliveries. And then importantly, they had zero commercial capability, so they did have a sales team that was inside. They were basically just answering calls and taking orders, and they had one person for a roughly $100 million business, managing the whole thing. very immature. Here’s a company that had a great opportunity to grow and continue to grow, but just had a very immature commercial function.

So what did we do? We built this thing up for them over a couple of years. So developed a customer-centric strategy, around strategic accounts. So, they’ll say, you’ve got a lot of strategic accounts, you can’t have one person managing 15 or 20 of these. You need a whole team that has the talent and has the charter to manage these in a focused and responsive manner. We clarified customer service responsibility, who does what, what’s prioritized, when do you absolutely need to get a part to one customer versus another so their planes don’t sit on the tarmac for a month. The team grew over this period. I think they started with 3 or 4 strategic account sellers and some support resources to, over a couple of years, 15, 20 resources that supported this commercial function. And then importantly, Sales Ops was given a charter, and two specific things that they were chartered to do. One is: get a handle on the pipeline. Prioritize it. Figure out what’s our pipeline, who should be focused on what should we be closing, what should we pass on? And then number two, get a lot more visibility into customer satisfaction, and just make sure we’re not pissing our customers off to the point where they might leave us. the overall results, they grew, they were growing well, and they grew even better. I think they went from a 9, 10% growth rate to 15, 20% consecutively over a three- or four-year period. So this is an asset investment that literally doubled over a 3 or 4 year period. They found a $20 million pipeline. This just boggles the mind. The pipeline was there, but it was buried, right? So they would go after what they could. They didn’t have the resources to really go after it well, and they didn’t really prioritize. So when they cleaned it up, when they got the sales ops to clean it up, they found, like, wow, there’s $20 million just sitting there that we should get on right away. So the close rate increased dramatically, and they had the capacity to go after the right types of deals. And they were able to convert or expand. There were a lot of customers that were like, we’re not going with you guys, we have a bad rep. There were others that will only use you as a last resort. After this came into play, several, I think 3 or 4, greatly expanded or were converted and contributed materially to their growth. Any thoughts, questions on this one, Jim?

Jim Ettamarna: The panel. Yeah, no, it’s, and I’ll come back to a couple panel questions in a second, but just, it never ceases to amaze me sometimes if you really get serious about growth and about commercial excellence. What can be accomplished if you do just some of the basic fundamentals, right? It’s simple, but simple is not always easy. But if you do the right segmentation and develop the right account plans, if you put the right talent in place and enable them. And then you support them with the right sales operations, RevOps. I’ll come back to audience question about this in a second. But put those things in place and then get the team executing, there’s share to be gained, right? Sometimes, and by the way, your end market doesn’t need to be growing. We see, John, you and I see this in clients that have arguably decreasing markets. And in industrials, you have to be ready for the ups and downs, right? But especially in a down market, you have to go and take share. But if you do these basics, but do them well, and simple is not easy, you can go and ring the cash register by doing these kinds of activities. And then there’s a comment here from the audience about how big a company needs to be to support RevOps. I’ll give you my take on this for a second. Sometimes, RevOps, SalesOps, sometimes, that can start within finance as just commercial finance, or, if you want to think about the basic analytics, having somebody to do good market-focused, customer-focused analytics, get the metrics in place, do the right dashboards and metrics, and provide intelligence to the salespeople, a lot of that can be done out of commercial finance. If you use AI tools now, like Claude, for example, I see some good uses. We use it, we do some great things developing tools for our clients in Claude and give them the right tools. That’s a good way to make it more scalable. And then also, you can step it up a little bit to say, what are the kinds of enablements that make a difference, whether that’s sales playbooks or sell sheets or we see this with our software clients, just battle cards or ways to engage with customers. A lot of high-performing RevOps organizations do that stuff. But I would say start with the basics around process control and execution control and metrics and dashboards, and then you can move into more of the enablement. But I would also say, if anybody has ever read the book, The Goal, focus on where the constraints are. So look at your commercial processes and activities, understand what the constraints are in the system, and then solve for those constraints. And that’s, fundamentally, John, when you and I do engagements with clients, it’s a lot of what we would do in a diagnostic phase, understand the opportunities, understand the constraints to go get those opportunities. and then address those. Any reactions to any of that?

John Drosos: Yeah, no, that all makes sense, and from the question. From a data perspective, we looked at companies, $50 million to $100 million manufacturing firms, more than 50% have a RevOps function. Now, it could be just one person, it could be two or three. Above 100 million, it’s almost universal, about 80% or so. You don’t have to be huge to have a RevOps function. And another interesting fact, it almost always pays for itself. I’ve seen this over and over again. You get one, two RevOps resources in a $50 million organization, they will find you enough savings to pay for themselves, and then you can focus on growth. So you don’t have to be that big. You don’t have to go crazy. You don’t need 10 RevOps resources probably for a $50 million company. One, two, three, maybe four— you could probably,, make a good case for that.

Jim Ettamarna: Yeah, John, so you mentioned savings. I fully agree with you because a good RevOps function will help prevent goof-ups, right? And there can be some very costly mistakes, and we can talk about what those look like. I would also assert that a good RevOps function pays for itself by helping drive growth. Both. If I’m a CFO, I can make a case easily, like, look, if I have a good RevOps function, I can prevent the unforced errors and prevent some goof-ups, but yet I can also then provide people the enablement and provide sales managers and sales executives with the analytics and the metrics to go drive execution, and so you then get the growth on top of it.

John Drosos: Yeah, we probably need another session just on RevOps because it is a fascinating topic. I’ve seen the case where it is growth, but it’s also a RevOps person comes in and says, like, we don’t need 15 salespeople. We need 12 and a half, and we need it in the right spot. Boom, it’s paid for itself, and you have a more efficient sales force.

Jim Ettamarna: It’s an interesting point because I’m not sure if you’ve seen this in your career, but I would say the first time I ever heard the term RevOps was at a software company, probably twenty years ago. And I’ve seen, I will observe that we see some practices that are in software that have migrated into industrials. to take some of those good practices in and start doing those kinds of things, RevOps, Sales Ops, sales enablement, things like this. A lot of industrial companies used to drive growth and sales performance because they had a good brand, right? Like being a former GE guy when Lexan was a plastic polycarbonate pellet, when that was on patent, you had Lexan didn’t really matter how good or bad your salesperson was. If somebody wanted polycarbonate, they bought Lexan.

John Drosos: They had no choice, yeah.

Jim Ettamarna: Right? So then over time, you have to start getting better at commercial things, and I would assert that a lot of technology companies are really good at selling and at revenue things. You see that coming in. So you see RevOps, and then again, I would come back to say, you might have needed a 20-person sales team before you get the right RevOps person, and you start using the right digital commerce. Now you need fewer salespeople, but your salespeople make more money. They are better. They drive more growth. They can make more money. They’re happier. And, on net, the company grows, and it’s a good it’s a good way to do things.

John Drosos: It’s typically a win-win, and again, we see it in the data, it is a big factor for these high-growth companies. All right, real quick, let’s go through a pricing engagement here. This is for a fire and safety equipment manufacturer. So this is not six levers, but this is two. They actually use pricing, and they actually created a charter for sales ops to better support pricing. What was happening here, several BUs, there were no real good pricing practices, no market data or information, and importantly, very unprincipled pricing. I talked to the MV who led this engagement, and he said they had distribution partners, they thought they were doing a lot. And they would give them 10-15% pricing discounts for bringing in a new customer, things like that. They actually went to those distributors and found that distributors were doing nothing. The customers were just walking in the door. Why give someone a 15% discount for doing nothing? So things like that, just no pricing strategy, architecture, consistency, whatsoever. What did we do? We helped build that out. We created a list and discount pricing architecture. All right. Started with gathering market perspective, secured buy-in through leadership workshops, and then created a fully functioning dynamic pricing model that was adopted as part of the day-to-day rhythm of this company, so it was also supported through a roadmap, like, here’s what you need to do to go from not having any pricing architecture to having a strict pricing architecture that you will adhere to. And again, this comes back, sales operations and revenue operations were the glue to this, so they were the gatekeepers of making sure that everyone was using Pricing effectively, and that they understood when they weren’t, and what the goals were. What happened here? What were the results? Like I said, I think this was, I don’t remember quite that the revenue was probably a $300 million to $500 million company, $14 million in a year. So keep in mind in pricing, you get an EBITDA hit again. You can get a growth gain at the same time. So they got both. So $14 million in-year EBITDA improvement, fantastic. This was, this was also a fairly recent case study here. Consistent pricing, so they didn’t have distributors getting unwarranted discounts, they didn’t have crazy stuff going on somewhere else. Importantly, and this is very relevant for today, they were able to become much more flexible and efficient in executing price increases.

So why is this important, right? Well, imagine if you have a massive tariff increase in, say, 2025. So this project was done in 2024. There was a massive tariff increase in 2025. Manufacturers in this company in particular, it would have taken them 6 months to respond to that. They responded to that in one week. They were ready to go, no lost money, nothing. They were able to raise tariffs 50%, the price increase is almost automatic, so very, very good results. Again, this was a recent project about, in 24, and it just keeps getting better for them in their ability to capture EBITDA, capture growth, and very importantly, be a lot more flexible on questions concerning price and price increases in particular.

Jim Ettamarna: Yeah. John, I, like, knowing a little bit about this particular situation, a $14 million in-year EBITDA impact at, let’s call it a 10x multiple,, $140 million of enterprise value improvement relative to everything, like. This is why I love pricing. So putting my private equity hat on, when you think about what this does for enterprise value, it’s significant. And then the other key thing here is, and you touched on this obviously, but it’s around getting the market insights. It was the customer and market insights that allowed them to understand what,, what drives value, what are the potentials, what are the issues to be solved for, and then I think the other key thing is making it dynamic, and with the ERP, the CRM. Sometimes, for example. We see this a lot with distribution clients. For example, you can have, inventory, where you start to build up excess inventory, and then it’s like, we gotta move this stuff out. the linkage between revenue and EBITDA and free cash flows, having a good dynamic tool so you can manage the ebbs and flows of supply chain, but you start to get a bit long on some inventory to convert to move that through the system. there are a lot of things in here, but again, I’ll bring it back to that. Yeah, $140 million, roughly, of enterprise value, if not more, created.

John Drosos: Yeah, yeah. And one thing that comes to mind with this is, okay, now you’ve got $14 million. Maybe you can add a little bit more to your commercial function, right? Maybe you can add a little bit more to marketing. Maybe you can focus a little bit more on new logos or sales talent. So again, we can see that positive feedback loop.

Jim Ettamarna: Yeah.

John Drosos: If you harness a bit more profitability by better strategy and pricing, you can invest more in your commercial model. Among other things. Or just give it back, give everything back to the, the investors.

Jim Ettamarna: There’s that too.

John Drosos: All right, real quick, we have a couple more slides here, but we’re coming to the conclusion here. We put all this together, and we named the groups—we branded, we did a little bit of marketing, we were able to, to brand, folks here, and so our top growers, we branded them as commercial converts. When you think about these companies, the takeaway here is they’re growing fast, their profile is, they are really sophisticated with commercial excellence. They’re not necessarily investing a ton more, but they’re investing smartly, and they are putting that effort into a number of different commercial levers. A couple of other things, they’re getting more productivity per rep, they’re getting better margins. So all around, these companies are just outperforming the rest through primarily being a lot more strategic in their growth and a lot more focused on commercial excellence. The mid-tier, I would say they’re dabblers. They are focused on pricing, they are focused on talent, they are investing in their commercial models. But they’re not necessarily doing it as smartly as they could. They are getting growth, this is most of the manufacturers out there, but what this tells me is that they could probably get a lot more if they just did a little bit more of what the commercial converts are doing. And then finally, our low gear folks here, more commoditized, on commercial autopilot. It’s not a big growth factor for them. They do see the importance of pricing and talent. But they may not be investing in it, maybe more aspirational rather than something they can actually put some money and effort behind. Did we have something pop into the chat?

Jim Ettamarna: I do. There’s a question here, which is, what is the best way to move up the margin ladder if you’re a laggard?

John Drosos: Wow, I think.

Jim Ettamarna: pricing.

John Drosos: The pricing project. The fastest way is pricing. Yeah, it is pricing because it’s not just pricing. It’s pricing with strategy, because what that does, it tells you that, look, there may be customers that aren’t worth investing in, right? They’re costing me money. We’ve seen this, and, Jim, you’ve seen this where we have negative margin customers that are still on the books, and they could be half our business, so pricing will tease that out. At the same time, it might tell you, if you tie it with, strategic growth initiatives. Which customers, which sectors should we be in and should we be investing in and so forth? So that’s the easiest answer. That’s probably the starting point.

Jim Ettamarna: Yeah, yeah, thank you for that, John, which is starting with that growth strategy, that segmentation, and strategy sounds like a big word, but it can be as simple as just peeling the onion back on where you make money. What are the customers where we are really successful, which products are really successful? What are the ones where we’re not? And as you said, sometimes there’s money-losing ones, so just understanding some of that. Pricing’s a good lever, but obviously there are some other things you can do, but it’s, again, simple, simple. The basics are not always easy, but you have to do the simple analytics to tease that apart, and flow it through.

John Drosos: Yeah, and how it might work is you might just say, look, all my customers that aren’t really worth keeping on, you all get a 10% price increase. And what you might find is that most of them stay, you will probably break even on the ones that don’t, and then you can focus more on the high margin areas of your business and you can put more investment in.

Jim Ettamarna: Funny you mention that, John. And I know you have a few things to hit here, but, I’ll give you a quick anecdote for a second. Oftentimes with clients, you see the Pareto, the steep Pareto. You get bigger customers by revenue, and then there’s the so-called long tail. Sometimes, your bigger customers are very sensitive, and you have to be very careful in how you handle those. Sometimes for your long tail, you’re the tertiary supplier. And they only come to you for things that are not in their core. To your point, you may be able to put through a more significant price increase on the long tail, and they don’t notice it at all, or if they do notice it, they don’t really care, because, again, they’re buying small things from you. But if you move that long tail up a bit, that can drop real dollars to the bottom line.

John Drosos: We could devote an entire session to moving up the margin ladder—where to reduce investment, where to increase it, and which growth strategies can help a company progress from a 28% margin to 35% or 40% while continuing to grow. For now, let’s close with the key actions and takeaways. If you focus on only one slide, make it this one.

First, embrace a broader set of commercial growth levers. If you are already focused on two, continue investing in them, but consider adding a third—such as new-logo acquisition—or give Sales Ops or RevOps a clear mandate to identify where to focus. You do not need to pursue all six levers to move from 2–3% growth to 5–6%; start with the opportunities that offer the greatest impact.

Second, refine your segmentation and strategic-account approach. Decide which customers, industries, and geographies deserve more time and resources. For example, if your strongest customers are in Texas, you may need greater coverage there. Focus on your most important customers, understand how they are growing, and determine how to serve them better.

Third, leverage RevOps. Give the function a specific charter—even if it consists of only one strong person. Ask it to uncover pipeline opportunities, improve pricing visibility and reporting, or strengthen sales enablement and marketing programs. With the right mandate, RevOps can pay for itself, even in a small company.

Fourth, sell higher-value products and solutions. Review your portfolio, acquisitions, markets, and businesses objectively. You may find that some offerings should be discontinued, while others warrant additional capacity, investment, or acquisition. Often, there is low-hanging fruit in shifting resources toward the areas with stronger value and growth potential.

Finally, do not starve commercial investment. If your margins are in the 30–40% range, consider where an additional one or two percentage points of revenue investment would have the greatest effect—new-logo acquisition, RevOps, cross-sell, or upsell. You do not need to double commercial spending. Take a stepwise approach, make targeted increases, and invest where the expected impact is highest. We’ll leave it there. Was there a final question?

Jim Ettamarna: No, all this makes sense to me, John. I think we’re good for questions, I guess. My quick reaction, though: it makes a ton of sense. I think the devil’s in the details of number one about which of those levers you look at. And I know you’ve been doing some cool things with, and I think you call it 333, which is looking at how you can do a three-day workshop and then plan out what initiatives to go execute over three weeks and then take the three months to go and execute and ring the cash register—make stuff happen. But it seems to me that first workshop to come out within three days with an answer to what we should do, which of these growth levers do we invest in, that sounds very sensible as a way to operationalize these things you just laid out.

John Drosos: Absolutely. You might spend two weeks and find that it’s pricing and cross-selling, right? Go after pricing and cross-sell, or maybe something else if you’re a different company. But yeah, that’s something we’ve really been pushing. You don’t have to spend 6 months to figure out what issues you might have in your commercial engines. You can do it fairly quickly, and then move fast to get that growth.

Jim Ettamarna: Right. Awesome.

John Drosos: All right, on that note, thank you to everyone who attended here. Thank you for all the questions. We will make the presentation available. We might do a few changes here, but we will get it out to those who are interested in getting a copy, and again, thank you for your participation, and we will look forward to having more of these types of sessions going forward. They’re highly valuable, and as Jim, as you can see, as the panel can see, some of these topics, on their own, merit a full hour or more.

Jim Ettamarna: That’s right. Thank you, John. Thank you, audience.