Growth Strategies

$1 to $1 Billion: A 4-Stage Formula for Company Growth

How you run your business will be very different depending on what stage you're in.
$1 to $1 Billion: A 4-Stage Formula for Company Growth
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Guest Writer
CEO of Motus
7 min read
Opinions expressed by Entrepreneur contributors are their own.

What works for a company at day (or dollar) one probably won't work for that company at day (or dollar) one thousand, let alone 1 million. And at dollar 100 million? No way. It's a very different game at each age and stage of company growth, and you need to be ready to adapt the way you play to account for the way the game is changing. To approach a business the same way at different ages and stages is as silly as parenting a toddler the same way you would parent a teenager.

Related: 9 Steps to Increase the Value of Your Business

I get it. I've covered enough ages and stages in my entrepreneurial career to know about the growing pains. It's incredibly easy for company leaders to get too deep in the weeds of their own business to gain a bird's-eye perspective. I believe understanding the stages of a company can be an advantage in succeeding as a CEO because you'll be more confident in what should and shouldn't be happening at the stage you might be in (or heading toward). Most importantly, you'll know what you should be focused on to be the leader the company needs at that stage.

There are four distinct stages that organizations mature through, which are determined by factors like revenue and valuation. It's these elements that inform the stage a company is in, far more than how long the company has been around. The age of the company -- and the entrepreneur leading it -- can be very telling as well, but it's revenue and valuation that determine the specific stage the company is in. And whatever stage you're in, as an entrepreneur, you need to know where to put your focus.

Stage 1: Startup

Revenue: $0 to $10 million
Valuation: $5 million to $50 million
Your priority: Whatever it takes

Starting out, many organizations are bootstrapped, or have secured smaller, early rounds of VC funding. The focus in this phase is typically all about developing the product, although that shouldn't happen in a silo. An organization's initial stakeholders -- both investors and your earliest customers -- play an important role in the direction of the company and its offerings. Over-servicing these early customers establishes a strong foundation for the organization, not only validating your business and products, but also fostering loyalty that could result in leads, referrals and references down the line.

One of the most important growth factors in Stage 1 is what you might call the "entrepreneurial spirit." Early in my 20s when I founded ConnectEDU, I was working with a more seasoned mentor (as you do when you're a new entrepreneur). Growth was steady, but slow. As an ambitious recent-grad, there's nothing more frustrating. Despite my limited business experience at the time, I came to realize my mentor and his abundance of experience were actually holding us back. Having already reached his own personal career heights, his approach with us was cautious and leaned toward risk averse. He cared more about stability than growth.

My early mentor did highlight an important lesson, though perhaps not the one he intended to. Startups -- or any new venture -- equals risk. Things are bound to get messy. You can't worry about what it looks like; instead, worry about just getting there. To make it in the long run, your earliest employees should share that entrepreneurial spirit. Growth comes from that opportunistic, "do whatever it takes" mentality.

Related: 25 Common Characteristics of Successful Entrepreneurs

Stage 2: Growth

Revenue: $10 million to $25 million
Valuation: $50 million to $150 million
Your priority: Systems and processes

You'll need processes and systems to get through this stage. More importantly, you'll need the discipline to adhere to these processes and systems across a fast-growing organization. If you haven't already secured the right management team, this is the time to do it. The right people, especially in leadership positions, are the key to sustaining growth on strategy. Double down on your resources, including an investment in a brand that you can grow into (rather than one you might outgrow). That brand will serve as the true north for the company, which you'll no longer have time to do.

Of course, growth is expensive. At this stage, many organizations tend to be venture funded, but it's worth considering taking on growth capital or venture debt as you gain confidence in your offerings. That's exactly what this stage is about -- diversifying your risks, learning from early mistakes, figuring out why things happened and getting more comfortable. As you align earlier opportunistic efforts into strategic and repeatable offerings, patterns begin to emerge. It becomes easier to identify and focus on your core audience and their pain points. As this happens, an organization's single "product" will often evolve into a more comprehensive "platform" that meets customers' needs. Focus on that, and get it right. Make sure you have the systems and processes in place to deliver your offering at scale, and the leadership team to drive discipline around those systems and processes.

Related: I Started Saying 'No' to These 6 Things. My Life and My Business Got a Lot Better.

Stage 3: Scale

Revenue: $25 million to $100 million
Valuation: $150 million to $350 million
Your priority: Brand and culture

It's rare that the same entrepreneur who thrives in a startup stage would survive the "discipline and details" environment of the second stage; rarer still for startup leaders to successfully steward a brand versus run a business. But that's the biggest difference in this stage: You need to be focused on the vision for the brand, rather than the minutiae of the business.

Everything that happens in Stage 3 is a result of how effectively you found your organization's pattern to success in Stage 2. Good or bad, things that started as small ripples are magnified into tidal waves as you "rinse and repeat." While incredible customer service is key, offerings should be scalable. By identifying what's working and what's not, R&D can become more strategic, and even incorporate M&A where appropriate to drive the platform forward. At this stage, culture also becomes critically important to growing the business, and should be done strategically.

Related: Don't Get Slowed Down by Growing Too Fast

Stage 4: Enterprise

Revenue: $100-plus million
Valuation: $350 million to $1-plus billion 
Your priority: Culture or die

Here's where we witnessed the 2017 falls from grace of companies like Uber and Tanium. Unhealthy culture, bad choices, faulty leadership -- it all comes to a head the further down the road you get.

Leaders that are doing their jobs right should be able to step back from their role in Stage 4 and watch their department or the company continue to operate without them. Aside from a few higher-level, directional decisions that often fall to the CEO, much of the company will continue to grow organically from the foundation created in the earlier stages.

If you've grown the company to over $100 million in revenue, you won't need me telling you what your priority should be. At a valuation north of $350 million, you'll be able to choose what you want to do next. You might stay in your role, or you may realize that you're happier in earlier stages. My experience is that leaders often thrive in one specific stage more than the others -- each stage requires a very specific leadership style.

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