The Big Hairy Audacious Goal. 10x 2018 Revenues by 2028. Profitably.
Let’s say my 2018 revenues were $1,000,000 (this is not my revenue, but it’s a nice easy number to work with). In 2028, that’s $10,000,000. That’s a compounded average growth rate (CAGR) of 26% for 10 years. If I tried to do this in 5 years, that would be a CAGR of 58%. If I tried to do this in 10 months, it would be…well you get the picture.
So, what does this mean?
In my business, 10x in 5 years seems unrealistically aggressive, unless I were to raise a lot of investor money. Since I’m not planning on raising the money right now, I’ll stick with the 10-year time frame. In case you’re wondering, a 26% CAGR looks like this:
| Year | Annual Revenue | Incremental Revenue |
| 0 | 1,000,000 | |
| 1 | 1,258,925 | 258,925 |
| 2 | 1,584,893 | 325,968 |
| 3 | 1,995,262 | 410,369 |
| 4 | 2,511,886 | 516,624 |
| 5 | 3,162,278 | 650,391 |
| 6 | 3,981,072 | 818,794 |
| 7 | 5,011,872 | 1,030,801 |
| 8 | 6,309,573 | 1,297,701 |
| 9 | 7,943,282 | 1,633,709 |
| 10 | 10,000,000 | 2,056,718 |
When first setting the 10x goal for revenue, it seemed aggressive and challenging. I had just read an article about Google. Early in its history, there seemed to be a fixation on 10x growth. The goal seemed to be attainable, but difficult to do.
Seeing the annual revenue targets of 26% growth on a spreadsheet is daunting. The growth in the early years seems aggressive, but doable given some new investments. When I look out several years into the future, I’m not sure where I would find the $1-2 million of new revenue each year to meet the challenge. It’s the relentless march of 26% and growing off a larger number is harder than growing a smaller number.
From a strategic standpoint, this particular BHAG has 3 implications:
- We want to aggressively grow. Many of my competitors get to a point where they are pretty stable, and their growth is more about price increases. 10x revenue growth changes our trajectory and will require us to become a much different company.
- Capital Needs: This goal requires growth capital. This cash comes from profitable operations, investors, debt, or a combination of the three. We don’t plan on raising capital now. We’ll fund the growth from cash from operations and debt financing for good acquisition opportunities. This means we need to become increasingly efficient: relentlessly scrubbing unnecessary expenses from the profit and loss statement. Cash is king and it starts with profits.
It also means that we start managing for the balance sheet. Are we adequately capitalized so that we’re not reliant on a line of credit? Is the equity in the company growing over time so that we can access bank financing when needed? It’s not just about maximizing the P&L to maximize the owner’s personal income. It also means building balance sheet wealth.
- Organization: We’ll need to build a strong team to meet the challenge. As a small company, we have the owner and one or two key individuals leading the company. The small company doesn’t have a full contingency of specialized professionals leading key roles like marketing or finance or human resources.
- Think like private equity investor: Can we utilize debt to acquire a company or two over the next several years. It will be hard to reach the goal through organic growth alone.
Can the existing company become a platform company? In other words, can I use it to take on new lines of business, which would then make the underlying business more profitable? An acquisition or two may be the only way to scale the entity fast enough.
- Sales and Marketing: This is the key. We must improve our ability to sell services to new and existing clients. To 10x revenues, though, Sales and Marketing must operate excellently and repeatedly day in and day out. It requires internal business development skills so that existing customers keep buying and don’t meet their needs elsewhere.
The BHAG focuses the mind. We can reach the goal if we go in the right direction. There are activities that we can do that will never lead us closer to the goal.
What do you think of this BHAG? Is it the right goal? What else? Or should we be looking at a different BHAG.
Ned Morgens 