∆ 0 → 1. AKA scaling a business from nothing to something.

It looks like a mathematical formula. Scaling a business from an embryonic state into a full grown version of itself. Full of life and opportunity. But unlike most living things that will grow on their own with just the basics of food & water, businesses will certainly fail if only given the bare minimum. To truly flourish a business needs a good idea, a solid staff, fertile business conditions and the ability to execute. But even with all those elements in place, the weight of these shifts depends on the stage of the company. For this post, let’s focus on the early days: getting off the ground floor, or what is often called Scaling from zero to one. I just completed a 2 year position in a role doing exactly this and I want to share what went right & what did not.

In 2020 I entered a mature company that had incubated a new spin-off business idea that was just a concept with little more than a (shitty) website and a skeleton staff. I was tasked with getting this business off the ground and generating meaningful revenue. First step: define our short term goals that align to medium term success metrics. Revenue was our North Star, but allow me to say now (Spoiler Alert), this was not the right metric. Better KPI options would have been client count, client retention, pass through revenue, or LTV. But revenue is revenue and the CEO felt that was what showed success. Lesson 1: choose the right KPI for your life cycle. Nevertheless we marched forward and established some clear-eyed goals:

1. Craft the ICP (ideal client profile)-Translate: what are the qualities of a successful client?
2. Identify the specific “blue ocean” to targets-Translate: which market segment should we sell to?
3. Clean up all external marketing material. Translate: make it look semi- professional
4. Support a client roster. Translate: how many concurrent clients can we support before we need to hire more account managers?
5. Sell & be able to repeat sales. Translate: create a great sales pitch
6. Grow revenue to “something meaningful”. Translate: cover your costs

With these KPIs & goals in mind we went to battle. Along the way we launched a new website, changed our commercial terms to an industry standard structure, created a new billing and invoicing systems, changed our brand name and identify, updated our team names and functions to align with these KPIs, created new specialized financial indicators to track and measure customer growth, and hired, fired, & laid off staff. All inside of 2 years.

By the end of year 2 we had hit multi million dollar ARR, supported 50+ concurrent clients, and became a badged member of the prestigious Meta Business Partner program. By the end of 2022, we had clients that spent more money with us in a single day than all of our clients spent with us in a month back in 2020. We truly went from zero to one. At this point I felt it was fair to declare we had graduated from Junior Varsity to Varsity. But in hindsight the real work begun because growing a small number into a slightly larger number is easy and looks good as a percent of growth. The new trick becomes (and here is my main lesson) finding the single growth lever rather than chase revenue growth. This is where we failed.

Lessons learned:

1. The various life stages of a company’s growth require very distinct KPIs, team capabilities, and degrees of patience & tolerance
2. Expectations cannot be the same at every stage
3. Finding at least one growth lever to unlock value (defined by the KPIs of the stage) is crucial. Failure is the alternative.

Here’s what I see: (adapted from Nikhyl Singhal post)

The tipping point between Product Fit and Hypergrowth (essentially stage 10 into 11) is what I believe to be the hardest. Finding the lever to unlock real growth requires new ideas and sometimes even new team members. I concluded that this tipping point KPI should be revenue per client. This was the right KPI we should have focused on (but didn’t). If you do not know how much revenue to expect per client, at least chart it and ensure it grows quarter to quarter. Working backwards, what would increase revenue per client? Here are some possibilities:

1. commercial terms (are our fees getting so high that they offset the revenue to the client our product produces)
2. product performance (is our product working well enough to be worth the time and/or are there other products that work better)
3. retention (is the client sticking with us long enough to generate growing revenue). This KPI may just be a factor of # 1&2
4. customer support and upsells (are we providing amazing support and finding new products & services to sell)

These are all factors we only started doing but I believe are the keys to unlocking the growth that bring your business from 0 to 1

Right?