How to Navigate Past Revenue Inflection Points
Why do otherwise strong companies stop growing? Is it a sales or product issue? Does a key market dematerialize? Here are some proven ways to jump over hurdles for growing firms.
August 23 2013 by Christine Comaford
When companies hit a wall and seem to stop growing it’s natural to wonder whether the problem is sales, marketing or something external in the industry. Nope. It’s much simpler than that.
Roberta is a CEO at a mid-sized automotive parts company. She and her business partner, Greg, rapidly grew their company to $85 million in revenue, but then conflict arose. They each had clear responsibilities, but Roberta kept diving into Greg’s area.
Seeing Roberta’s micromanagement as an attack, Greg began to withhold information, which resulted in awkward moments at board meetings. Roberta in turn felt attacked and exacerbated the problem by recruiting the loyalties of key board and team members.
When companies grow, they come to certain places where the things that used to work, thethings that created that level of success, don’t work anymore. We call these inflection points. It’s essential to navigate to, and through, inflection points. Otherwise you end up like Roberta and Greg’s—stuck between them.
Here’s the trouble with inflection points: at each one,a company must reinvent itself in order to continue growing. Companies are either moving forward or moving back – stasis is not sustainable to reach that next inflection point, companies need to intentionally map out a plan to get there, and then execute with tremendous intentionality. Changes must be made in each of the following areas: people, money, and model.
People. As the company passes the higher revenue inflection points, the CEO will need to step back more and more, empowering their executive team to take more responsibility, and in the extreme this can mean a large scale organizational and/or cultural overhaul.
The only way to break the endless cycles of an organizational stuck spot is to start treating the system instead of individual symptoms. In order for your organization to change, everyone has to be involved – starting at the very top of the organizational chart and working all the way down to the people on the front lines. Coaching and training are essential here to help leaders adjust their own beliefs and behaviors.
Money. At each inflection point you’ll want to ask a number of money-related questions. How is the business funded? Do you need expansion capital? How are departmental budgets created (or not)? How are costs accounted for and what is the discipline in reporting? Financial systems must be looked into and explicitly altered to fit the next inflection point.
You’ll want to look at how efficient your operations are, how streamlined your expenses are, how you track ROI on all projects—internal and external. Looking at sales will be essential too: does your process of creating and converting new business work well, are your incentive programs motivating, and are sales commissions tied to profit per sale. What are your sales channels? Are your top and bottom lines optimized?
Model. What’s your business model? How will the company grow– organically or via acquisition? As a company grows, core competencies shift, markets (customers, competitors, environment, distribution channels and technology) evolve, and some opportunities are more leverage-able than others. You’ll want to consider whether today’s product line will be the same as tomorrow’s, whether your product path is working and how you can scale your relationships with clients, strategic alliances and key influencers.
Through neuroscience-based coaching, Greg quickly saw that Roberta had the company’s best interests at heart, and Roberta no longer felt the need to micromanage.
Within four months the Roberta-Greg battle had ended. Within six months Greg was in a new, more appropriate role with a fresh new focus, and the entire organizational chart had been revamped and optimized. Within fifteen months of training and coaching the entire company had become aligned, profits had hit a new record, and leadership was a common daily topic across all company levels. Roberta and Greg now work together very well, and the company is one cohesive team.
The company quickly grew past the $100 million inflection point. They plan to pass the $250 million inflection point within three years.
Christine Comaford (Twitter:@comaford) and (www.ChristineComaford.com) is a five-time CEO with 700% ROI on her company exits. She coaches CEOs to achieve remarkable results in performance and operational efficiency by combining neuroscience and business strategy She recently authored SmartTribes: How Teams Become Brilliant Together.