At the juncture where a company’s annual revenue reaches around $10 million, a pivotal transformation becomes necessary. The systems and processes that previously propelled its growth are no longer sufficient. This is a crucial phase for businesses, signaling the need to embrace new technologies and establish innovative processes aimed at propelling the company towards the next significant milestone: $50 million in revenue.
This introductory piece marks the beginning of an insightful series designed to map out a strategic trajectory for companies at this critical $10 million threshold. Our focus is to provide a comprehensive plan to facilitate sustained growth and scalability.
The U.S. Department of Commerce, under its current definitions, categorizes small businesses as those with fewer than 100 employees. This classification encompasses 89% of U.S. businesses. However, considering that the median size of an American business hovers around three employees, a company that has expanded to about 30 times larger than this median hardly fits the conventional ‘small’ tag.
It’s observed that when businesses grow to approximately 100 employees or achieve $10 million in annual revenue, they often outpace their foundational systems and processes. This stage might occur earlier, around the $5 million mark, or later, near $15 million. But inevitably, there comes a time when scalable, robust systems become essential. Traditional methods like managing inventory through spreadsheets or allowing sales teams to track clients informally turn inefficient. Growth demands a more sophisticated, data-driven approach, not just in marketing but across all departments.
This series is specifically crafted for business leaders, especially those in finance, to smoothly transition from what is traditionally considered a small business to a medium-sized enterprise. We aim to guide you through this transition, from having 100 employees and $10 million in annual revenue to surpassing the $50 million mark. Our approach is grounded in practical, actionable advice, integrating the best practices in business and technology that are relevant in today’s dynamic business environment.
Join us in exploring ‘Project $50 Million’: A Detailed Overview.
The Significance of the $10 Million Revenue Mark: A Strategic Perspective
The choice of focusing on the $10 million revenue mark is not arbitrary. Through our comprehensive surveys conducted before the pandemic, a fascinating trend emerged among businesses with revenues between $10 million and $50 million. These companies tend to divert their attention from enhancing existing products and services to prioritizing fundamental business aspects such as payroll and marketing. This shift signifies a strategic pivot: leaders consciously ease off aggressive growth strategies to address core issues in internal processes, systems, and expertise. The objective is clear – to eliminate barriers that may hinder sustainable future growth.
A striking observation is the inclination of Chief Financial Officers (CFOs) in companies just crossing the $10 million threshold to invest in business process automation, more so than their counterparts in smaller or larger firms. This trend suggests a pivotal point in a company’s growth journey. Smaller businesses may not yet have encountered the challenges that necessitate such investments, while larger enterprises are likely to have already implemented these changes. In this series, we delve into not only the innovative tools necessary for automating your business to ease growth-related challenges but also into the valuable data these tools can generate. We will explore the organizational transformations needed to effectively utilize this data, setting the stage for renewed growth and development.
The relevance of these findings becomes even more pronounced considering the data was collected in late 2019, a period marked by economic stability and consistent growth. The tumultuous year of 2020, with its inherent instability, led many business leaders we surveyed to shift their focus. Instead of minor product enhancements, they concentrated on fortifying internal systems and managing crises. The few who did adapt their products, such as manufacturers pivoting to produce Personal Protective Equipment (PPE), gained significant media attention. This period also saw a surge in remote work and internet-based sales and marketing, while the importance of effective cash flow management remained a constant priority.
The concerted effort to enhance internal systems proved largely successful in 2020. Companies not only discovered novel avenues for sales and adapted to remote working environments, but they also found that the newly adopted technologies and processes enhanced efficiency and yielded better data compared to traditional methods. This transformation exemplifies how strategic adjustments at the $10 million revenue mark can be a catalyst for sustainable growth and success.
Embracing Change in a Non-Essential Context
The year 2020 was a testament to the necessity-driven adoption of technology and the earnest efforts to utilize it effectively. As we move forward and the economy stabilizes, technology adoption, while still a priority for many businesses, does not seem as urgently critical. This perspective is supported by our December 2020 survey findings. However, a McKinsey survey on the industrial application of cloud technology suggests that overly optimistic expectations, potentially spurred by aggressive sales tactics, can lead to a sense of underachievement among technology adopters.
This phenomenon is not unique to technology adoption. Consider personal goals like maintaining a regular gym routine, losing weight, or increasing reading habits. There’s often a discrepancy between our intentions and outcomes. Adopting new, sophisticated software is particularly challenging due to its inherent learning curve. Not every employee is eager to embrace new methodologies, especially when they replace long-standing practices. Yet, certain conditions can enhance the appeal and perceived value of these tools for both staff and management.
Consider the adoption of Customer Relationship Management (CRM) software. Every minute spent by salespeople learning this new system is a minute not spent engaging with customers. The necessity of remote work, however, and the inaccessibility of traditional note-taking or legacy systems, can reduce resistance to new technologies. If legacy data is integrated into the new system, widespread adoption is more likely, making the investment seem more worthwhile.
However, widespread use doesn’t always equate to extensive use. CRMs, when fully utilized, are potent tools capable of managing sales funnels, reducing customer churn, and automating the production of contracts and Statements of Work (SOWs). But this requires consistent and thorough usage. Top salespeople, known for their creativity and interpersonal skills, might not naturally gravitate towards detailed technology usage. Here, McKinsey suggests external consultancy for optimization, but we propose an alternative: training or hiring a sales admin dedicated to maximizing the CRM’s potential.
This suggestion might seem daunting. It involves not only the application’s recurring fees and training the sales team but also allocating resources for an expert user to refine processes. Despite the significant investment, the returns are substantial. Sales managers gain tools to manage leads effectively, while sales professionals benefit from the admin’s support. Operations and finance teams find their workload eased due to the consistency in contracts and SOWs.
Another key advantage is scalability. Depending on your sales’ complexity, one sales admin can support up to 10 salespeople. The efficiency gains and quality output provided by a skilled admin justify the investment, saving significant time for the sales team and benefiting operations and finance departments.
Furthermore, expert CRM management allows sales teams to shift focus from solely acquiring new business to nurturing customer relationships throughout their lifecycle with the company. This holistic approach not only improves customer retention but also enhances overall business efficiency and effectiveness.
Strategizing People, Process, and Technology for Business Growth
Throughout this series, we will delve into the intricate dynamics of people, process, and technology in the business realm. Our objective is to guide you in strategically analyzing the operational side of your business. While we don’t claim expertise in enhancing your product quality or service intelligence – that’s your proprietary domain – we are dedicated to helping you construct a more effective, intelligent, and scalable support framework that evolves with your business.
For businesses at the $10 million revenue mark, scaling and efficiency are paramount challenges. The concept of economies of scale is not just theoretical; it’s a practical aspect often overlooked by business growth strategists. Despite seeming cumbersome, large corporations often exhibit higher productivity per employee compared to smaller counterparts.
Consider this real-world comparison for a clearer perspective – but remember to stay within your industry vertical as it significantly impacts revenue-per-employee metrics. Take Gap and Mastercard, for instance. Gap ranks around 200th on the Fortune 500 list with a revenue per employee of approximately $127,000. Mastercard, a bit higher on the list, has a staggering $900,000 revenue per employee. In similar industries, $10 million companies generally achieve about one-third of the revenue per employee compared to their Fortune 500 equivalents, and about half of what billion-dollar companies make. Industries like energy, pharmaceuticals, and financial services excel in revenue per employee, with companies like ExxonMobil generating around $3.5 million per employee. On average, a $10 million company with about 100 employees earns roughly $100,000 per employee, though this can vary widely across sectors.
A critical aim of any system or process upgrade should be to enhance revenue per employee. This metric is vital for competing effectively at the $50 million level and beyond. Returning to our CRM example, even though you might add a full-time employee (FTE) to maximize the potential of your customer management system, the resultant efficiency gains and adherence to improved processes by the sales team should lead to increased sales and reduced customer churn.
It’s also important to recognize the resource disparity between large and smaller companies when implementing new systems. A billion-dollar company might allocate several employees and a consultant to select new inventory management software. In contrast, a $10 million company will likely have a couple of employees juggling this project with their regular responsibilities. Therefore, in this series, we aim to steer clear of suggesting multi-million dollar initiatives that require extensive time and dedicated teams to implement and even longer to yield a positive return on investment (ROI). Instead, we focus on practical, scalable solutions that align with the resource capabilities and strategic needs of growing businesses.
Practical Technology Integration for Sustainable Business Growth
In our series, we prioritize practicality over novelty in technology recommendations. The business world is abuzz with emerging technologies like the Internet of Things (IoT), blockchain, and artificial intelligence. These technologies indeed hold tremendous potential and have significant applications in various business sectors. However, the real value lies in their practical application, not just their technological allure.
For instance, consider the decision to implement a new supply chain management system. The critical factors should be whether the system meets your business needs and is financially viable, rather than whether it incorporates blockchain technology. While blockchain may revolutionize supply chain processes in the future — as evidenced by the current surge in NFTs and digital currencies highlighting its potential in tracking and transactions — its immediate relevance to your business needs is what truly matters. Choosing the right technology partner will naturally lead to the integration of such beneficial technologies when they become reliably advantageous.
Businesses in the $10 million to $50 million revenue range need to be particularly judicious in adopting cutting-edge technologies. Even Fortune 500 companies face challenges in effectively leveraging speculative technologies. It is often more prudent for smaller businesses to focus on proven, scalable systems rather than venturing into untested technological frontiers. Let larger corporations with more resources invest in refining these technologies. Meanwhile, your focus should be on implementing tried-and-tested systems that can grow with your business. This approach not only ensures a more secure investment but also aligns with the practical realities and resource constraints typical of mid-sized businesses.
The Essential Turning Point for Business Growth
There comes a defining moment for companies nearing the $10 million revenue mark – a time to pause, reassess, and prepare for the next significant phase of growth. This juncture presents an opportunity, almost an invitation, to embark on a journey towards greater heights, potentially reaching $50 million and beyond. If your business is approaching this crucial point of growth reflection, embracing it can be a strategic move.
Our series is designed to assist you in navigating this pivotal stage. We aim to provide you with valuable insights and practical strategies to help you chart a clear path towards this ambitious goal. The journey to expanding your business is not just about relentless forward motion; it’s also about timely pauses for strategic planning and alignment. By embracing this phase of reassessment and equipping yourself with the right tools and knowledge, you can set the stage for sustained growth and long-term success. We hope that our series serves as a valuable guide in mapping out your journey to $50 million and beyond, helping you to make informed decisions and adopt strategies that propel your business forward in this exciting phase of its evolution.