BUILDING A FAST GROWTH COMPANY

Recent research funded by the Kauffman Foundation tells us that over 440,000 Americans are starting businesses every month.

Most of these businesses are sole proprietorships or small firm ventures – the type of companies that make up the backbone of our economy.  However, some of these new businesses have the potential to experience rapid expansion and become breakout growth companies.  These types of fast growth companies, often called gazelles, certainly succeed against the odds. Verne Harnish, author of the book Mastering the Rockefeller Habits, notes that there are 23 million firms in the United States and that only about 4 percent ever get above $1 million in revenue.  Of those, only 10 percent ever make it to $10 million revenue (0.4 percent of the total).

These stats lead me to ask the question – what does it take to become a successful fast growth venture?

Uncovering the Principles of Success

I am fascinated with the art and science of how companies with dreams and desires to become fast growth ventures can successfully achieve their goals. For years, venture capital firms have struggled to locate the next big thing; however, we know that out of any portfolio there will likely be far more losers than winners. While that success rate may ultimately work out for the VC firms and their investors, those failures are not good outcomes for the dedicated men and women working in those businesses. Thankfully, recent research is starting to shed more light on how to increase the odds of success for fast growth enterprises. While there is no silver bullet, there are principles that can be applied to help businesses increase their chances of success.

Thinking “On” Your Business

In this article, I will focus on one of the core principles for turning businesses into gazelles – methodically sizing up your business. Management teams need to periodically and methodically stop and honestly size up their business. For most leaders, the path from startup to creating a stable business is a whirlwind of activity. I rarely see owners/management in this stage that routinely take stock of where they are in their business. Most business plans, if there ever were any, are usually collecting dust on shelves.  When you are in survival mode, it is understandable that taking time for seemingly theoretical concepts such as planning, analysis, and goal setting seem like a luxury. However, to help take the business to the next level, leaders need to begin the disciplined habit of critical analysis and planning.

Clarity

While the type of analysis will vary depending on the business and industry, the benefit of this principle is the same – management should come away with a clear vision of the company’s strengths, weaknesses, market position, and where opportunities for growth may be available. For the owner, this is often also a chance to reflect and make sure the business is meeting his or her personal goals for being an entrepreneur. The key is to come away from the process with clarity.  This clarity will help focus the efforts of the team to propel the company forward. Without this clarity, the sheer volume of decisions, challenges, and opportunities can be overwhelming.

Planning For Success

In the late 1990’s, I had a unique opportunity to participate in a venture backed dot.com in Silicon Valley. While the dot.com ultimately failed, like many others at that time, the experience was memorable and invaluable training for working with fast growth entrepreneurs.

I was fortunate to meet many successful entrepreneurs during this period and was struck by their focused vision and execution. Almost every one of these individuals had a disciplined practice of methodically evaluating their business. In addition to these anecdotal observations, this principle of planning is backed by leading research which tells us that it plays an integral role in helping businesses achieve their full potential.

HOW TO VETT YOUR NEXT BUSINESS IDEA

Entrepreneurs are people with big dreams and ambitious goals. They pour their time, energy, and resources into their business ventures in hopes of success. Unfortunately, the odds are stacked against most of them reaching their destination. Statistically, we know that most will fail within the first five years.  However, there are some people who defy the odds and somehow achieve success as serial entrepreneurs.   Are some people just born with the Midas touch?  What is it that people like Sir Richard Branson, founder of the Virgin Group, Ltd, have that gives them the ability to repeatedly strike gold in the cut-throat marketplace?

While there is no one magic bullet, there do appear to be some consistent themes.  One quality worth noting is the ability to critically vet business ideas to make sure the new venture has a fighting chance.  This takes rigorous analysis and the ability to honestly and objectively review the idea and the entrepreneur’s own ability to execute.

Clark Love, a native Mississippian, has achieved the goal that most entrepreneurs only dream about – he has successfully started a business, grown it, and sold out to a larger company. Love, a graduate of Ole Miss and Northwestern’s Kellogg School of Management, started Forest One, Inc. (later renamed Lanworth, Inc.) in 2000 at the age of 28.  Lanworth is an information technology company providing consulting services, applications development, and software to the forest products, environmental, and land management industries.  Love originally founded Lanworth with his college friend Dr. Henry Jones and grew the company to be a multi-million dollar enterprise with the main offices being in Jackson and Chicago.  In 2007, The Westervelt Company acquired Lanworth.

While Love achieved his goals for Lanworth, he has not remained idle.  His entrepreneurial drive has already rekindled as he in the process of launching several new ventures. Love’s analytical training as an engineer in college, his experience as a consultant with Accenture, and his “real world” experience with Lanworth and other startups has allowed him to develop a framework for analyzing new business opportunities.  His checklist for a new business venture includes the following requirements:

Have a Cause

The product or service offered by the business should move people.  Love added, “It doesn’t need to move everyone, just the segment of customers I plan to go after and the people I will hire.  You want a business people will put their hearts and soul into.”

Know Your First 3 Customer’s By Name

An entrepreneur should know by name the first 3 customers for the product or services the business will offer.   Many people have ideas about what will work in the marketplace yet they have never actually vetted the idea with a potential customer.  You need to know if anyone will actually buy your product or pay for your service.

Build a Recurring Revenue Model

A large majority of the revenue should be recurring so the business does not have to start from scratch each year.  Having a solid financial base of recurring revenue allows for more growth opportunities.

Be Passionate about Your Industry and Customers

Love noted, “Starting a company is incredibly hard, harder than most people realize.  Pay and economic reward are not enough – you really need to have a passion for the business and serve customers that you actually care about.”  This passion serves as the “pull through” that helps you get through the difficult times as an entrepreneur.

This checklist can serve as a useful tool in analyzing any new business opportunity.   I believe that serial entrepreneurs like Clark Love will play an integral part in Mississippi’s future in creating jobs and opportunities for Mississippians.  Hopefully, we can collectively make Mississippi, Tennessee, and the Mid-South attractive places for entrepreneurs to invest their passion and energy into creating world class businesses.

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