GROWTH

Success and Failure

IS GROWTH IMPORTANT?

• Depends on where you are in the life cycle of the business

• Start up• Second stage• Maturity• Exit

Traditional business life cycle

Sigmoid curve

A bankers perspective

• Who you are – personal reputation• Understanding needs• Ability to pay the loan back – think interest

cover• Security• Keeping the bank informed

Focus as an entrepreneur• Focus on the problem you solve – what is your market

offering• Charge and collect on sales• Keep customers happy and the business generation model

working• Prepare cash flow and budgets• Monitor performance weekly and manage cash daily

Tech Co. – what worked as we grew• Industry undergoing significant change• Held our pricing model• Missed a lot of tenders – stayed at 30 people and $2m for longer

than we wanted• Recovered when competitors failed – grew to 200+ people and

$8m quicker than we wanted• Identified further opportunities to entrench market position• Successful exit – taken over by public company – still operating

Supply chain solutions – what worked

• Market change created niche opportunity• Large competitors targeted top 50 companies

– we targeted next level down• Built a great team and had fun• Managed cash carefully and had good

relationship with bankers

A growth trajectory – Supply chain solutions

0

2000

4000

6000

8000

10000

12000

Revenue(ooo's)

Profit(ooo's)

Supply chain solutions – what failed

• Competitors targeted business and board chose not to sell

• Competitors targeted top staff and we couldn’t retain them

• Internal division and dispute• Lost focus

Avoiding common traps• Have enough money to cope with growth – equity – suppliers –

clients - banks can help• Capacity constraints – systems and people – be prepared so you

can cope with extra workload• As your organisation grows it changes – be aware of what to

expect and prepare for worst case or back off – manage the downside risk to ensure survival

• Employ people who are better than you• Prepare for exit from day one – even if you never do

Funding gap

Capital raising exampleAmount raised Stage Company value Source Owner's equity Value of owner's equity

$50k Seed $50k You 100% $50k

$100kStart up $500k FFF 80% $400k

$500k Early stage $2m 20/12 60% $1.2m

$2m Expansion $8m P/E 45% $3.6m

Exit $10m $4.5m

Equity distributionEntity value

Seed You 100% $50k $50k

Start up You 80% $400k FFF 20% $100k $500k

Early stage You 60% $1.2m FFF 15% $300k 20/12 25% $500K $2m

Expansion You 45% $3.6m FFF 11% $900k 20/12 19% $1.5m P/E 25% $2m $8m

Exit $4.5m 1.125m 1.875m $2.5m $10m

Some suggestions• Clear goals about what you do (and make the choice about

what you won’t do)• Be objective – get an advisory board/independent advice

in need• Don’t get greedy - raise enough capital and share equity• Hire right – people to do the job not who you like – and

get diversity in the company• Know when to recruit

ResourcesBarry J Moltz You need to be a little CRAZYhttp://barrymoltz.com Michael Bungay Stanier Do More Great Work http://www.domoregreatwork.com Al Ries and Jack Trout Positioninghttp://www.ries.comJim Collins Good to Greathttp://www.jimcollins.comRobert Kaplan & David Norton The Strategy Focused OrganizationDr. Tom McKaskill Invest to Exit