The 4 Most Critical Growth Factors Founders Need to Watch

— June 16, 2019

Surviving as a new business isn’t easy, but thriving is a much greater challenge. If you don’t know what your goals are, you’ll struggle to take your business where you want to go.

Every company experiences the first few years differently. Some businesses depend on two or three big clients to get by, while others focus on user acquisition and then transition to profitability later. Whatever your strategy, you must set realistic yet ambitious goals related to profitability, growth, customer acquisition, and other important KPIs if you want your company to make it.

Consider the following milestones and how they reflect your company’s progress:

1. Number of Employees

A small business of one is still a small business, but without employees, your growth is limited to your own personal efforts. Your first employee marks an important milestone, and as you begin to build your team, your company’s growth should begin to accelerate beyond the sum of your combined efforts.

According to a study by payroll solutions provider OnPay, businesses are twice as likely to have fewer than five employees during their first two years of operation as they are in years three and beyond. Most new companies (68%) employ five or fewer people, while only 34% of older companies have teams of the same size. After the second year, the likelihood that a company will employ more people generally goes up over time — but only if it crosses the five-employee threshold by the end of year two.

If your company is two years or older and you have yet to hire more than a couple people, consider whether you’re ready to expand. By now, you should have enough experience and industry knowledge to make use of some extra hands if growth is something you hope to accomplish.

2. Profitability

Different companies achieve profitability on different schedules. A B2C company that sells grooming products, for instance, will follow a different path than a B2B SaaS company.

Most companies take two to three years to become profitable. If you have been in business for longer than that and have yet to generate consistent profits, you either have an extreme outlier of a business plan or need to adjust your strategy. Small companies typically only have a few months of runway at a time, or a couple of years at most, which means you must get into the black quickly if you want your company to thrive.

Even if you plan to rely on funding from VCs to build your business, modern investors are less interested in users than they used to be. Investors recognize that profitable companies on small budgets are more stable than unprofitable companies with massive user counts.

3. Industry Clout

Once you have a good team of employees and a profitable business model, you can focus on scaling your company. To do so, you must create a brand that commands respect within your industry and in the eyes of your target audience.

Measure industry clout by the performance of your online content. When people search for terms in your industry, do they find you or your competition first? Are you producing content that cements your company as a leader? Content marketing is an incredibly powerful tool, but if you don’t invest in high-quality content, your brand won’t achieve the level of authority it deserves.

Perform keyword research, and aspire to get at least one of your webpages on the first page of Google search results for your targeted terms. As you build your content library, you should have a page near the top of search results for multiple industry phrases. Not only does this indicate that people respect your brand, but the benefits of SEO will also provide a significant boost to your revenue.

4. Incremental Revenue

You can’t survive without profitability, but profits don’t necessarily translate to long-term success. To take your company to the next level, focus on revenue milestones and invest in the growth of your business to achieve them, even if that means sacrificing margins in the process.

Companies that can trade some profitability for growth should already have a solid foundation of success. Once you know your business model works, put more money into your most successful marketing channels and test the limits of your potential.

Growing companies with sufficient capital should focus on $ 1 million, $ 10 million, and $ 25 million milestones in annual revenue. A company making a million dollars per year has a viable market, while a company making $ 10 million has an opportunity to use that income to become a powerhouse. Big rewards don’t come without big risks, however, so make sure your business can handle the pressure before you ramp up your efforts to scale.

Not every small business will evolve into a unicorn startup, and not every small business owner wants to become the leader of a massive enterprise. Don’t let anyone else tell you what your vision should be. Use these milestones as a guideline to judge the progress of your company’s growth, and adjust as necessary to accomplish the goals that matter to you.

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Author: Kimberly Zhang

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