- February 18, 2016
- Posted by: Ken Edmundson
- Category: Leadership and People
Starting a company and growing it past $25 million in revenue is no small achievement. In fact, fewer than 25% of all US companies ever achieve this mark.
To get there, you have to seize an opportunity, be aggressive, make intelligent decisions and take calculated risks.
After passing the $5 million mark, most founders feel like they’ve validated their business concept, so they focus on amplifying what’s worked in the past. The company takes on the personality of the founder or founding team who are the main drivers in sales, offering development and company culture.
That personality helps the company up to a point, but then it begins to work against it, actually preventing it from growing further.
In most companies, that ceiling is around the $10 million in revenue mark. My experience is that this is the point where the business has become larger and more complex and begins to exceed the natural strength and talent of the founder alone – this is the time when major decisions must be made about adding skilled leadership talent and allocating responsibilities.
This is a critically important insight for the founder to realize. (It’s almost counter-intuitive right? If I got us here, isn’t it logical I can also get us to the next level?)
Characteristics of the $1 Million to $10 Million Company
Most of these companies are
- Led by the original founders and management team
- Taking on the personality of the founder
- Allowing the founder to lead the sales efforts
- Following a self-directed marketing plan
- Operating in multi-purpose mode based on the highest need rather than strengths
- Having most employees reporting to the founder (or having a relationship with them that amounts to pseudo reporting even if the org chart says something else)
This causes the following struggles:
- Cash flow – can be on a daily basis
- Staffing – it’s difficult to find the right people
- Employees – turnover can be catastrophic
- Survival – most companies face numerous times where they might become insolvent
- Growth – sales growth rates often slow in this range or stop completely
- Competitors – the competitive landscape becomes overwhelming
- Strategy – is based on short term instead of long term
Key Steps to Break Through the $10 Million Revenue Barrier
In addition to seeing the commonalities and struggles, I’ve also identified the solutions to overcome these challenges.
For some founders, this is extremely difficult, because it’s hard to accept that you can’t just keep doing the things that got you off the ground and achieve the same results forever.
For those founders and leadership teams willing to accept that the things that brought you success are not necessarily the things that will bring you success tomorrow … here are the most important actions to take to survive and continue your growth:
- Hire a strong bookkeeper or accountant
- Create structure around roles and identify the right people to handle them
- Identify weaknesses in personnel and create improvement plans
- Begin tracking key performance data
- Create a repeatable selling system
- Separate the marketing and selling functions
If you’re feeling any of the pains I’ve outlined above, or have questions about how to implement the solutions, feel free to connect with me.