How quickly do you want to grow your business? Or let’s frame it in more aspirational terms – how fast can you double your company’s revenue? That’s not an unrealistic question when you stop to think about it. Would you like to see some numbers? We’ve done some fun math to illustrate just how inspirational it can be to contemplate doubling your business:
- If you grow by 15% per year, you will double your revenue in 5 years.
- If you grow by 20% you will be more than double by year 4.
- If you can crank 25% growth per year, you will be almost double by year 3 and TRIPLE by year 5!
How exciting a journey to commit to this level of growth! Notice the use of the word “commit”. You might say that you are growing at this pace already, if you are coming out of startup mode and your base for growth is pretty small. When your business is growing from a mouse into a gazelle ($5-50 million), it only takes a handful of new clients or new projects to jettison you into growth territory. But rapid growth in mid-market businesses doesn’t happen automatically. A company that commits to growth has to overcome four hurdles:
You the leader cannot keep doing it yourself if you are going to succeed in growing by 15, 20, or even 25 percent per year. You need A and B+ players who can run the operation while you are focusing on strategic and market facing activities. Your team needs to operate within a strong culture that retains the best people and attracts the best. A gazelle’s engaged team members work hard, and they also have fun at work. The responsibility for the culture lies with the leaders of the company.
If you are not growing right now there is probably something wrong with your strategy. Leaders of growing companies have their eyes on the trends and are using that information to leap ahead strategically. Growing companies also grab market share by being truly different from their competition in some way. by building their business around the needs and wants of a core customer. Scaling Up author Verne Harnish says a gazelle may even have to decide to be bad in some ways to make room to be incomparably good in their core offering.
You don’t have to be everything to everyone to grow – actually the inverse is more likely to boost your revenue. Imagine if your company could own 70% of only a narrow 7% niche in your market. There is a dog food company that did this by changing its product assortment from pet size (small, medium and large dogs) to the dog’s relationship with its owner. As a result of this strategic thinking, there is now a category of dog food that is designed specifically for performance fuel, for dogs who accompany their owners on daily runs or other athletic pursuits. This new way of looking at dog food created a market.
Strategy is the thinking part – successful execution requires planning. As the business scales and the team grows bigger, the communication and accountability processes become more and more complex. The company needs a framework to keep track of who is doing what, and by when. A gazelle has to maintain its nimbleness, and that means that frequent communication has to occur to keep problems small and the team responsive.
A growing business needs a meeting rhythm, a regular and predictable set of processes for obstacle identification, accountability reporting, problem solving, and action planning. In addition, if the team is truly to become accountable, they need to know what “good” looks like. They need a clear definition of priorities, and a way to count their progress.
Yes, we saved the four-letter word for last. Growth consumes cash, and successful gazelle-stage companies develop strategies to accelerate the flow of cash into the business. Gazelle companies like to be able to fund their growth internally, from profit. They might even modify their business model to improve cash. Here’s an example: Store chain Costco pulled ahead of Sam’s Club when it decided to start to charge a membership fee. The move was so successful that today membership fees contribute 75% of Costco’s profit, and they also fund the company’s expansion.
In the 1990’s Dell Computer was running out of cash. In 1991 the company’s cash conversion cycle took 63 days, which meant that the company had to fund all of its production, sell its product and then wait for payment. The company hired Tom Meredith as CFO, who streamlined manufacturing, worked with suppliers on payment terms, and changed the model so that the customer would pay up front. When Meredith retired in 2001, the company was getting its cash 21 days BEFORE it was needed. And as of 2006, the cash conversion cycle was even better at minus 39 days.
You can have access to growth tools that gazelle companies use by going to https://gazelles.com/resources/growth-tools. Or you can contact us at [email protected] to schedule a conversation about the future of your business.