How Do You Grow a Company To $100 Million?
By Bob Norton
Launching a startup company may be the hardest thing you ever do. This
is a big question with many moving parts and hundreds of things to get
right that come from experience and art, not just black and white
answers. However, there are many things that can be easily agreed on
that will go a long way to getting you there. First lets talk about
the stages, because it is clear that there are very different skill
sets and modes of operation at different stages of the company’s
development. Lets call these stages “Raw Startup”, “Early Revenue”
and “Established”. “Raw Startup” is the idea development stage,
working out of the home or "garage" without a significant burn rate.
Generally you are spending most of your time developing your plans,
researching the market and customers and defining the product. You
may also develop the actual product, or need to raise funding to
accomplish this. “Early Revenue” is when you have a product or
service to sell. It might even not be the “real” product, or may be a
service that gets cash flow going and builds the team and customer
relationship that meet milestones to the “real product”.
“Established” is a company that has customers and a revenue stream,
maybe not any profit, but it is getting real close to REALLY
understanding the market. You can only really understand the market
by being in the market and having constant customer feedback on a real
product. Until that happens everything is theory and what people say
they will do.
recently heard that a company interviewed people going into a store
about what they were planning on buying there, and then checked what
they actually bought on the way out. In FACT people did NOT
buy what they said they would 70% of the time. A cold hard reality,
and why investors want to see real customers that are paying cash, not
just saying nice things about your company.
First off let’s start with the initial steps of a Raw Startup. All of
these steps are while you are working out of your home and pulling the
business plan together. You are avoiding expenses like the plague and
trying to get up to speed on your business, product and market. This
is something the entrepreneur must understand fully themselves, and
can not hire people to understand for them.
Step #1 – Idea – This is actually the easy part. Due to the
constant march of technology new opportunities are always emerging.
You must have an idea that will solve a painful problem and do it at
an order of magnitude cheaper, or better, than anything else out
there. This is the “Better, faster, cheaper” approach and in
technology products is generally the way to go. Alternatively a
“paradigm shift” product is much more expensive to launch, as change
takes more time and money. So you need to leap frog the competition
by a wide margin, but in an evolutionary way, not a revolutionary way,
which will require lots of capital probably. The margin must be so
wide that companies have no choice but to listen to you, and try your
product or service. Sounds hard, and it is, but if you can’t say this
about your product, then it will be a difficult and slow process to
get anyone to take the risk of working with a new company. They will
simply wait for the next generation from their current vendors who
will be happy to tell them it is coming soon.
Step #2 – Team - Begin to develop your team with the
correct skill sets that hammers all the major risks, and
there are many, with the right domain experience, the right level
level of experience (solution ideas, lead, manage, or do) AND working
in the right stage company. A VP of Sales who worked at a $1 billion
company does not likely have the skill set needed to be the VP of
Sales at a startup. You probably will not be able to attract someone
like that anyway as there are few that would take that kind of risk
today. Even if you did, as many did in the bubble with easy funding
of $10MM+, they still are not the right person. As a Raw Startup this
team needs to be “virtual” meaning your can get lots of expert help
for short money or none at all. It is unlikely that one individual
can do all that is needed to plan and design a business completely.
Step #3 – Market Research - Do tremendous amounts of market
research and face-to-face and other interacting with lots of potential
customers. When I say this I mean you the entrepreneur spending two,
three, or even six months on this until you know you have it right.
You can do this while you have no burn rate except your own personal
expenses but as soon as you start hiring other people time has now
become the enemy. The further you can get without hiring full-time
employees the better. C-Level Enterprises is an example of that
because we will actually have twenty different products around June 1st,
but have only two employees and lots of virtual help. This is a
“Service to product flip” a strategy that is great today because it
requires very little capital and yet gets to the point of product
leverage. Essentially service customers are covering your nut while
you are developing your products(s) and you are also getting closer to
your real customer market and learning, also on someone else’s nickel.
Your customers get great value too, because they are getting the
advantage of the product you are building directly or indirectly.
This is likely to add value to your services for them too if your
product and services are closely tied together. This should include
developing a complete customer brochure and showing it to potential
customers for feedback.
Step #4 – Develop Your Business Plan – At this stage this
should be an executive summary and/or a deck of PowerPoint slides that
conveys the Unique Selling Proposition and how you will get from here
to break-even. This is easier said than done and will require help
from several people across all the major business disciplines. These
people must have high-level management experience in sales, finance,
operations, marketing and product development, or whatever skills you
can not say you have done full-time for five of more years.
Step #5 – Your Funding Plan – Today this is a different process
and different plan than in the past due to the scarcity of early-stage
funding. Develop a funding plan with options that does not require
more money than absolutely necessary to get to breakeven. This is a
simple financial model that you can understand completely and plug
numbers into as new information becomes available. It is not time to
hire a part-time CFO, controller or accountant until you are very
close to getting some revenue other than to review and comment on
something you have developed. If you have no experience with
financial projections you probably have no business starting a company
and need to get that knowledge – It is not brain surgery, as I am
talking about straight cash accounting here, not tax law, accrual
accounting or other gymnastics that will just isolate you from the
reality of cash flow way too early. Even angel investors are
insisting on breakeven cash flow 12 months out because they are
avoiding the VC cram down that dilutes them to nothing. If
institutional funding is required the market should be projected to be
$1 billion or more in five years. However, remember 40% of the
Fortune 500 companies were started with less than $25,000, so don’t
make the mistake of relying on VC money in this environment. I am
recommending to most of my clients today to design a business plan
that can get to breakeven on personal resources, then friends and
family and then $1 million in angel money alone. This is possible
with many companies and gives you options. Because of the funding gap
between $2 million and $5 million today many good companies are doomed
to failure because their financing plan is all wrong from day one.
Step #6 – Prove you can sell it – At this point plans can diverge
completely depending on the capital and time required to get to a
first product. You need to develop something in startup mode, which
means it is a focused 80% solution, not the end all be all you picture
developing ultimately. You need a very targeted niche, which means an
actual list of customers and a very tight profile with a good
understanding of the “economic” buyer who signs the check, the user
buyer who uses the product and the influencers in the sales process.
The ultimate proof is getting Pos or checks, while being honest about
the delivery time and risks if the product is not ready.
this point you may be ready to jump into having a burn rate to get to
the next level, depending on what your product development and funding
need may be.
There are many ways to grow any company to this size. You can grow a
product portfolio of small products, attack larger markets as you get
bigger, or get there by acquisition doing a roll-up of other
companies, merging for stock.
The fact of the matter is that there are hundreds of steps here and I
am glossing over most of them. We have compiled over one thousand
slides, 7,000 ideas and over a dozen step-by-step systems to help
entrepreneurs and CEOs go from raw idea to $100 million in sales.
This is all based on my experience as a serial entrepreneur since
1977, when I founded a business to sell antennas to ham radio
operators with a friend. Since then I have ridden two companies from
no revenue to over $100 million in sales, participated in eight
startups and two multibillion-dollar corporations. I have learned
lots of hard lessons in many industries and all size companies and
want to help you avoid some of the mistakes I have both made and
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