Emerging Company Leaders: Are You Prepared for Exit?
One of my favorite movies is the beloved classic fairytale The Princess Bride. My family and I watch it frequently and can recite every line. Fun fact — the sword fight scene between Westley and Inigo was the inspiration for my youngest daughter to take three years of fencing lessons! We especially love to quote the Spanish fencing master’s famous line, “Hello. My name is Inigo Montoya. You killed my father. Prepare to die.” And in the spirit of me being a complete and total dork, here’s a variation for B2B marketers at emerging companies — “Hello. My name is Barbie Mattie. You’ll kill your startup. Prepare (for exit) or die.”
What is an ‘Emerging Company?’
Forrester characterizes an emerging company as having less than $100 million in revenue, rapid year-over-year growth, and limited organizational resources while expecting long-term, repeatable, scalable revenue growth. Our benchmark data shows that the average marketing budget as a percentage of revenue is 2% and the average size of the B2B marketing team is 7.3 people. Combine limited resources with the added pressure that only one in 10 emerging companies survive past the 10-year mark, and there really is no other option other than taking a proven, prescriptive approach to conducting business.
As an emerging-company leader, do you know your company’s growth stage? Do you have confidence about how to move to the next stage? Are you a CEO who wants frictionless conversations with the board of directors and/or investors about the company’s growth plans? Are you a marketing leader who needs the CEO to enforce sales and marketing alignment from the top down to optimize the demand engine? Are you trying to build your 2021 marketing plan, but can’t because the business objectives and goals are still unknown? If you answered “yes” to any of these questions, please take five minutes to take Forrester’s Emerging Company Sales and Marketing Growth Stage survey so you can be better equipped to have these conversations.
Five Growth Stages of Emerging Companies
Forrester has identified five growth stages that emerging companies undergo. The first stage is idea generation, during which the goal is to prove the value of the idea. The second is incubation, during which the company is trying to validate the minimum viable product, as well as prove commercial viability through sales. When an emerging company is in the third stage, early growth, it has yet to surpass $10 million in revenue and the goals are to build the revenue engine and tend to grow primarily through new buyers and new offerings to existing customers. The fourth stage is the expanded growth stage, with the goals of achieving scale, expansion, and stabilization of the revenue engine and growth through new markets, new buyers, or acquisition. The final growth stage is preparing for exit or investment. At the very least, and to prove that a scalable growth engine is in place, leaders at emerging companies will be expected to measure and substantiate that the lifetime value/customer acquisition costs are less than three and profit plus growth is greater than 40%.
After identifying which stage the company is in, emerging-company leaders must understand how to move to the next stage in the most efficient manner possible. However, many emerging companies simply focus on the end goal: exit. If all the i’s have not been dotted and the t’s have not been crossed in the previous growth stages, preparing for exit or investment will be painful. So, by answering just four questions in less than five minutes, you can take the Emerging Company Sales and Marketing Growth Stage survey and successfully climb the Cliffs of Insanity!
Within a few business days, Forrester will email a results package that includes your company’s growth stage score, so you know how close you are to achieving the next growth stage. We will also provide a prescriptive workflow of the tasks requiring sales and marketing alignment during early growth, expanded growth, and preparing for exit or investment.
In the more than five years I have been an analyst at SiriusDecisions and now with Forrester, I have worked with leaders of nascent and emerging B2B marketing teams across a multitude of industries that sell offerings varying from software-as-a-service to thermoplastic resin, to crossbows and beef jerky. I have observed many startups die on the vine, sell out lower than they should have, or remain at $10 million in revenue for years — all of which resulted from leadership not taking the proper steps to grow the company to the next stage. I hope you will take our survey to learn what stage your company is at as well as what to do next.