Your business is stuck; Profit & Scale, the Vicious Circle of building a business

You own or run a Small Medium Enterprise (SME) product company that has built a cool product that has found a “product-market fit” and therefore, you have revenue/customers. In the early days, you have had fun growing the business but now you are stuck. Scalability is hard. 

You struggle to understand future revenue; you just can’t see it. With questionable revenue, you can’t predict profit and therefore, you worry more and more about cash flow. You know lack of cash flow is a business killer.

With questionable profit and cash flow, you don’t hire, don’t invest in marketing, don’t invest in new products, … well you just don’t do the investments you need to scale your business.

Scale is a Vicious Circle. You cannot see growth far enough ahead so you do not invest in the business and now since you haven’t invested, there is limited growth. Alternately, since you cannot see growth far enough ahead, you invest in the wrong things. The results are the same; limited growth. Its self-fulfilling.

This is not what you signed up for. You just aren’t having fun. You miss the early days.

Future State

Now visualize having a part-level and customer-level 12-month revenue forecast that encompasses all the revenue scale levers that exist for your business. On a single sheet of paper, you have ALL risks and opportunities to your revenue forecast and the employee who owns resolving these risks, sorted from most important to least important.

Let that last sentence sink in;

On a single sheet of paper, you have ALL risks & opportunities to your revenue forecast and the employee who owns resolving these risks, sorted from most important to least important.

You will meet monthly (S&OP) to reevaluate and refine this forecast and the risk & opportunity list. Both will get better and better.

With increasing future revenue confidence, you can invest early in the scale drivers of your business; headcount, marketing, product, sales, etc. These investments generate more revenue. Full circle.  

Additionally, more revenue allows you to drive Gross Margin improvements since volume drives costs down. Also, better revenue forecast dramatically improve the quality of inventory you build which, with gross margin improvements, generates more profit and cash flow. 

More profit and cash drives more investments which drives more revenue which drives more profit and cash which drives more investment which drives more revenue that drives….

This is Scale.

This is fun again.

This is Focused Profitability. We know how to focus on the drivers of profit and scale: optimizing Revenue, Gross Margin and Cash drivers.