MBA1805 Q&A Wednesday: Am I growing too slow?

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Hey oh welcome to the $100 MBA show. Real World business advice you can count on every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014 and today's episode is Q and A Wednesday. On Q and A Wednesdays, we answer a question from one of you, one of our listeners. If you have a question you want to ask, go ahead and email me over@omar00mba.net Today's question is from Helen and Helen asks. Hey Omar, love the podcast. I have a very simple question. Am I growing too slow? I run a small WordPress plugin software business. I've been doing this for a little over two years and I'm not really sure how fast I should be growing. Should it be 3% month over month? 5%? 10%? I have no idea if I'm doing well or if I should be picking up the pace. Any help or guidance in this area would be super helpful. Thanks Helen. Helen, you are not alone. Many people have the same question in their head right now. How's my business doing? Am I growing at a decent rate? It's really hard to know, because we hear crazy numbers from big companies in startup world. In Silicon Valley, growing at 200, 300, 400% month over month. Absolutely bonkers. Well, I had the same question in my head years ago and I just started asking people, hey, how fast is your business growing? So I have a pretty good understanding of what other software companies are doing. What is decent growth, but more importantly, how to decide what good growth is for your company. So let's get into it. Let's get down to business.

ADP knows anything can change the world of work. Like what if a blocked shipping port caused a worldwide coffee shortage? What if suddenly businesses are scrambling to manage an increasingly drowsy workforce? Productivity slips 20% just due to the extended time it takes to conduct a job interview while yawning. Anything can change the world of work. From HR to payroll, ADP helps businesses take on the next anything. ADP always designing for people.

One of the best things about entrepreneurship is that you make up the rules. You get to choose who, what is what. And in fact, when it comes to growth, you actually have to choose. Because growing at all costs may not be good for your company. It may cause your business to implode. If you grow too fast and you're not ready for it, you're not ready for that demand. It may not be compatible with your lifestyle. If you like to have a good life, work balance and explosive growth is going to cause you to work 80 hours a week that is not congruent with your goal, with your life. And maybe that's not what you want. If you don't want to manage a team of 50 or 100 or a thousand. Again, explosive growth is going to cause you to have to hire a lot of people quickly. So understand that this is something that you can decide. My job today is to kind of give you some guidelines on what is normal growth that you can control. And then what is considered very good growth, at least in the software world. As I ask many entrepreneurs, hey, how well is your business growing over the years at business conferences, at SAS conferences? What I have found is that actually most software companies are growing at a modest rate, something between 5 and 15% annually. That doesn't sound earth shattering, but it actually is pretty good growth. Now, of course, some companies will have spurts. They'll have maybe one month where they grew 20% or 30% or 50% or 100%, but one month they had a loss, or one month they had a little bit of growth, 3%. So it all kind of evens out. It also depends on where you are in your business. You said you were around for two years now, that's still early stages. You might see more growth in the early stages, but once the company has been established for five, six, seven, eight years, it's going to be really hard to have those huge leaps and those huge percentages monthly over month. For example, a company like Convertkit, which is an email marketing service, has been around for seven, eight years and their month over month growth is a little over 1%. Yet the company is doing very well. They make $2.3 million in monthly recurring revenue. They're doing all right. But if you look at their growth early on, let's go back three or four years, their month over month growth was like 30, 40%. So it will fluctuate because you will have some spurts along the way. If you're wondering where am I getting these numbers? Well, if you go to baremetrics.com at the bottom of the page it has a little link called startups. Some of these startups, some of these software companies publicly publish their numbers and you can see their growth numbers over the years. You can play around with the dates and see different periods of time. Over there you can see small and large businesses, or I should say more established businesses like invertkit. So you can kind of compare with your own company. But again, this is a very small sample size. Don't take everything for face value. Take it with a grain of salt. I'm here to tell you from my experience, any growth is good growth. If you are on the trend of going up, meaning that you have grown, you've made more money, you've made more profit. Remember profit? We want to make sure we're profitable compared to last month. That's really your ultimate goal every month, whether that's 1% or 15% or 40%. The point here is that you're always growing and that's compounding. That's your goal. Let's try to make sure you're on that trend. You're in the green. You should celebrate. If that's the case, you should really be happy because a lot of companies don't do this. A lot of companies are not profitable. Uber is not profitable. Okay, you see, they're huge. They have incredible growth, but they're not profitable. So make sure you're growing and you're profitable month over month is really what you should be aiming for. Now, how much growth, this is up to you. And obviously you can manipulate this with more marketing and more ads and all that kind of stuff. To try to bring in more customers. But if you're like a self funded small business and you're growing organically and just through word of mouth and through your own content marketing, this is all good stuff. Keep it going. And with software, it's really hard to to judge yourself from one month to the next. You really should be looking at the trend of the year. Last year, what was your total growth compared to the year before? You can even do this with quarters. How is this quarter compared to last quarter? And if you're going up, that's something to be proud of. Now, if you are doing something between 3 and 5% in growth month over month, that is pretty good. You should be really proud of that. That's not easy to do. Anything above that is is what I would call an exceptional month. And that will help you boost your numbers for the year. Now that's fantastic. But I want to spend some time talking about profit. You can have great growth, but if you have great profit, this is where you can really grow your business. You're taking home more cash, you can reinvest in your business, hire more people, spend more on marketing. So don't just look at your growth numbers, your revenue numbers, look at your profitability numbers. We've been doing this recently and really focusing on this for the last couple years. And this really helps a lot. Why? Because it puts things in perspective. Say, for example, we made $2,000 more this month versus last month. And that might sound, okay, that's not bad. But compared to, let's say the month before that, we made an extra $4,000. So you might feel like, oh, I didn't make as much as I made in terms of growth from the month before. But if I look at profitability, what about profitability? Did I lower costs? Any saved money? Was I more efficient? I might have saved $5,000 in cost. So in fact I am more profitable $7,000 in profit or more profitable this month than last month. This puts things in perspective that at the end of the day you want to have more money left over. Because if you do, then you can reinvest in your business and grow even more. It's not just about revenue, it's about profit here. Now, if you're funded and your stakeholders, like your investors are telling you, we need you to grow at all costs, that's a different story. But you said you're a small business, so I'm going to assume that you aren't working with angel investors or venture capitalists where they're telling you hey, we gave you $2 million so that you can reinvest in the company. Don't worry about profitability. Just grow, grow, grow.

ADP knows anything can change the world of work. Like what if a blocked shipping port caused a worldwide coffee shortage? Suddenly, businesses are scrambling to manage an increasingly drowsy workforce. Productivity slips 20% just due to the extended time it takes to conduct a job interview while yawning. Anything can change the world of work. From HR to payroll. ADP helps businesses take on the next anything. ADP always designing for people to wrap up today's lesson.

Growth is an interesting thing, but look at your profitability because that's what's going to allow you to say, hey, I more money this month left over versus last month. That means I can reinvest in my company and grow more. I can invest more in my marketing, in my sales, in my blog and my team and the actual product, improve the product so I can get more happy customers. That's really what you want to focus on now? When it comes to growth, I like to look a little bit long term because things can go up and down. Whether it's annually or quarterly. Anything between 3 to 5% growth month over month is something to really celebrate. That's pretty good. And any growth really is worth celebrating, even if that's 1%. That means you're trending in the right direction. Business is difficult. Growing consistently month over month is not an easy task. You will have moments in your business where you'll plateau and you'll have a little bit of decrease and you start getting nervous. But you're like, okay, you'll change some strategy, you'll change your marketing, you'll change maybe even your product and pivot things a little bit. But the point here is that if the general trend means you're going up, that's what you need to focus on along with your profitability. Thanks so much for listening to the $100 MBA show. If you have a question you want to ask here on Q and A Wednesday, just email me over at Omar MBA Net. I'll be happy to answer your question right here on the show. Before I go, I want to leave you with this. If you have a reoccurring subscription type business like a software as a service business, I highly recommend you use some SaaS metric tool like barometrics like I mentioned. Or if you're on a budget and you want something free, ProfitWell is free. It basically plugs into your payment processor like Stripe and it tells you in a nice clean dashboard. Hey, this is your mrr. This is your ARR. This is your growth from last month. This is your churn, all those important pieces of information so you can have it handy and even track it. But be careful, it can get addictive to watch your metrics every day. All right, I'll check you in tomorrow's episode. Until then, take care.

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ADP knows anything can change the world of work. Like what if a blocked shipping port caused a worldwide coffee shortage? Suddenly, businesses are scrambling to manage an increasingly drowsy workforce. Productivity slips 20% just due to the extended time it takes to conduct a job interview while yawning. Anything can change the world of work. From HR to payroll, ADP helps businesses take on the next anything. ADP always designing for people.