In our last post, we discussed the importance of the First 100 Days after a growth financing. Above all else, it’s a rare opportunity to systematically reset the Company’s operational priorities, trajectory and pace in order to meet its long term objectives.
Armed with a cohesive plan and a clear set of course headings, you and the team are ready for growth.
So what’s next?
The focus for the balance of the first year should be to enhance the team’s results-oriented culture in the face of more aggressive growth objectives. Businesses experience new stress points as the rate of their growth increases. These weak spots or “2nd harmonics” can show up anywhere in the operational four P’s; people, process, product or partners.
Up until now, you’ve overachieved as a bootstrapper with a combination of grit, brainpower, agility and endless hard work. Looking ahead to the next 6 – 12 months, the “tried and true” approach that got you to this point most likely won’t scale. As you invest in growing the top-line, the business must quickly find its cadence in order to consistently achieve these new operational goals.
Simply put, the Company’s growth phase is all about maximizing the return of every dollar invested with confidence and with the highest degree of predictability. A synchronized cadence is the elastic band that connects these growth investments with the desired results.
So how does a team find its new cadence? It begins with understanding the link between high-performance execution and productivity. That, of course, is easier said than done.
Let’s break team execution and productivity and down into it’s three fundamental and sequential elements:
Part 1: Establishing Organizational Alignment
During the First 100 Days, the biggest challenge is to refocus the team’s attention away from the 10, 15, even 20 number one priorities on the “We definitely should…” list to the 3 key operational tasks and goals required to ensure long-term organizational alignment:
- Developing an institutional discipline around team communications at every level of your organization
- Committing to the Annual Business Plan as a team – bottom to top
- Aligning every team member’s individual role and their personal definition of success with this Plan
Alignment up and down the organization – particularly as the team grows – is a critical success factor with respect to high-performance execution.
Part 2: Measuring the Results of Every Action
Even if you already consider your business to be a data-driven operation, you will need to become maniacal about measuring the results associated with every growth-related action. These actions can be traced to assumptions in the annual business plan and, whether they’re implied or explicit, their impact can and must be measured.
Establishing an objective frame of reference is an operational imperative. At Workhorse, we’ve developed a comprehensive Company Dashboard and a set of SaaS Metrics that CEO’s and their teams use to maintain a real-time pulse on the business as well as to identify issues and any related corrective actions. If you don’t already have a dashboard or something comparable, insist on putting one in place before you begin spending one additional dollar on growth.
Given your bootstrapped roots, cash has always been at the top of the daily, weekly and monthly operational metrics. Just because you now have a fully-funded plan and a healthy balance sheet doesn’t mean you should focus on cash any less. It is the most strategic resource in Company, and as such, needs to be managed accordingly. Make cash management and cash reporting a distinct and regular part of your monthly routine.
Part 3: Having the Courage to Make the Necessary Course Corrections
For businesses that are operating at or near breakeven at the time of the growth financing, it is often necessary to take the operation cash negative for a period of 18 to 24 months in order to maximize the top-line revenue growth. This “cash trough” is carefully designed to exit this value creation phase at the desired growth rate and EBITDA metrics in line with something we call the “Rule of 40s Compass” – it’s part of the company-building value creation process and a topic we’ll discuss in more detail in future posts.
The growth/trough model should include definitive revenue/cash targets and thresholds to help the team manage the day-to-day financial operations. For example, if the revenue growth meet or exceeds the plan for the assumed level of invested cash, fantastic! You should consider increasing the pace of investing to capitalize on the market pull and the team’s higher than expected productivity. Conversely, if the growth for any period is below expectations – that is, the business is burning more cash and has less to show for it – a timely pull back on spending is not only warranted but necessary until the root cause and flawed assumptions are clearly understood.
Finding the business’ new cadence is a function of team alignment, a data-driven mindset and confidence to course-correct. Companies that understand this and make it a priority – everything else being equal – put themselves in a position to win. It’s also an iterative process. Maintaining this alignment, mindset and sense of urgency will be a constant challenge the team grows and diversifies. Nevertheless, this is the phase where the Company’s potential and intrinsic value begin to converge.
In future posts, we’ll expand our discussion of the Company-Building Value Creation Process in preparation of ”The Rule of 40s Compass” segment. This includes the importance of focusing on the right meetings up and down the organizations as well as finding an optimal meeting cadence. From town halls, to weekly commitments, to daily stand-ups to one-on-ones and cross-functional roundtables – meetings can either spark or stall team productivity. In the meantime, you can find more resources and growth perspectives for your business at The Growth Equity Blog and the Workhorse Capital Blog.