Consider for a moment that 90 percent of entrepreneurial training is focused on how to start and grow a successful company from an idea to a full-fledged award winner.
Do you know how you'll scale your business from $1 million to $10 million? Or from $10 million to $100 million?
Powering a successfully growing company into the stratosphere has an entirely different set of challenges. Business leaders who face explosive growth would be wise to call on experienced and talented mentors for guidance. What, then, are the right strategic steps to reach a meteoric company's full potential and enjoy the fruits of their labors?
I recently met with a fast-growing company that was seeking funds and advice on a topic of great interest to company leaders. Their invigorating question was this: "How do we build a company that can generate $100 million in annual year-end revenues?"
As I pondered their request, I thought to myself, whether a firm is small or large, the same key drivers of hypergrowth will apply. This unusual startup, no more than five years old, had achieved double-digit year-over-year growth. It was adding new large clients on a monthly basis. A talented team of experienced and dedicated employees was executing with distinction. Word was spreading in the industry that the founder's solution was best in class. Angel investors were happily providing financial fuel to power the flourishing enterprise. Clearly, the company was well positioned to be a top-notch organization.
"Why do you need my advice?" I asked. "It doesn't look like you need my counsel."
"Well, sir, we have never had a tiger by the tail before. We've never managed something with this much upside potential. And we don't want to fail."
"All right, my friends, here's what I suggest we do together," I said. I stepped to a white board. "Let's work backwards from your goal of $100 million in sales and learn what you will need to accomplish to achieve it."
The following set of questions will be discovery in nature and will form the foundation of a forward-thinking strategy:
1. What is your annual revenue goal in five years from now?
2. What's the average selling price of the product you sell?
3. How many months does it take to sell a product from the first contact with a customer until you collect payment?
4. How many salespeople do you have?
5. How many system engineers are working today in the field to install and support your customers?
6. How many customers do you need to increase sales by $90 million?
7. How many potential targeted clients are there in the world?
8. How many new customers can a salesman close in a year?
9. How many salespeople do we need to land 360 new clients in five years?
10. In a like manner, how many SE's will you need?
11. To finance this important asset, will you need growth equity capital from investors?
12. Will there be sufficient gross margins to cover all expenses and leave earnings equal to 15 percent of revenues?
13. Can expenses be controlled and not exceed the budget?
14. Lastly, you are very talented executives, but has anyone on the team grown a business this large and this fast?
"Gentlemen, I believe this exercise has been very useful and strategic. We have listed what needs to be accomplished for exponential growth. With the road map clearly before us, let's turn our thinking to three fundamental areas of focus that will propel us forward," I said. "These are: 1) Selecting the right priorities, 2) Deploying the most important resources, and 3) Implementing the most efficient processes. Let's now discuss each category. What do you think your specific priorities should be?" We pondered and debated several and arrived at this list:
1. All employees should be focused on selling and retaining satisfied clients who will make referrals. Going forward, we want to be known for having a sales culture.
2. We will begin hiring great salespeople and system engineers.
3. Employees will be generously rewarded for their performance.
4. Marketing will identify and cultivate every potential client who might be an early adopter of our products.
5. Marketing will provide a thoughtful brand to differentiate our unique offering.
6. The sales team will have a list of prospects, a quota, the best resources available and a compensation plan to reward excellent performance.
7. The system engineer and customer support teams will be in place and properly trained. They will actively support clients to ensure a high level of satisfaction.
8. The managers and the new CFO will manage expenses carefully. The budget will be based on our key priorities, resources and processes.
9. We will raise money to cover the expenses of growth.
10. Every manager should feel ownership for his or her assigned area. They should feel empowered and responsible for their performance.
11. We will hire an experienced CEO.
12. We will also hire an experienced technology officer to guide software development. We need to make sure our products continue to be relevant and best in class.
13. We see the need to establish a professional board of directors.
14. We agree as a team to report on our progress on a regular basis and to be held accountable for our efforts. We pledge to be persistent in our efforts and to avoid complacency.
The next items for consideration include important and urgent resources, specifically the following:
1. Hire the best people for each job. Make sure they clearly understand what's expected of them.
2. Ensure there are sufficient funds to achieve the plan.
3. Ensure there are supportive systems, tools and equipment.Comment on this story
Each prioritized task should be carefully delineated, documented and taught to appropriate employees. Each process should be implemented, followed and monitored and be examined and improved on a regular basis.
I welcome your thoughts. You can reach me via this column, on Twitter @AskAlanEHall or via my personal website at www.AlanEHall.com.
Alan E. Hall is a cofounding managing director of Mercato Partners, a regionally focused growth capital investment firm. He founded Grow Utah Ventures, is the founder of MarketStar Corp. and is chairman of the Utah Technology Council.