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Day: April 7, 2023

What Is Growth Strategy?

Posted on by Kyle York

Growth strategy is a purposeful, forward-looking plan for a company to achieve its long-term goals. Growth strategies should manifest themselves throughout an organization, from the corporate overview deck and financial model to the processes that teams rely on for their day-to-day tasks.

In this post, I’ll explain how to create an effective growth strategy and share tips on how you can develop the best approach for your business.

How Do You Create an Effective Growth Strategy?

An effective growth strategy should:

  1. follow the 80/20 rule.
  2. be built on a solid financial foundation.
  3. rely on data and research to identify market needs.
  4. provide a blueprint for sustainable scaling.
  5. align with your company’s brand.

When you’re fundraising for your company, you spend a lot of time putting together your three- to  five-year financial model and your pitch deck.

But whether or not you’re actively raising money, you should be doing this anyway. It is the foundation of your growth strategy. Revisit and update it at least annually.

1. The 80/20 rule

Identify your core engine for business growth and focus 80% of your efforts on that.

Do you have an inside sales model, a field sales model or a channel model? Will you rely on self-service ecommerce sales or product-led growth? Whatever the answer, that’s where you’re going to invest the most so you can scale. You need to nail your product market fit, ideal customer profile and average deal size so you can go win deals on repeat.

From there, the other 20% should focus on additional levers you can pull to unlock new opportunities. These may include new products, changes to pricing and packaging, international expansion and more.

2. Financial Planning and Analysis

As the size of your company grows, so too does its complexity. The finer points of running a business, such as financial modeling, key performance indicator (KPI) reviews and fundraising planning, can easily go astray without proper planning and attention to detail. Include them in your growth strategy to build a solid foundation for your future.

3. Product Strategy and Development

Too many companies build products they think their customers will want, then try to bring them out to market. But the best business growth strategies take a market-in approach instead: relying on research and data to identify needs, then creating a roadmap and building a product that actually drives the company forward.

4. Go-to-Market

In a startup’s early days, it’s often the founder and other executive team members who are responsible for sales. But that isn’t sustainable for the long term. Your growth strategy should include detailed plans for transitioning from founder-led sales to an effective sales organization with predictable revenue for scale. Do you have a quota model in place?

5. Brand

Your brand represents what your company stands for. What are your values, and how do you convey them to your market? Develop a messaging hierarchy with a unique point of view and shout it from the rooftops consistently — a practice we call drumbeat marketing.

Because no matter how good your product or how strong your go-to-market (GTM) motion, your growth strategy won’t succeed if nobody knows who you are. You need a top of funnel that others will envy.

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Choosing the Right Growth Strategy

At York IE, we get introduced to thousands of startups every year, and they pretty much all fall into one of these categories:

Strong companies in small, niche markets: A lot of times we see this with vertical software. A founder will say, “I’m building this EdTech app for elementary schools.” I believe they can build a good, stable company, but I’m not sure it will ever be a large, venture-backable growth company.

All-aspirational companies: We’ll get a pitch that says, “We’re creating the world leader in cloud computing.” But I don’t believe their financial model, I don’t believe they can secure the amount of funding they’d need, and I don’t believe they can compete with Amazon, Google or Salesforce.

Strong companies with aspirational vision: These are the best companies. They aren’t just dreaming big, but they have solid, realistic business growth strategies to back it up. They have accurate and actionable plans for what they need to do today, this week, this month, this quarter and this year to succeed, letting each milestone unlock their next phase of growth to the top of the mountain.

To choose the best growth strategy for your company, start by looking in the mirror. Which of the above categories do you fall into? Which category would you like to be in?

Be honest with yourself. Then, identify your long-term goals and work backwards to where you are today. What specific actions do you need to take, and what specific investments do you need to make, to achieve those goals?

What Factors Affect Business Growth Strategies?

It’s also important to consider external factors and how they may affect your growth strategy. If you’ve spent years grinding to find a repeatable, scalable business model, and you’ve finally locked in, that’s great. But if current market conditions aren’t conducive to scaling, it might not be time to put your foot on the gas.

Be mindful about the operating mode your company should be executing within:

Protect: Clear your head, batten down the hatches, cut the fat and focus on your unique differentiation. When times are tough, don’t do anything you don’t have to do. Extend your runway and live to play another day.

Optimize: When the time is right, focus on your end-to-end operations and triple down on what you’re good at. Be a maniacal leader focused on insanely good execution and successful attainment of your KPIs.

Maximize: When the opportunity you’ve been working towards is finally opening up to you, you have a damn right to go for it. Rev your engine, invest for scale, make bets, take risks and drive enterprise value creation.

Keep in mind that these aren’t stages of your business growth. You could be a $50 million or $100 million company and need to be in Protect mode. Act accordingly.

Unlock New Opportunities with Your Growth Strategy

For any company, your growth strategy is truly analogous to your business strategy. It should be closely aligned to your financial model while also marrying your product, GTM and brand strategies to the team you’re building to implement them.

It’s critical to have both a long-term vision and a near-term focus on execution, so you can unlock new opportunities with each milestone and stage you hit.

Develop and implement the right growth strategy — not just for where you want to be, but for where you are now.

The 8 Stages of Business Growth: From Idea to Exit

Posted on by Kyle York

The stages of business growth are often talked about relative to funding rounds.

“I’m a Seed-stage founder.” “We’re a Series A company.”

But even if you’re a bootstrapped startup that never raises funding, I can still qualify you as a Series B company vs. a Pre-Seed company, for example, based on certain criteria and milestones.

The eight stages of business growth: genesis, initial revenue, product market fit, foundational, expansion, growth, scale, exit.

What Are the 8 Stages of Business Growth?

The eight stages of business growth are:

  1. Genesis
  2. Initial Revenue
  3. Product Market Fit
  4. Foundational
  5. Expansion
  6. Growth
  7. Scale
  8. Exit

If you’ve got a great business that is profitable and sustainable, you may not raise as much money as other companies at the same stage, and you may not even need to raise outside capital at all. (The best funding, after all, is customer funding.) You may also start to rely more on bank debt, lines of credit and other forms of financing that don’t require you to sell more pieces of your company.

We’re still going to pattern-map your company at revenue scale or customer scale to others that follow the traditional fundraising-focused company growth stages, however.

Let’s take a look at these company growth stages and how they track with venture capital funding rounds:

1. Genesis

At this earliest of the business growth stages, you have an idea, maybe a pitch deck or business plan, and not much else — certainly not a fully developed product or any revenue.

2. Initial Revenue

This is the equivalent of the Pre-Seed stage. Companies here typically have a minimum viable product (MVP) that’s in use with some beta customers or product design partners, but they have not yet found product market fit.

Their revenue can range from zero up to the low tens of thousands of dollars — basically, enough to support continued work on their MVP, but not much more.

3. Product Market Fit

This maps to the Seed stage on the traditional funding journey. These companies are close to achieving product market fit, or they at least have some initial proof points, having identified their ideal customer profile (ICP).

They should be bringing in between $500,000 and $1 million in revenue from paying customers, some of whom are willing to act as reference customers.

4. Foundational

Companies at this stage have a real business and are ready to raise a Series A round. They absolutely have product market fit, have nailed their ICP and have hardened their business and product foundation, and their revenue may range from $1 million to $4 million.

With foundational revenue from a foundational customer base, it’s time to put fuel on the fire for growth with a larger capital infusion.

5. Expansion

Companies often reach the expansion stage after raising a Series A round. Maybe they’re not ready to raise $20 million, but they still have an opportunity to accelerate their growth by targeting new markets, launching new features or expanding into existing accounts.

These companies have typically cleared $5 million.

6. Growth

The growth stage is the equivalent of a Series B. After years of steady growth, now is the time to really go for it. How can you take that $10 million in revenue to $20 million or $30 million?

This is when true stars shine and the potential of your startup is realized.

7. Scale

People use the words “growth” and “scale” interchangeably, but I view them as separate stages of business growth. The best way I can describe it is, growth is your journey and scale is your destination.

Once you’ve achieved the goals you laid out in the growth stage, you’ve become a scale-out company. Once you’re here, it may require an entirely evolved or different leadership team with layers of management and processes that weren’t in place at prior stages.

8. Exit

Once you’ve built a large, profitable business, you have several appealing options. You can have a strategic exit by selling stock in your company through an initial public offering or a private acquisition or majority buyout.

But depending on how much equity you’ve sold over the years, the choice may not be completely up to you. If you fundraise, keep that in mind as you progress through the stages of business growth.

Navigating the Business Growth Stages

Remember: Funding isn’t the only way to determine where your company is in this lifecycle.

At York IE, we’re experienced operators who’ve lived through all of the stages of business growth. We highly encourage founding teams to preserve their optionality, meaning they retain the ability to exit along the way if it makes sense at their specific stage. We know which growth levers to pull and which pitfalls to avoid at each defined inflection point. And we’re here to help the next generation of entrepreneurs.

Our goal is to help you build a good SaaS company!