4 ways to grow your company and snare a multimillion-dollar windfall

You can't plan on building a company solely with the goal of getting it acquired or having it go public. To go really big, you have to build it to be successful. Develop a great product and a strong business, and the rest will follow. If you want to "go big," don't look outside your company. Focus instead on making your existing business the very best that it can be.

That is my answer when people ask me what it takes to help companies with their long-term exit strategies.

This may all sound very straightforward, but it's often hard to know where to begin. Finding the starting line can be the biggest challenge. Over the years, I've developed a tool that resembles a heat map to identify which parts of a business are "hot" (i.e., in need of attention). It helps examine what I think are the four most critical areas to evaluate when positioning a business for its next stage of growth: R&D, go-to-market strategy, organizational readiness and market size.

This map has served as one of the most reliable guides I've used to secure millions in funding and spearhead multiple acquisitions.

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1. Research and development 

Take a step back, look at the research and development arm of your organization, and ask yourself a few key questions: What are your research, development and engineering costs as a percentage of your revenue? How much of your research and development is sustaining or supporting an existing product versus engineering new products and innovation?

Whenever I walk into a new organization, one of the first things I do is determine how to measure the overall effectiveness of research and development. This includes looking at where your teams are located from a cost perspective and quantifying the output of R&D in terms of productivity, quality, features, bugs and products you are bringing to market.

2. Sales and go-to-market 

Most high-tech, high-growth companies are dominated by engineering and sales in terms of cost and focus, so it follows that sales and go-to-market (GTM) plans — that specify how a company will reach customers with their products and achieve a competitive advantage — are another cornerstone of the heat map. When it comes to sales and GTM models, the most important assessment is what they represent as a percentage of revenue. This will begin to tell you the model's level of productivity and its effectiveness. The percentage depends on your stage of growth. For example, early-stage companies should spend a considerable portion on GTM to gain traction, and later-stage companies should grow their GTM spend accordingly. This could range from 20 percent to 40 percent depending on the stage and industry.

First, get down to basics and make sure you understand the sales model in its entirety, including the sales process and how it matches the customer's buying pattern. Is it a direct sales model with high customer-acquisition costs? Is it a channel-based model? Is it global? Then, consider the additional markets, geographies and verticals you could access, by tweaking or reconsidering the current GTM strategy. This is a big part of a company's effectiveness. It's just as crucial to think about the markets you could be accessing, as the ones in which you already have a strong foothold.

3. Organizational readiness

Satisfied, engaged employees are more passionate, productive and motivated to help drive a company forward; however, passion and productivity make up only a small fraction of the qualities your employees should possess when evaluating the readiness of your company for its next stage of growth. Assembling the right people with the right skills at the right time is critical for achieving growth objectives.

Ask yourself this: "Do I have the right talent for the next 36 months of my company's journey, as opposed to the people that were with the organization for the previous 48?" Sometimes when companies go through growth or development spurts, they need different skill sets than those that brought them through initial ideation stages. Some people excel at starting companies but need help scaling them, and vice versa. While this can be a difficult bridge to cross, determining whether an organization has the leadership and the talent to take the company to the next level is a key stepping stone on the journey toward successful growth.

4. Market size

Before engaging with any organization, I ask myself: "Is the view going to be worth the climb?" In other words, if I'm successful, is it really going to matter? And how would I know?

To answer these questions, I look at the target addressable market size and how many players are in that market. Is it a $100 million market with 17 players, or is it a $40 billion market that five or six companies are chasing? I also look at the margin and expected compounded annual growth rate to understand how the organization can become a leader in the market segment. It's easy to see an opportunity and dive straight into it without fully defining success. However, if you're committing to the journey, make sure what you're chasing is worth the climb.

"A heat map won't always have all the answers, but it can serve as a starting point and ongoing guide to find what's broken so you can get closer to building a strong company."

What's next?

Take the time to develop your heat map and identify the pressure points that need improvement. You will be tempted to jump immediately on fixing the "hot" spots, but try to focus first on maintaining and nurturing areas of the company that are working exceptionally well.

When you get to the pressure points, how you approach your improvement strategy will make all the difference. Change and development are slightly different. Most often, employees perceive change negatively and development positively. Keep what's working really well and prioritize three-to-five things you could do as a company that will have the greatest impact on growth over the next 12 to 18 months.

Transparency is critical all the time, but particularly during periods of growth and development. Be open and clear with all stakeholders — board members, investors, partners, employees, customers — so that everyone understands where you want to take the company. In doing so, be just as honest about things that are working as you are with things that could be going better. This underscores the importance of having open conversations about what isn't working and figuring out how to fix it.

A heat map won't always have all the answers, but it can serve as a starting point and ongoing guide to find what's broken so you can get closer to building a strong company. After you've done so, the right exit strategy for your business will become clearer, and the rest will fall into place.

— By Colin Doherty, CEO of Fuze and former chief executive of Dyn and BTI Systems