"High growth"

Philip Morgan

The chart in yesterday's email came from Hinge Marketing's "2017 High Growth Study", which you can see here: https://pmc-dotcom-uploads.s3.us-west-1.amazonaws.com/uploads/2018/11/2017-High-Growth-Study-1.pdf

Here's that chart again:

Let's pick this apart.

What do the percentages mean?

Let's start with Hinge's definition of "high growth".

They define that as "average yearly growth rate of at least 20%".

Let's translate this to real numbers:

  • If you start with $70k in gross revenue, after 3 years of 20% revenue growth (high growth), you're at $121k, and after 5 years of that growth rate you're at $174k.
  • If you start at $100k in revenue, after 3 years of high growth you're at $173k, and after 5 years you're at $249k.
  • And finally, if you start at $150k in revenue, after 3 years of high growth you're at $260k, and after 5 years you're at $373.

There are lots of ways to measure growth, but for a money-making enterprise, measuring the money it makes is one good way to measure growth.

In fact, I often ask new clients what subjective and objective forms of feedback they value in their business.

The objective feedback is almost always defined as "revenue" or "my bank account".

I think this is fine, but it brings up the question of what you should focus on when building a business. Should you have a singular focus on revenue, or perhaps focus on a broader set of observable factors?

To me this is the most interesting question, because it doesn't have one single "correct" answer.

There's a school of thought that suggests we should focus on things we can control rather than things we can't.

Most of you would rather eat a bowl of broken glass than make a cold call (that describes me too, BTW), but think about this in terms of a sales grunt doing cold calling.

The "focus on things you can control" school of thought would encourage the sales person to focus on how many calls they make each day rather than on the outcome of those calls.

They can't directly control the outcome of those calls. They have much more control over how many calls they make. They have control over their behavior during those calls, but that still doesn't give them control over the outcome.

Clearly, you can take this school of thought too far, or take it out of context.

If we think of stuff you can directly control as inputs and your business revenue as the outcome, we'd want to focus on inputs that reliably produce the outcomes we want.

That's a perfectly serviceable way to think of strategy: the inputs and decisions that reliably lead to desirable outcomes for your business.

In other words, I think it's good to prefer focusing on stuff you can directly control (inputs) rather than stuff you can't. That's a good idea.

But make sure those inputs are at least likely to lead to the kind of outputs you want to see.

That brings us to the next interesting part of this Hinge study:

I'll discuss this more tomorrow.