A common growth path for most successful startups is taking five years to grow their revenue from zero to one million—and then growing 10-20 percent annually thereafter. A solid result, but certainly not an explosive growth result. Their founders begin to bang their heads against the wall wondering: “My company is successful, but why isn’t it hugely successful? Where’s the explosive growth?”
Explosive growth firms require only seven to 10 years to grow to $50 million or beyond.
They’re as rare as unicorns because these six attributes aren’t easy to find. Explosive growth firms . . .
1. Have founders with uncommon skills: I’ve often wondered what would happen to my company, Vertical IQ that provides industry profiles for sales and marketing professionals, if Amazon’s founder, Jeff Bezos, managed it instead of me. Would he just keep hocking the same product to the same niche market like I do? I doubt it. He would think bigger. Bezos would learn what sales and marketing professionals really want to know about their prospects – and then build the most solid and complete solution for them. Bezos has the energy, ideas, access to capital, propensity for risk, management and leadership skills to pull it all off.
I personally believe that in terms of raw skill, extraordinary founders are as rare as professional athletes. Many people can play a sport well and maybe even be a star in high school – but very few have the talent and skill to play for the big bucks. In the same vein, many people can create a $5 million business, but very few can create and manage a billion-dollar company. To be off-the-charts good, you have to work your ass off and dedicate yourself to always learning new things and improving. You need to really go for it. It helps to be born with this talent and drive, but you have to be hungry enough to learn it. One attribute of highly-skilled founders is that they don’t focus on their personal needs and wants, instead putting their focus on what is best for their company. They clearly want their company to be at its top potential and to have as big an impact as it can to as many people as possible.
2. Sell to a relatively high percentage of a big market: Explosive growth firms’ products are helpful to a large percentage of a market – while non-explosive growth firms’ products are helpful to only a small percentage within a market. Let me explain. When it comes to defining market size, founders often exaggerate the size of their market because they identify the entire group they could sell to, instead of the subset of the market who desire their solution. For example, Vertical IQ sells to banks. According to the FDIC, there were 6,714 banks in the U.S. Our average price is about $15,000 per year, so the “market” for Vertical IQ within banks is $100.7 million. But here’s the catch – only a small fraction of those 6,714 are good candidates to purchase Vertical IQ, so we aren’t an explosive growth firm. If we had even 50 percent market share; we’d be an explosive growth firm.
3. Solves big, impactful problems: Non-explosive startups provide “nice-to-have” products, meaning they solve one problem that provides a competitive edge. Their founders are forced to educate, beg, and plead to convince purchasers. Their sale processes drag out for months or years because proof of concept pilots must be conducted. But explosive growth firms provide products that are clearly needed. Their solutions are clear-cut, must-have, no-brainer, easily-calculated ROI. For example, in 2016 customer relationship management (CRM) software firm Salesforce.com had $6.6 billion and was growing 20 percent-plus per year. Just about every company that sells B2B needs a CRM system, and Salesforce’s product has become a gold standard in terms of its flexibility and ease-of-use. The usefulness of a well-architected CRM solution can easily be calculated by the data it produces and the time it saves salespeople – hence the “hard” return on investment. Many, many sales occur without any begging and pleading. For example, when my firm Vertical IQ purchased the Salesforce product, we didn’t speak with one salesperson; we just signed up. Today, we’re spending $15,000 per year on it.
4. Enjoy word-of-mouth marketing: Explosive growth firms have a big advantage because they don’t have to work so hard for marketing leads. Why? Because their customers are doing this work for them. Their customers want to tell their friends about the clear-cut, must-have, no-brainer, easily-calculated ROI features I mentioned above because they’re jazzed about their newly discovered solution. Think Uber. One popular measure of the likelihood of customers to recommend your product is the Net Promoter Score.
5. Deploy the right amount of capital, at the right time, in the right places: Explosive growth firms pour money into a well-oiled, already-working sales and marketing machine. They don’t deploy the capital so early that the money gets wasted on sales and marketing processes that don’t work, yet they don’t deploy it so late that they miss the boat. Not all explosive-growth firms need an outside injection of capital to boost sales and marketing efforts. But most do. Facebook is an example of an explosive growth firm that timed its capital very well. This 2005 interview of Mark Zuckerberg at Stanford University reveals how patiently and wisely the firm deployed capital.
6. Add critical features that improve relevancy to a wider audience: During the blade years, explosive growth firms find out what their customers really want – and then add those specific features. The features they add make their products much more complete – and suitable for a wider-audience. The great book Crossing the Chasm by Geoffrey Moore discusses how hugely successful companies learn from early adopters in order to satisfy the needs of their early-majority users.
Most successful founders will build niche, lifestyle companies with modest to solid growth. If you’re a founder and that result isn’t acceptable to you, read above! But I can tell you from personal experience, building an explosive firm is no joke and not for the faint of heart. These six attributes are really difficult to pull off.
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