Why growth doesn’t happen in a straight line – and why that’s a good thing
Published July 24th, 2015, updated November 22nd, 2022
Summary - It’s exciting when a company goes through a growth spurt. But it’s good practice, after a period of growth, to take some time to regroup. Have the new employees ramped up? Has anything changed with our product or the market? Putting growth on pause every so often will help keep a company on track – and allow time to build in efficiencies.
I’ve always been fascinated by the fact that growth doesn’t seem to happen in a straight line.
Successful companies, it seems, are either in growth mode, which is characterized by hiring and expansion, or in efficiency mode, which is all about making the best of the resources you’ve got. That’s been the model in every single company I’ve worked for or followed closely.
It’s always seemed to me that growth and increases in efficiency should take place in tandem, in a smooth progression. After all, you’d think you’d be able to follow a formula: For every X number of new customers, we hire two support people and one sales person.
Instead, it seems that all too many companies go through peaks and valleys: First they hire like crazy, then they fire like crazy.
Those peaks and valleys are just not good for the business.
So can they be avoided? Can growth be made to happen more smoothly?
My recent summer vacation got me rethinking my views about this.
I now think that a stepped approach to growth is OK.
Just as a vacation provides time for people to rest and recharge, I’m now coming to accept that growth spurts need to be followed by pauses – pauses that set the stage for the next round of growth.
The whole issue of growth is very relevant to me because Klipfolio has been growing by leaps and bounds lately. Since the beginning of the year, we have expanded our office and added 23 new team members - a significant increase considering there were only nine of us just a few years ago.
So I find myself now beginning to focus on efficiency. More specifically, I’m looking at the percentage of sales and marketing spend to revenue, our revenue per employee, and customer acquisition cost ratio.
I use these metrics as efficiency guideposts, and they tell me I need to take a look at this new capacity and ask a few questions: Are the new employees performing properly? Are they doing what they need to do as efficiently as they can? Are there new processes that we should be thinking about, or manual ones that now need automating?
The thing is, you can’t get the answers to these questions instantly. It takes time for people to settle in, learn their jobs and work efficiently. It takes time to see how everyone interacts, and how much each person is contributing. And then you adjust according to what you observe.
And in addition to employee performance, there are also external factors that come into play.
When you’re looking for efficiencies you have to take stock of how the product is behaving or what other factors have changed. Maybe a competitor is doing something differently all of a sudden, or maybe your sales are increasing in an unexpected way.
This all needs to be factored into the assessment and decision-making process. Management needs to think purposefully and understand what stage the company is in. Are we in the growth phase, or are we looking for efficiencies?
And while you may not be able to make growth happen in a nice smooth line, you also need the foresight and the planning to avoid tremendous ups followed by tremendous downs. It’s best to stabilize things before moving on.
Perhaps it is kind of like climbing a very tall mountain.
You can’t climb it all in one day. So you climb for a while, then set up a camp for the night in a safe place where you can rest and regroup. The next day you take down the camp, climb some more, and set up a new camp at a higher level.
You may occasionally have to spend a few days at your new base camp to get used to the altitude before climbing again.
The wait can be frustrating, but it’s absolutely necessary. And it shouldn’t distract you from the fact that you’re on your way up.
Allan Wille is a Co-Founder and Chief Innovation Officer of Klipfolio. He’s also a designer, a cyclist, a father and a resolute optimist.