“Setting goals is the first step in turning the invisible into the visible.” – Tony Robbins
Growth is the lifeblood of any small company, but how much should you aim for? The answer isn’t a one-size-fits-all solution. However, aiming for a minimum of 25% growth is a prudent starting point. Anything less, and you risk lagging behind competitors, becoming a follower instead of a leader in your industry. But what about scaling? Scaling, in this context, refers to achieving a growth rate of 50% or more annually, a far more challenging endeavor. It requires not only a dedicated management team but also robust internal processes (systematization) and often additional capital investment, alongside your cash flow.
Plan for Growth: One way to fuel growth without relinquishing control or diving into the complexities of external capital raising is to reinvest your cash flow. If your business generates enough cash internally, this can be a powerful method to fund expansion. However, it usually requires a track record of at least eighteen months of profitability. It’s a path that allows you to maintain control while keeping your business on a steady growth trajectory. Yet, it’s essential to assess your market opportunity. If there’s a limited window of time to seize, it might be wiser to secure outside capital and pursue faster growth.
Leverage Vendor Relationships: Another growth strategy involves optimizing your relationships with vendors. Some vendors may offer you extended payment terms, which can significantly improve your working capital situation. By negotiating terms of sixty or ninety days instead of the standard thirty days or cash-on-delivery, you can unlock substantial working capital, enabling your company to grow even more robustly.
Here is what happens to valuation when a company grows at 10%, 50% and 100%:
The Exponential Power of Growth: As your company grows, that initial 25% growth goal can transform from hundreds of thousands to tens of millions of dollars per year, creating exponential growth. However, this level of scaling demands an elevated level of management prowess. It necessitates meticulous planning for capital requirements and other aspects of your business to sustain this rapid pace of expansion.
The Vision of Growth: Setting and striving for growth goals is fundamental to transforming your business from an idea into a flourishing enterprise. As renowned entrepreneur and author Tony Robbins aptly puts it, “Setting goals is the first step in turning the invisible into the visible.” Your growth aspirations give your business direction and purpose. They provide clarity on where you want to go and act as a beacon guiding your efforts.
Growth isn’t just a desirable outcome for small companies; it’s a necessity. While there’s no one-size-fits-all answer to the question of how much growth to plan for, aiming for at least 25% is a prudent starting point. Falling short of this benchmark could relegate your business to follower status in your industry. However, scaling, which involves achieving annual growth rates of 50% or more, demands much more than a simple growth plan. It necessitates a dedicated management team, refined internal processes, and often additional capital. Depending on your financial situation and market opportunity, you can fund your growth through reinvested cash flow or by negotiating favorable terms with vendors. Remember, growth isn’t just a numerical target; it’s a vision that transforms your business’s potential into a tangible reality.
Bob Norton is a long-time Serial Entrepreneur, CEO and investor who founded six companies with four exits that returned over $1 billion to investors for a 25X ROI. Two others are still in development. He has trained, consulted and advised thousands of Entrepreneurs, CEOs and boards since 2002. Mr. Norton works with companies to 2X to 10X growth rates and valuation using AirTight Management™, the world’s most comprehensive Leadership Operating System. He also helps companies raise capital to fund growth. He is also the Founder of The CEO Boot Camp™ and Entrepreneurship University™ for early-stage companies that have not reached product-market fit and $1M ARR.
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