If a lucrative sale and successful exit from your company is the goal some day, hitting the $10 million mark in annual revenue (AR) is a critical milestone to achieve. Of course, a business that does less than $10 million in revenue a year can be sold, but it’s unlikely to hold the value necessary for the founder to receive a premium offer and secure their financial future.
Why is the $10 million AR milestone so important when considering the company’s value and the potential for a future sale?
This revenue milestone indicates several characteristics that are attractive to potential acquirers.
- At this level of revenue, healthy profit margins are assumed, as the business has a proven track record of generating revenue and has achieved financial stability.
- Market position and a competitive advantage is also assumed, as the business has clearly captured a significant customer base and established a foothold in the industry.
- Higher revenue also indicates a diversified revenue stream, and this mitigates risk from being overly reliant on a single product or customer segment.
Each of these indicators makes your company more attractive to potential acquirers, who will see that the business already has the necessary systems in place to scale, so they can further activate the growth potential that exists.
This blog post will outline the steps to take so that you can hit your next big revenue milestone.
Topics covered include: understanding the current state, building a solid foundation, developing a comprehensive growth strategy, and sales and marketing optimization.
Table of Contents
- Understanding the Current State
- Identifying the potential for scaling and setting ambitious yet realistic goals
- Building a Solid Foundation for Scaling
- Owner Knowledge and Skills
- The Business Model
- The Value Proposition
- Infrastructure and Systems
- Developing The Leadership Team
- Company Culture
- Comprehensive Growth Strategy
- Sales and Marketing Optimization
Understanding the Current State
Having a deep understanding of the true current state of your company is a crucial first step to scaling. You must assess and understand your business's current financial performance and potential growth trajectory.
This includes analyzing your revenue streams, profit margins, and sales trends to identify areas where improvements can be made. One common mistake that is made is not tracking these metrics for each and every line of service or product that is sold.
Messy financials that clump all of the business revenue together, do not provide the insight necessary to see where the real opportunities lie within the business to dramatically grow.
In addition to knowing which products and services provide the best opportunity for scaling sales, you must also understand what the drivers of success are for your highest performing money makers.
- the marketing funnel?
- the sales enablement process?
- the offer?
- the results customers receive?
- the delivery method of the service?
- alignment with current market needs?
At this step, it’s important not to rely on your assumptions, and instead, test those assumptions with data to truly understand the performance of the business and the why behind that performance.
Only by conducting a comprehensive evaluation, can you pinpoint specific areas that require attention and develop strategies to address them effectively.
Identifying the potential for scaling and setting ambitious yet realistic goals
Once you’ve evaluated your business’s current state, it’s time to set ambitious, yet attainable goals for scaling. By establishing specific revenue targets, you provide your team and yourself with a clear direction and purpose.
These goals should be challenging enough to motivate and push your business forward, but also realistic and based on a thorough understanding of market conditions and your company’s capabilities. Setting clear, time-bound objectives not only helps you guide your actions and decision-making but also allows you to measure your progress along the way, keeping you focused and accountable as you work towards reaching the $10 million annual revenue milestone.
One common mistake by founders is having revenue goals that are vague, and not broken down into key performance indicators (KPIs), along with the exact action steps that need to be taken to stay on track to hit those goals.
Ambitious revenue goals are meaningless for a business without a growth plan that’s written down on paper that includes every necessary component: measurable goals, KPIs and leading indicators, action steps, goal owners and due dates for completion.
Vagueness and ambiguity does not scale.
Clarity and accountability does.
Building a Solid Foundation for Scaling
Just because a business has successfully generated $2, $3 or even $4 million in revenue a year, does not mean that it is prepared to scale. The business model and strategies that took a company from startup to seven figures in annual revenue more often than not needs to evolve to hit this next big revenue milestone.
The saying, “What got you here, won’t get you there,” rings true for founders who’ve found themselves stuck and unable to climb to $10 million in annual revenue.
Several areas that require upgrading at this point include:
- owner knowledge and skills
- the business model
- the value proposition
- infrastructure and systems
- the leadership team
- company culture
Owner Knowledge and Skills
It’s not uncommon to hear a founder with eyes set on $10 million AR to say, “I don’t know what I don’t know,” once they’re finally ready for external support. Most founders are willing to struggle for years before reaching out to get help. They carry the belief that they ‘should’ know what to do and fear that if they don’t figure it out on their own, people around them will find out they’re an imposter.
These limiting beliefs are flawed for many reasons. The most striking reason perhaps is that only 2.4% of all entrepreneurs in the US actually have a Master’s in Business Administration. Yet, founders tell themselves daily that they should have all of the answers, and in doing so, delay the potential success of the company, and put their financial future at risk.
The vast majority of business owners aren’t experts at business strategy. They are skilled practitioners with a passion for a particular industry or they stumbled across an opportunity to become an owner. And given the rapid pace of change, even those with formal business education in their past don’t know, and can’t know everything. This is why it’s critical to secure external support to breakthrough plateaus and hit the $10mm AR milestone.
The Business Model
While business models can vary across industries and companies, there are common shifts that need to occur for businesses in the low 7-figures to hit $10 million in annual revenue.
Roles & Responsibilities
From over-reliance on the owner -> reliance on other company leaders
Products & Services
From customized/low-margins -> productized/higher margins
From founder generated business -> marketing generated business
From founder led sales -> sales team
In addition to these aforementioned shifts, businesses preparing to scale also need to scrutinize and more often than not, update their value proposition. Over time, the company’s internal capacity to deliver certain products and services changes, and externally, market shifts occur as well.
The Value Proposition
Upgrading your company’s value proposition should be done through market analysis and research. There is a simple process to follow to ensure that before you double down on marketing and brand visibility efforts, what you offer is what your target market actually wants and needs.
Step 1. Conduct market research that includes all of the following: total addressable market, behavioral analysis, surveys, and interviews or focus groups.
Step 2. Define and segment your target market. Narrow your scope so that your marketing can speak powerfully to the exact target market you aim to serve.
Step 3. Narrow the scope of products and services to the most pressing problems that you’re prepared to solve for your desired target market. Focus on selling fewer things to more people so that you can productize and optimize the efficiency of delivery.
Step 4. Upgrade the value proposition to speak exactly to your target market and express how you solve their biggest problem in a way that is new and different.
A simple framework to consider is:
We help _________ (target customer) achieve _________ (positive business outcome) through __________ (unique mechanism) so they can ________ (transformation).
Step 5. Socialize the updated value proposition across your organization and make sure that every single employee knows it well.
Infrastructure and Systems
Scaling a business to $10 million in annual revenue requires improvements to infrastructure and systems to accommodate the increased demand and complexity. Here are some necessary improvements to consider:
- IT Infrastructure
- Evaluate your current IT infrastructure and ensure it can handle the increased workload and data processing requirements. Upgrade hardware, servers and networking as necessary to improve speed, reliability and security.
- Invest in scalable cloud-based solutions to accommodate growing data storage needs.
- Customer Relationships Management (CRM) System:
- Adopt a robust CRM system to manage customer interactions, sales processes and customer data effectively. A CRM system helps track leads, manage customer communication, and optimize sales and marketing efforts to drive revenue growth.
- Hold staff accountable for implementing upgraded processes and create standard operating procedures (SOPs) to ease the transition to new behaviors and information and management.
- Scalable Production or Service Delivery Processes:
- Streamline workflows, eliminate bottlenecks, and implement automation or technological solutions to increase efficiency and capacity.
- Invest in training and development programs to enhance employee skills and cross functional capabilities, allowing them to handle increased production volumes or service demands.
- Standard Operating Procedures
- Create SOPs for every repetitive task that occurs across the organization. Remove the resource draining question of, “How do I do x thing?” from the company.
- Create an easy to access table of contents for your SOPs and make sure every staff member has it saved at their fingertips.
Company founders wanting to scale to the $10 million annual revenue milestone must accept this truth: you cannot do this alone.
The only way to scale is to hire and train others to help lead an aggressive growth strategy. This means delegating important projects to other leaders, giving them the resources they need to execute effectively, and removing the owner bottleneck to key processes. Many founders find themselves hesitant to invest in the talent necessary to instead save a buck. This behavior can knee cap a business's ability to scale and will decrease overall company value.
Oftentimes, a business needs capital to hit the $10 million annual revenue goal. If this sounds like you, please check out this resource: Maximizing Your Chances of Raising Capital.
One of the biggest obstacles to aggressive growth is company culture. Humans tend to resist change and while scaling, you may hear things like, “But that’s the way we do it around here.” This can be maddening for an owner that’s wanting to grow, but the good news is, there are ways to help move your people along at a faster rate.
- Clarify your vision and share it frequently and passionately
- Explain how the changes will benefit everyone and reduce anxiety
- Err on the side of over communication throughout the process, always checking for alignment and understanding
- Empower your leadership team to also speak to the vision frequently and passionately
- Be patient with the emotional aspect of change
Finally, and most importantly…
- Learn to listen more than speak
As the visionary of your company, you are always multiple steps ahead of your people. You’ve already processed all of the changes and what they mean. Don’t ever forget this fact. The most important thing you can do while scaling is to listen intently, ask more questions to seek understanding and view yourself as someone who supports others through the change process.
Check your ego and impatience at the door and be the servant leader your people need to successfully transition to the new normals that are underway.
Comprehensive Growth Strategy
A comprehensive growth strategy is an absolute necessity to hit the $10 million AR milestone. Let’s define exactly what this is.
A comprehensive growth strategy is a very detailed plan, usually in the format of a spreadsheet, that includes all of the following…
- Annual revenue goals for the next 3 years
- Year one revenue goals broken down into quarters
- Projected multiples related to company value
- Major projects and initiatives to drive growth and efficiency
- Key performance indicators (KPIs) for milestones
- Goal owners identified
- Clear action steps
- Clear deliverables and deadlines
The challenge most owners face is two-fold: the first is that they aren’t experienced business strategists, and second, they aren’t experts at delegating and holding others accountable for performance.
Mapping out a detailed strategy is essential for scaling, but if this is not a skillset the owner already has, and they do not seek external support, this missing piece will hinder business growth.
Scaling is both an art and a science and knowing which steps to take in which order, along with the talent and resources necessary to execute is so critical that expert help is very much recommended.
Once the growth plan is clearly defined, the next step is to both support and hold the goal owners accountable for leading their projects successfully. This requires leadership skills, patience and the ability to successfully delegate and empower others.
If backwards mapping a detailed growth plan from your long-term vision is not a strength of yours, we would love to help!
Sales and Marketing Optimization
You cannot scale a company on referrals alone, or with mediocre marketing and low converting sales mechanisms. Every business, regardless of industry and size needs to build a comprehensive marketing strategy that effectively generates leads and a sales process that reliably converts those leads into revenue.
Every business is unique, and the marketing strategy that’s effective for one business, won’t necessarily work for another. This is why it’s essential to conduct target market research to understand where your audience spends their time, what type of content they search for, what content they respond to, and how to capture their attention.
With so many marketing channels to choose from, it's essential to narrow your scope so that your marketing budget is significant enough in the channels you choose to truly analyze performance and make data-based decisions.
There is no silver bullet strategy for marketing or lead generation. Instead, think about marketing and sales holistically. Analyze how everything is working together: value proposition, branding, content marketing, pricing, offers and your sales funnel. There’s never just one thing that generates revenue for a business. It’s about how all of the pieces work together to reliably deliver results.
The only way to optimize your marketing and sales processes is to track key metrics and KPIs daily and weekly. And though it’s natural to want to find the ‘one thing’ that’s making the difference, when you take a holistic approach to brand building and marketing, and understand that you’ve created an ecosystem, there is no one data point or KPI that you can look to for answers. Instead, find ways to continuously collect data from the customers you do convert, and have meaningful conversations with sales and marketing to uncover what’s working and what’s not.
The very best thing you can do to optimize your marketing and sales strategies is to take calculated risks, test everything, respect the data, but realize it doesn’t tell the whole story. So most importantly, have an insatiable curiosity about what’s in the hearts and minds of your target customer.
In conclusion, reaching the $10 million annual revenue milestone is crucial for business owners who aim to secure a premium offer and financial stability. This revenue level signifies healthy profit margins, a strong market position, and diversified revenue streams, making your company more attractive to potential acquirers.
To achieve this milestone, it is essential to understand your business's current state, including analyzing revenue streams and identifying areas for improvement. Setting ambitious yet realistic goals based on market conditions and your company's capabilities provides clear direction and accountability.
Building a solid foundation for scaling involves upgrading owner knowledge and skills, evolving the business model and value proposition, improving infrastructure and systems, developing the leadership team, and nurturing a growth-oriented company culture.
A comprehensive growth strategy, with specific revenue targets, milestones, KPIs, and action steps, is a must-have for scaling. Seeking external support and expertise can help overcome strategic challenges and hold goal owners accountable for successful execution.
Optimizing sales and marketing is vital for scaling success. Conducting target market research, narrowing the scope of marketing efforts, and analyzing how all marketing and sales components work together are key steps. Tracking metrics and KPIs, taking calculated risks, and maintaining curiosity about customers' needs are crucial for continuous optimization.
By following these steps and taking decisive action, you can unlock the path to rapid business growth and increase your chances of reaching the $10 million annual revenue milestone. Remember, scaling requires a combination of strategic planning, execution, and a commitment to learning and adapting along the way.
The Scale-to-Sale System™ is a simple method for scaling and building the value of a company, proven to work across thousands of companies worldwide that incorporates several diagnostic tools, including the Value Builder Score. Those businesses that achieve a Value Builder Score of 80 or greater are worth double over the average-performing business.