Is your tech company growing between 1 and 5 percent every year?

Business growth figures that many entrepreneurs will dream of, but in the technology sector such business growth is nothing. As a tech entrepreneur you miss out on a lot of potential.

In Silicon Valley they even have a term for it: Walking Dead. In 2018, the average growth rate of the tech sector was 12,59% according to research by CSI Market.

Are you already impressed by that? Deloitte calculated in 2017 that the 50 fastest growing technology companies in our country on average 681% showed growth in the period 2013 to 2016. We live in promising times.

Are you satisfied with your current growth rate? Stop reading and enjoy your results.

Are you not satisfied with your current growth figures or your Walking Dead status? Then read on!

The first step out of the Valley of Death

Many entrepreneurs do not even realize that their company has become a Walking Dead. The startup or scale-up mentality has gradually given way to a culture in which people work on autopilot.

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They often like it too. Because why would you put in a lot of effort if you can earn good money this way? Take Oracle. In August 2019 it published Financial Newspaper an article about this tech company titled: Oracle has been running for 8 years to stand still.

Despite 53 acquisitions and 100,000 new customers, the company has been operating the same revenue and profit for almost a decade. While this is of course a great achievement in itself, a comparison is made with Salesforce.

While Oracle's value has doubled in recent years, Salesforce has managed to increase its value sixfold in that period. The company grew by 25,29% in one year. Oracle is the epitome of a Walking Dead.

It limps on and is unable to take advantage of the technological prosperity that dominates this age. But how can Oracle break that cycle?

Explosive Growth of Annual Returning Revenue

The answer comes from Silicon Valley expert Jacco van der Kooij, owner of Winning By Design. It's all about creating a Window of Opportunity.

Explosive business growth

In concrete terms, it means that as an entrepreneur you have a growth plan must define what will allow you to massively grow Annual Returning Revenue (ARR). It is crucial to think about themes like your proposition, go-to-market strategy and delivery model. Scalability is the magic word in all cases.  

How do you get a hockey stick?

In an ideal situation you create a hockey stick without additional investments. Based on a smart partner model, an improved go-2 market or a simplified delivery model, scaling up without significant investments is realistic.

Tip: why payment term? Prepayment is much better.

Think of Salesforce's growth numbers as a classic example of a company that made the hockey stick a reality. But although Figure 2 suggests otherwise, investment is usually required to actually achieve the intended growth.

Only then do you see the hockey stick emerging in the graph, with a small bend downwards at first. The principle is very simple: your turnover and profit first make a small dip and then grow at lightning speed.

Hiring additional staff, simplifying your technology platform and/or tilting the sales model are examples of costs that lead to that dip. The growth in ARR subsequently ensures the rapidly increasing turnover and profit.

From Walking Dead to hockey stick

In 2017, our Associate, Rene de Jong helped a Dutch software company escape its Walking Dead status as a marketing director.

To realize this, René had to prepare the software for the cloud and mobile devices, among other things. The software was installed on-premise, and that is not scalable in the long term. In addition, the revenue model has been tilted.

We switched from one-off turnover and a 10% Service & Maintenance (R&D) contract to a license model, based on the number of users.

Where previously, for example, we could invoice 100K in advance, now the situation arose that we started invoicing approximately €5,000 per month. The result: revenues decreased and expenses increased due to investments in the software.

The downward kink in the hockey stick was a fact. Our ARR grew rapidly with the new revenue model. We previously earned €10K in ARR, in the form of R&D, with the new model this became €60K.

The result was that from the third year we had the upward trend of the hockey stick in view.  

grow with your business

The pitfall of rapid growth

If you are a startup that is walking the path towards scale-up, this often happens gradually. Employees from the very beginning will in many cases grow along with the ambitions and growth path of the organization.

Make sure you actively involve them in the implementation of the growth plans. Don't think of it in a back room with a management team, but make these people part of the process.

But do you have an organization from the Walking Dead category?

In that case, it is often not enough to involve them in the process. In many cases, the honest conversation is inevitable.

Growth from intrinsic motivation

The desire to grow has everything to do with a strong intrinsic motivation. It requires a winning mentality that does not even settle for second place.

To achieve business growth, as an entrepreneur you will sometimes have to enter into an honest conversation. In concrete terms, this means that you have to retrain, relocate or in the worst case let go of certain people who have been working for your company for years.

Precisely because they have been with you for so long, they may be entrenched in the mañana culture. They approach their work the Spanish way. Chill, you know, tomorrow is another day to take care of things.

Could this attitude cause problems in the long run? Can't keep up with the pace? Is a growth spurt no longer possible? As hard as it sounds, let them go.

Above all, do this in a humane way. Help your employee understand this step. Agree on a realistic work-out period and help the employee find a new job. Take plenty of time for this.

There will also be doubts. Also have an honest conversation with them and discuss openly whether they can and want to participate in the new strategy. The choice is theirs. Record this conversation well and continue to follow your gut feeling.

Do you still have doubts? Then it's NO! If you skip this step, you really have a problem in a later growth phase.

The mañana people will slow down the growth and fall out because of the new pace.