Bill Canady distinguishes growth from expansion: growth means keeping more profit per dollar of revenue, expansion means keeping less. They look the same on top line but diverge on bottom line after four quarters, long enough for companies to hire based on the wrong metric. The profit engine has five mechanical parts: segmentation, pricing, product mix, cost to serve, and operational complexity.
Growth is what you add a dollar of revenue and keep a bigger share of it than you did the last year. Expansion is when you add a dollar of revenue and keep a smaller share of it than you did last year. Big difference. Now, both look identical on the top line. They diverge on the bottom line about 4 quarters later, which is exactly long enough for you to have hired against the wrong one. Now, here's the mechanical part. And this is the part that's not an opinion. The company has an engine that converts revenue into profit. Segmentation, pricing, segmentation, pricing, product mix, the cost to serve, how much complexity the operation is carrying.
