Entrepreneurship Tips — Scaling

How can a company plan to maximize growth?

Posted by Robert Norton on

How can a company plan to maximize growth?

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...

Read more →

What is a good growth rate to plan for in a small company?

Posted by Robert Norton on

What is a good growth rate to plan for in a small company?

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....

Read more →

How fast must a company grow in its projections to attract interest from venture capital funds?

Posted by Robert Norton on

How fast must a company grow in its projections to attract interest from venture capital funds?

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. Also check out my blog where I have loads of articles on entrepreneurship, scaling and raising capital. Click here to visit my Blog See our courses and coaching programs related to scaling here. Bob Norton is...

Read more →

What is the difference between growth and scaling?

Posted by Robert Norton on

What is the difference between growth and 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...

Read more →

Do you need capital to scale or grow a company?

Posted by Robert Norton on

Do you need capital to scale or grow a company?

The vast majority of companies will need outside capital to grow at more than twenty percent or so compound annual growth rate (CAGR).  This can vary a lot by industry, sales cycle, margins and other cash-flow factors.  Some industries are more capital intensive, requiring upfront investment in plants, equipment, people, research and development or other things. However, generally if you plan to grow a company over $1M in sales, you will need a working capital financing strategy projecting these needs over three or more years. We define scaling as over fifty-percent growth.  So, unless your gross profit margins are exceptional,...

Read more →