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  • Writer's pictureAcumen Learning

The 5 Business Drivers of Sales

Succeeding in Sales

We've taught the 5 Driver Business model to hundreds of companies for years to help employees break down what every company is thinking about. Now, we're teaching it through the lens of sales. These are crucial ideas to understand if you want to be successful in the sales world.

Business Acumen: The 5 Drivers

At the core of developing business acumen is this fundamental mental model called the five drivers. Those five drivers are cash, profit, assets, growth, and people. People are in the center of this model.

Business Acumen: Sales Edition

This is a mental model that executives use to determine their strategy, priorities, and choices and can help you as an employee understand the financial implications of those choices. All of the drivers are interdependent of one another. For example, if a business has to make a decision on what to do with its cash, does it invest and make an acquisition that expands its growth driver? Or does it invest in assets that allow it to expand its product portfolio and manufacturing capacity?

These five drivers are also really important as a mental model for sales teams. If you want to understand your customers' world, priorities, challenges, and industry, you first need to know how this five-driver model looks and acts differently for them than it might be for you. Because as you start to understand their business, you can position your products and solutions better to what they are most focused on.

If you're going to go and sell to a customer where growth is #1 — driving top-line, driving market share, getting new products to market, expanding geographically — then your products and solutions have got to better align to that narrative. However, if they're really focusing on profitability, and driving what we call operating leverage on the P&L, driving more and more cost efficiencies, then your products and solutions are going to have to be talked through a very different lens. Knowing which of those is more important to them is really vital to be a better business partner. You need to be able to speak to how your products and solutions fit with the core of their business.

If you knew nothing more than what was the trend of their revenue growth, and what was the trend of their profit growth, then you've got a pretty good sense of what's likely happening in that business. For example, if they're driving revenues but not driving profits, that's a great sign of market share and differentiation and competitive advantage they have in their markets and they're gaining more and more customers. The problem is those sales and revenues are not translating to the bottom line. Meaning their costs are growing at a faster rate than sales. They're likely going to be a little more cost-sensitive because their costs have been going up faster than sales.

Now flip that around. If you go in and you're going to go sell to a customer and their profits are growing but their sales are not, what does that mean? If their revenues are flat but their profits are up, their costs have been going down over time. The challenge is, they're not growing the top line. They're not winning market share, they're not winning versus their competition. They're managing their costs well, but they really need you to better align your products and solution to help them drive more of their top line by getting into new markets and customers.

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Business Acumen: Adapting your Sales Approach by Industry

When you adapt your sales approach to what your customers are dealing with and thinking about, that is a great demonstration of having good business acumen. Let's do a quick dive into how these five drivers may look and act differently in different industries.

If you're going to sell into big retail firms, like the Walmarts and Krogers and Targets of the world, their issue is that they typically don't carry a lot of cash because most of their cash is tied up in inventory and physical assets. Their margins tend to be pretty thin because they don't have a lot of pricing power, and they don't have a lot of cash because the cash is typically tied up in their inventory. Also, they really need more and more return on their assets and faster and faster inventory turns to help them grow and generate enough cash flow for them. Now that's retail.

Now let's take a whole other view of this, let's think about pharmaceutical companies, right? They tend to carry a lot of cash, their margins are really high, but they don't have a lot of fixed assets. They have a lot more intangible assets. Patents, licenses, and trademarks. Now they carry a lot of cash because they have to invest in years of product development and research. When they finally get a product to market, they need to make sure they price well above their costs.

If you think about the five-driver model in different industries, you'll just see that it starts to shape and morph in different ways. Knowing how this five-driver model applies to your biggest customer is a vital first step in having great business acumen.

Business Acumen: Adapting Your Sales Approach by Stage

Once we've understood the five drivers and how those five drivers might change and adapt by industry, I think it also may be important to understand how these five drivers change by business stage. The life cycle of a business. Initially, it's about trying to get a product to market, getting the right people, and having enough cash to fund innovation. As you get to a later stage, it's about operating efficiency, standardization, generating goods, and stable cash flow that then allows you to fund new products expand, innovate, and grow. Understanding what stage your customers are in better allows you to then position your solutions in a language that they care most about.

Business Acumen: Knowing Your Customer

If you're selling to customers who are large and publicly traded and may have their financials available publicly, the first thing we'd suggest you do is to go to their investor relations page or any news that's highlighting their executives' latest messaging and financial metrics. You'll get a sense of how often they're talking about growth as opposed to how often they're talking about their profit margins or profit trends. They may be talking a lot about their products and new product development. Maybe they'll speak on assets the most. Use the five-driver model as a lens to understand the messages that their executives are sharing.

Next is their financial statements. If you could only look at their income statement (also known as the P&L) and see if their revenues are growing and how that relates to their profits. Ideally, their CEO is seeing revenues growing and profits growing faster, but if they're not that means they're dealing with some kind of challenge that you can help them with.

And now if they're not a publicly traded company, what do you do then? You may want to go look at their competitors and get a sense of what's happening in the industry. That's a way to at least understand your customer a bit better. Being able to use these tools and learn the art of communicating their priorities helps you really understand what the other side of the table cares about. Once you master this art, you'll be better able to position your products and solutions to their business strategy needs. We invite you into this journey of building your business acumen.

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