3 Stages of Company Growth and Why it Pays to Be Proactive
December 10, 2020
Where Is Your Company in the 3 Stages?
Every business starts with big plans and high aspirations, but most have to simply focus on keeping the lights on initially. As a startup, you need to commit a great deal of time and effort to getting as much work as possible so you can fill your pipeline to the point where you’ve got the revenue stream and the confidence you need to hire more staff. Consequently, your marketing is inconsistent or non-existent, your sales efforts are broad, your internal processes aren’t firmly established, and there’s only a loose correlation between hours worked and dollars invoiced. But because you have low overhead, management costs, etc., your profit margins are probably healthy.
When your business graduates to the next level, your primary concern is delivering consistency. You’ve got to take the technical proficiency of your core team and scale it in a way that enables you to continue producing excellent work. As you do that, you start to conduct broad and experimental marketing activities while beginning to narrow your sales focus. You also start to get dialed in on the right balance of repeatability and flexibility. And in terms of finances, you still have write-offs, but you’re getting a handle on the numbers and your budgeting is more predictable. But sometimes, it takes more time and effort to be consistent, so your margins may shrink somewhat.
Once you’ve established consistency in your operations, you can turn your attention to maximizing profitability. You have a good understanding of what works and what doesn’t, and can start trying to figure out how to get a higher return on your efforts. Marketing and sales are now working in unison with highly targeted campaigns and outreach, and the work you do is accounted for through trust-based contracts.
So, you have to work through these three stages, in this order, if you want to achieve success.
Or do you?
A Revelation On the 3 Stages
Going from being a startup to the established company we are today, Aptera progressed through the three growth stages, essentially as described above. However, as we reached the third stage, we noticed something unsettling: our margins were shrinking and our profitability was declining even as our revenue was increasing. In response, we scrambled to determine what figures we needed to monitor and manipulate to improve our financial results.
Once we’d locked onto key performance indicators (KPIs) like realized rate, direct vs. indirect labor, and others, we had a revelation: This didn’t have to be a fire drill.
Even back when we were in the “keeping the lights on” and “delivering consistency” phases, we could have been keeping an eye on key metrics and how they were affecting our profitability. We realized there’s no reason you can’t operate that way—even as a startup—and every reason that you should operate that way.
We also concluded that one of the reasons smaller companies don’t focus on KPIs is that it’s difficult when you’re working with multiple disparate systems and having to figure out what data to pull from where. To address this challenge, we developed Factor.
Very quickly it became clear that real-time access to the right metrics all in one place, which Factor provides, wasn’t just helpful, it was an absolute game-changer for us. And, we subsequently learned that we weren’t alone in our need for this type of system.
Having access to simple software for managing projects, financials, and related KPIs can have a similarly positive impact on any software development company or services firm. The organizations that use our platform today find that while the three stages of growth still exist to some extent, with the right firm management platform, you can take action at any point on the timeline to start improving profitability and growing your company’s value.
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