Why 99 out of 100 Businesses Never reach $10 Million in Revenue & How to Become the 1 that Does!Dec 17, 2022
According to statistics, it’s hard for most businesses to make $500k annually in revenue, and it’s even harder to make $10 million. However, I believe that businesses that reach $1 million in revenue are more than capable of growing their revenue to $10 million+ if they apply the right framework.
Most of the time, not reaching this target has more to do with execution rather than the actual business ideas. However, before we go into more details on how you could break through the revenue barrier, let’s first take some time to comprehend why the $10 million revenue mark is essential.
The Goal: $10 million!
There are various reasons why achieving $10 million in revenue is important for your business; however, we’ll focus on two primary reasons; Freedom and Flexibility.
At its core, valuation has more to do with accessing capital and gaining leverage.
Most businesses can raise some money from family and friends, and angels to get started when beginning businesses. However, as time goes by, these options often dry up, especially when you need more investments to get or keep your business going.
Available options end up coming with an unreasonable price tag up until your business eventually gets to the $10 million annual revenue mark. It’s at this point that your company’s valuation is at its highest, supposing that your financials are decent. Reaching this mark gives you more options regarding raising some capital or even selling the company.
The constant message I get from people involved with venture capital, the merger and acquisition space, and private equity is that getting your business to the $10 million mark allows you access to additional capital. Plus, you get to pique the interest of lower-end private equity groups that can provide you with more capital or buy out your business.
(Check out my conversations with Domenic Rinaldi and Tim McLoughlin on the B2B Founder Podcast)
When it comes to getting your business to the $10 million mark, the best thing is that when more persons gain interest in your business, you get to have better leverage as the founder.
Looking at the situation from your business’ operations point, the $10 million mark offers you optimum freedom. You’ll no longer have to focus your energy on day-to-day operations. Instead, you’ll get to put more focus on working to build your business rather than working in the business.
This is pretty vital to you as the Owner. Scaling the $10 million mark and rising beyond it will transition you from the do-everything owner to the CEO. However, not all owners like to accept such a challenge because it adds more responsibilities. The beauty is at this point it is your option!
For instance, if you grow your business from $10 million to $25 million, or even $100 million, your business’s complexities, including daily operations, multiply exponentially. Plus, your business’ infrastructure, social structure, and various other challenges become more challenging. While a company’s growth is good, not all founders like taking on challenges and responsibilities.
The Growth Challenge
According to research, less than 10% of all startup businesses reach their million-dollar annual revenue. Furthermore, less than 1% of these companies hit their $10 million mark in annual revenue (Only .4% of SaaS startups reach $10 million).
Simply put, this means that only one out of ten startups that hit one million dollars in their annual revenue get to the ten-million-dollar mark. More often, this challenge can be attributed to poor execution rather than having the wrong business idea.
Having worked with several hundred founders within the past two years, I discovered that the million-dollar limit to be a bit arbitrary. The best threshold that can be used is what I’d call the Owner’s maximum capacity.
This refers to the point where the owner or founders have exhausted selling their product within their network to the point where they have to find new prospects that are unaware of their product or brand.
One fact that you could take as a universal truth is that revenue thresholds commonly vary in relation to price points and how big your network, as the owner, is. Therefore, your business’ accomplishments, or lack of, hinges on your ability to break through this barrier.
Owners that were fortunate enough to find a way to reach for, connect with, and sell to prospects outside their networks were able to grow their company’s annual revenue above $10 million. Some examples of such companies are Lucid, the Intelligence Bank, and Penji. (You could click on the links to get the full interviews with these founders.)
However, while each of these companies could break through the barrier, the founders admit that they went through a 9 to 18-month study curve before they figured it out. Unfortunately, a vast percentage of owners have a hard time figuring out a way to breakthrough.
Most founders often end up making the wrong hires or wrong investments in technology, using up all their money and ending up going bankrupt or getting burned out. However, the great news is that if you’ve maxed your capacity, you still have a shot at breaking through the barrier and getting to the $10 million milestones.
The Answer to this challenge is The Zero to $10 million Framework Strategy.
Growing your business in the B2B business model isn’t one-dimensional. It would be good if you didn’t suppose that you could hire a sales leader or a sales rep and automatically hit your target revenue overnight. The key to hitting your target is applying your approach systematically.
I established this business growth framework after helping my client grow their digital agency from their $200k annual revenue to $14 million in two years. I got to learn lots of lessons from my mistakes. I’ve tweaked and revised the framework based on my work with various B2B founders and more than 100 interviews conducted with founders and thought leaders that have managed to break through the $10 million annual revenue barrier.
The framework can be broken into two main parts and six individual modules, as shown.
Ideally, the framework’s design is meant to complete every section following a particular order. However, you can jump around and work on various sections depending on your business’s growth journey. However, one important section that would not be good to skip should be the alignment section.
Alignment: Your business’ Messaging and Positioning
The alignment section is a high priority regardless of your business’s size. It’s central to your company’s message, its position, and its differentiation from competing companies. It all centres on solving a particular problem for your customers and prospects.
The key questions supposed to be answered by this section are:
- Which problem do you solve for your customer?
- Is the problem good to solve or a need to solve?
- How will you solve the problem?
- How differently will you solve it (compared to your competition)?
- Have you got any proof that the solution works?
- What drives the company to solve the problem?
Answers to this question could help you align your business with who you serve, your services, and your reason for serving. Your job will be to ensure that there is a complete alignment between your company’s services and your customer’s needs. The alignment may pivot over time; however, you should be able to provide great answers to these questions wherever stage your business is. I would urge you to complete this exercise at the product or service level too.
Connect: With Your Prospects
If you’ve nailed the positioning and messaging section, you can refocus your attention on connecting with ideal prospects. Various industries are different; however, one key factor that links their success is creating and availing valuable content. The digital era has changed most things making content one of the core factors that influence the growth speed in startups, i.e., Lucid and Cool Planet Group. You don’t get any shortcuts. If you want your business to grow, you’ll have to provide valuable content to your prospects.
Only small percentages, about 3 %, of ideal prospects are in your buy now mode. So, you’ll have to increase your connection, create more awareness, and ensure that your prospects are educated about your products or services, especially when they are about to make a purchase.
Your core content needs to grow organically using search engine optimization strategies; however, you could still accelerate this growth through various growth strategies and strategic partnerships with resellers and channel partnerships with more access to your model customers.
An example of one of the companies that have disrupted the old-fashioned B2B demand group model is Chris Walker, founder plus CEO of Refine Labs. Chris Walker broke the B2B approach in marketing and silos. He provided businesses that came after with a blueprint that helped them drive digital growth. (Check out the full interview here)
Enable Your Prospects and Customers
Often, most startups tend to tussle to get this area right earlier on. Eliminating friction is the framework’s process section.
It involves three central sections:
- Buyer enablement: This section helps your customers go through the purchasing process quicker and more efficiently. Eliminating friction from the customer’s purchasing process has been proven to increase your business’s turnover.
- Onboarding: The practice involves reducing your customer’s time-to-value. It refers to how quickly your customer can get your product, use it, and get the value after making a purchase.
- Customer enablement: It involves helping your customers fully unlock the value of what your products and services offer. It includes training your customers, providing best practices, informative reviews, etc. Unfortunately, most startups make a mistake in having a poor engagement policy with customers until their contract is up for renewal or if the customer experiences a problem. By this point, the startup’s connection with the customer is already lost.
Don’t over-engineer the process too early. Instead, ensure that the relationship with your customers grows organically but at a steady rate. Once you’ve mapped the process, you’ll need to learn what sections can be automated.
I often begin with non-value addition (for your customers) practices first. Avoid waiting to pave the road while driving. You’ll need to identify various performance indicators and key metrics like average deal size, conversion rates, churn rates, etc. If you can’t gauge your progress, you’re less likely to improve your business.
Support: Your Customer’s Experience
The final section of the framework can be included in the framework’s Enable part; however, I strongly believe that supporting and providing adequate service to your customers is important, and it deserves its standalone section.
If you don’t straighten your business’ alignment right and if you treat your customer’s experience as an afterthought, you’ll find yourself putting double efforts to get and maintain your customers. Improving customer experiences has become competitively advantageous, and companies have had to build into their business structure’s DNA.
You’ll need to treat your prospects, your customers, and your customers as your prospects. This simple change in perspective could completely change and improve your approach. You’ll need to make the customer’s triumph a priority. Things may go wrong with your customer; it happens; however, how you react to the situation is what matters.
Some recommendations you could apply include:
- Incorporating your customer’s voice into your business from the first day. A great leading indicator you could use is the net promoter score (aka NPS); it’s simple to generate and use.
- I would extremely recommend completing customer experience, won/loss, plus churn analysis. It would not be good to assume that you know all the answers. Understanding the data, especially when your company is in its infancy, could help you increase your company’s annual revenue.
- Track various key metrics like churn rate, your business’ time to value (How long it takes your customer to get your product or service’s value once they’ve signed their contract), and your customers’ lifetime value.
Great and successful companies are always in constant communication and look to build a great connection with their customers and prospects. However, to achieve success and grow your business’ annual revenue to $10 million and beyond, you’ll have to improve in this section and all the others listed above.
Growing your startup may be challenging; however, it’s not difficult, no matter how many odds are stacked against you. You only need to work hard, work smart, and follow this framework to the latter. Take your time and stay motivated.
Avoid falling for company growth hacks since they aren’t sustainable. The best way to build your startup is by doing it organically. Build your company’s foundation from the ground up for accessible growth. Unfortunately, there are few unicorns when it comes to business. So don’t rely on that as your strategy if you want to achieve long-standing success.
Call me or drop me a note if you have any questions or want to learn more.