Jim Johnson warns against designing a company around a specific revenue target. Rapid growth without planned infrastructure leads to reactive spending and eroded margins. Align your overhead costs to your intended scale from the start.
If you build a company that's designed to do $15 million and you do $10 million, you're in real bad shape and you probably didn't make any money. However, if you build a company to do $15 million and you do $20 million, that can also be an extremely dangerous place to be. Focusing on your infrastructure helps you to understand what the primary target is you're aiming for revenue and volume-wise, and then what the profitability will be based on how much it costs to do it. In other words, your overhead. And if you're not focused on infrastructure, which many aren't, they're just grinding and trying to grow, then when we hit a real large growth phase of our business that maybe we weren't prepared for, we start scrambling in the heat of the moment. And when we begin to scramble in the heat of the moment, we might start throwing money at the issues that we're dealing with, which increases our overhead and decreases our profitability.
