It amazes me just how many small self (friends and family) or angel-funded software, internet and SaaS companies are out there that seem to just be flat-lined or oscillating in the $3 to $10M revenue segment. They are in every market sector you look at – XYZ software, a business in the (fill in your favorite) billion dollar market- B2B and B2C alike.
But why? Is there a common thread? Why do some break through and others just seem to linger, or sustain? There exists plenty of great academic reading, and thought leaders, that will explain the impact of the business life cycle, market timing and more. Take your pick; they all have valid points. I think, from a practical standpoint, that most times it all comes down to the CEO. It’s for good reason that they say “the company is a reflection of its CEO.”
The start up phase $0 to ~2M, is a ‘fly’ or ‘crash and burn’ zone. Companies come and go. Determined business owners can, and will, scale their business on sheer determination and survival instinct. At some point thereafter, they achieve a certain revenue threshold where the company settles in to a comfort or sustain zone; one that matches the initial organization’s (and more specifically the CEO’s) capabilities.
Many refer to this as the first major inflection point of a software company. To me, it’s the point at which the CEO has to make that decision – Lifestyle or Growth. That is when it is time for a look in the mirror, and to make some hard choices. Interestingly, I think many companies get stuck at this inflection point because the CEO either does not recognize this or does not know how to tackle the next stage of growth.
Deciding to create, or to run, a lifestyle business is great. However, if you opt for a path of continued growth; it takes both recognition that you have reached this stage and a strategic decision to adopt change that will help you push through.
What has to change?
- The team around the CEO will likely need to evolve. The people that helped start the business are not necessarily the same ones you need to build the business to the next level. Understanding what/who you need is very important.
- Measurement and metrics have to be revisited. The way success was defined and assessed in the early days is not necessarily applicable anymore.
- Processes will become more important. The business can no longer be subject to human (resource) bottlenecks or operate without repeatable and understood protocols.
- And, perhaps most importantly, the CEO will have to evaluate his role and area of focus. Accountability and responsibility to the business, and the rest of the team, oblige.
Change is good, if you want to stay on the growth track. Embrace it.
You know, I gotta tell you, I genuinely savor this blog and the useful insight. I find it to be energizing and quite informative. I wish there were more blogs like it. Anyhow, I finally decided to write a comment on Reflection in the mirror. CEO, are you running a lifestyle business or building a growth organization? DaggerBoard Advisors – I just wanted to tell you that you did a good job on this. Cheers mate!
It is useful to try everything in practice anyway and I like that here it’s always possible to find something new.
Thanks for making such a valuable blog, sincerely Kobos Mathers.
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I think this is a great post. One thing that I find the most helpful is number five. Sometimes when I write, I just let the flow of the words and information come out so much that I loose the purpose. It’s only after editing when I realize what I’ve done. There’s defiantly a lot of great tips here I’m going to try to be more aware of.
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