Entrepreneurship Tips — Scaling

This was a question from a prospective Entrepreneur.  Maybe one that believes that he/she can create a company without any outside investors. Well, whenever you use the word “All” in a sentence you are almost always wrong, but it is true that the vast majority of startups and any company wishing to grow rapidly (scale) will require either outside investors, founder capital investment and/or sweat equity (founders working long-term for only equity). This is because you cannot create something out of nothing. Like in physics, matter cannot be created or destroyed, it only changes form. Cash investment must be converted...

Contrary to popular belief, growth is not just limited by your ability to increase sales.  It is almost always capped by many other things like management quality, financing, operations, training systems, hiring and other systematization. Many companies have gone bankrupt by simply increasing sales. When this happens without getting ahead of problems with customer service, production, working capital and financial controls, companies can not just ruin their reputations and spiral down but even go bankrupt. If you are lucky or smart enough to have a product or service with a large market opportunity, your company’s growth will be mainly limited...

I believe a minimum of 25% should be planned for in growth as anything less will likely leave you behind competitors and being a follower, not a leader in the marketplace.  I consider “Scaling” to be growth of 50% or more annually. That is far more difficult and requires a quality management team, strong internal processes (systematization) and likely some capital investment in addition to cash-flow. If you can reinvest your cash-flow and/or get some low-cost debt, which usually requires at least eighteen months of profitability, you can maintain control and avoid the time and complications of raising outside capital....

Typically, no less than fifty percent compound annual growth rates after sales start will be needed to clear the minimums. More often, no less than one-hundred percent compound annual growth rate (CAGR) will be required at some point.  Of course, growth rates can vary by year, and these are just the average over a five to eight year investment before a liquidity event to cash out. Learn more about our Growth and Scaling (GSP)Certification program for Managers For a free video consultation call on what yourcompany and team need to scale better   See our courses and coaching programs related to scaling...

Well, although this is not officially defined by anyone, growth is literally any growth at all. We define scaling as the kind of growth that venture capitalists seek for high returns on their investments, which means fifty-percent compound annual growth rate (CAGR).  Typically, the math of this, which is reaching $100 million in sales in about five years, means a company will need at least 50% annual growth, and maybe 100%.  Here is a table that shows this kind of growth and reveals that massive compounding factor of this kind of growth. And explains why venture capital must seek large...