On the flight back from meeting with a client doing 100 Million + of revenue a year…
I wanted to share some insights on what it takes to predictably scale.
I learned this from a mentor who grew a company from 3 million to 100 million.
I wanted to share a case study of a business that did 40K/last month which will top 100K+ in the next 2-3 months.
Because the sales principles are the same to go from 40K to 100K as they are from 40 million to 100 million.
These aren’t metrics many people talk about…. Yet if you master them you can scale your business on demand.
1. TIME REQUIRED TO ACQUIRE A CUSTOMER
This may be the biggest mistake in business.
The truth is, in 95% of businesses it takes TIME to build a relationship. Most people on average don’t know how long this takes.
Once you have this number, you know how much capital it costs to grow your businesss.
Over the course of 2 months, we were able to find the average it took a client to become a customer: 24 days.
This is HUGE because you can start creating accurate cost to acquire a customer statistics.
2. Cash Flow Break Even
It’s great to know ROI, ROAS, and all the other metrics.
BUT, what ultimately determines how fast you can scale is your cash-flow breakeven.
Example: If your ROI is 300%, but your cashflow breakeven is 90 days, it’s very difficult to scale unless you have a pile of cash.
For this particular company, we spent the last 60 days shortening the cash-flow break-even.
Right now, the cash flow breakeven is 7 days.
7 DAYS!
This gives us the ability to 2X revenue without putting a significant strain on cash-flow as far as operations.
So now, we can spend 3K on Monday and have 3K on Monday after paying for ad spend/supplies/operations.
In other words, this is called having a marketing slot machine that always wins.
In a larger business (25 million+) with B2B reps, less than 90 days is amazing. 180 days is more common.
3. Inventory lead time/process velocity (training)
Once you get control over the above sales metrics, how fast you can grow your company is based on MATH.
Most companies will want to grow as fast as possible.
This is a challenge because the constraint is no longer in the sales process.
The constraint shows up in inventory lead times (product based businesses) or process velocity (how fast you can onboard/train to do quality work).
In other words, how fast you can buy inventory (or how much capital you have) is the math you focus on with your growth rates.
Fewer companies run into this constraint, but this can be a killer for long term growth/referrals if it’s not calculated.
Master these 3 metrics above, and you’ll turn your company into a growth machine.