Magic Tricks and Getting To $100M In Annual Revenue

I’ve been thinking a lot lately (perhaps too much?) about business, strategy, growth and other big picture decisions that can help push a company forward towards lofty goals ($100MM+ in annual revenue).  I’ll be the first to admit, my mind gets a little mushy sometimes when I think about all of the moving pieces it takes to get to that level of annual revenue.  There are a few revenue related milestones that are significant in an entrepreneurs career.  The first is the almighty $1 million dollars (in Dr. Evil style voice).  Some readers are starting companies or own a business and have high hopes to generate $1M in annual revenue in 2010.  It’s not an easy thing to do.  I realize that revenue can eventually mean little without profit, but for the purposes of this blog post, I’m focusing on revenue goals.  We’ll assume we all know how to control expenses enough to stay in business (or can raise enough money to afford losses until we hit profitability), and as such, the discussion will stay focused on the top line number.

So what kinds of things do you do when building a company from $o to $1M in sales?  All of the really scrappy, dirty, I-wanna-hire-someone-else-to-do-this kind of stuff. This stage is the scariest in my experience because it feels the most risky.  You don’t have revenue to fall back on if you screw up bad, and you are likely taking financial risks that you aren’t getting a return on (i.e. putting money in, not taking any out).  Also, its a time when you are certainly more lonely then at other stages of revenue growth.  There are some really cool parts.  You make lots of fast decisions, your team is really close (because it is small!), and you get to really celebrate critical ‘wins’ that propel the business forward.  Also, energy is perhaps at an all time high here as you are so completely consumed by your new shiny idea that you cannot sleep.  Every extra minute is spent thinking about new features, benefits, revenue models and ways to sell more, add more, and find more users and customers.

The next step up in revenue seems to be around $10M in annual sales.  Surely between $1M and $10M some incredible things have to happen.  I have been fortunate enough to experience this stage a few times in my career.  There are a lot of things that happen during this stage of growth that are entirely different then the previous stage ($0 – $1M).  A lot.  The company undergoes drastic change in almost every area.  The team gets a lot larger.  So do the offices.  So do the bills.  Hopefully so do the profits!  But not always.  A lot of what happens depends upon how fast you go from $1M to $10M.  The longer it takes, the more the companies are likely to feel and act totally different.  Case in point; if you go from $1M to $10M in sales in a year, is it likely you are a technology/internet/viral consumer business?  Yes.  If it takes you seven years to do it, are you more likely to be a ‘traditional’ type of business that acquires customers in ‘old school’ formats?  Yes.

Let’s assume you are trying to build a business that will go from $1M to $10M in less than seven years.  Heaven knows, every business I have been involved with certainly fits into this assumption – although only a few have actually been successful in doing it.  If you want to grow your business at a brisk pace, and get into the double-digit millions, you have to take some pretty decent risks.  There is no way to sludge your way to $10M in sales in under three years, it just doesn’t happen.  You have to go at a bit of a break-neck speed.  There are always exceptions, but I’m talking about the rule, since 9 times out of 10 that is what I seem to relate to most.  Anyhow, I digress.

So your sprinting towards $10M by adding employees, customers, financing, products, services and square footage.  You are also likely adding partners, debt, complaints, stress, turnover, and hours.  There is a lot of trade off as you can see.  It’s worth it though if you manage it right.  What does ‘manage it right’ mean you say?  I don’t know.  I’m not so sure I’ve figured that out yet.  I can say this though – it’s different for everyone.  I’ve done a pretty good job at making it ‘worth it’ for me and my family – with emphasis on the phrase ‘pretty good’.  I can do better and it seems that over time, for the most part, I improve.  Be prepared for the biggest challenges you will ever face though in terms of tough decisions.  You will likely have to fire some friends, put some stress on your personal life and go thru some frustrating choices all in the name of revenue.  Does that mean it isn’t worth it?  Of course not.  It’s totally worth it.  Why?  Because you are going to have a bunch of crappy stuff happen to you whether you hit $10M in revenue or not, so you might as well just do it.

This is the part in the post where  I have zero experience to call upon.  Going from $10M to $100M in sales is something I have never been a part of.  I have been a ways north of $10M before, but not even close to $100M.  Everything that happens from here on out is based on several things in my opinion (in no particular order):

• Quality of people that we hire – they know their stuff and are a great fit within our company culture
• Expanding direct sales and adding channel sales
• Potential VC’s on board to accelerate growth, help with key hires and strategic decisions
• Maintaining momentum, culture and energy amidst great change
• Not getting lost in too many new ideas – find that balance of focusing on core competencies while still being innovative

I know there are a lot more things that should be on this list.  Care to add any?  I welcome them in the comments.

I’ll be there January 7, 8 and 9.  Please email me:  alex AT fundinguniverse DOT com if you are interested in potentially getting together to talk business in Las Vegas next week.  Should be an interesting show, I’ve got some good meetings scheduled but am always looking for more.

Our family is actively pursuing adoption.  We would really appreciate it if you would keep us in mind if you know of anyone that is pregnant and might be considering adoption.  Please spread the word, although keep our names confidential at this time.  Email me – alex@theentrepreneursblog.com if you’d like to connect us with anyone.  Thanks so much in advance for helping us add to our family.  MERRY CHRISTMAS!!!!!

Those that work with me likely tire of my reference to MO’.  He (or she as the case may be) can be a good friend or a difficult enemy to a business.  MO’ is short for MO-MENTUM and I believe it is a significant factor in winning and losing at business.  It’s a simple concept really and I’m sure others have referred to it elsewhere.  Regardless, I have always looked at it as an important indicator as to how my companies are operating.  How?  By definition really.

The scientific definition of Momentum is:

A vector quantity (i.e. it has both magnitude and direction) that expresses the relation of the velocity of a body, wave, field, or other physical system, to its energy. The direction of the momentum of a single object indicates the direction of its motion. Momentum is a conserved quantity, it remains constant unless acted upon by an outside force.

That is a somewhat complicated way to say that if something big is moving in a direction, it is easier to keep it moving in that direction.  Conversely, if it stops, and gets pushed back in another direction, the same theory applies.  It’s tough to stop either way.  Hopefully you can see where this applies to business.  If your company is pushing a heavy object (it’s product, service, revenues, expenses, etc.) downhill, the speed will increase and it will be tougher to stop.  That’s a good thing if you are headed down the right hill, with the right object.  Suppose you are headed down the wrong hill, with the wrong object.  With each passing moment, the speed increases and the direction becomes more difficult to change.

With that in mind – what is MO’ doing for you?  Taking you in the right direction?  Or do you need to put some weight behind an energy shift?  I can tell you from experience that Momentum is a lot easier to manage when you are keeping it on a defined track as opposed to starting it down a new one.  That means that if your business is experiencing positive sales, decreasing expenses, improved attitudes or other positive things, make sure you keep your foot on the gas and push MO’ faster.  It can be tempting to sit back and let the ride carry you down the hill.  That’s dangerous though.  MO’ can shift on you like a bump in the road, and without the proper speed, you’ll be sent off track and now you are barrelling down the wrong direction.  BRAKES!!!!!

Where is your business at?  Are you pushing back and redirecting?  Are you hitting the gas and increasing your speed?  It’s probably one or the other, because MO’ doesn’t like to sit still for long.