Building a hyper-growth company is a challenging task that requires flexibility, constant questioning, and pivoting, as well as a large amount of confidence, capital, and energy. To assess the quality and health of such businesses quickly, the five-point health check for hyper-growth businesses is an efficient and proven tool.
It consists of five checks based on many decades of professional experience: a clear and understood vision and strategy; a focus on creating future value; a long-term asset focus; the establishment of a mega-culture; and an assessment of the true level of investor support.
Like regular health checks for athletes or mature people, business leaders and coaches can use the tests to check on a fast-growing business without slowing its growth down.
Check #1: A clear and understood vision and strategy
Tell me “who we are,”, “what we stand for,”, “how we differ from the competition,” and what makes us unique.” or how to assess the existence of a clear vision and company strategy.
A clear vision and strategy are essential for building a high-growth company. They provide direction, align everyone towards a common goal, prioritise activities, identify potential roadblocks, and create a focused and disciplined approach to business.
A well-defined and understood strategy aids in the effective allocation of resources and the development of contingency plans to overcome challenges, whereas a clear vision motivates employees and attracts investors. A clear vision and strategy, when combined, lay the groundwork for long-term success.
The Check
Ask a few random employees, managers, or the CEO to describe the company’s core values, the problem it addresses, its competitors or equivalent businesses, and why our business is superior. If the results are inconsistent, the design process needs to restart.
Check #2: Future value creation
How does the future look? “Or how do you assess a company’s ability to create value in the future?” High-growth companies must have a clear future focus in order to achieve long-term sustainability. Most businesses have a complex set of these data points, but they arrive too late and only reflect the past.
Forward-looking reports, such as total revenue for the period ahead signed up, upcoming customer signups or cancellations and the impact on financials and cash forecasts, are missing. The best analogy is being in a race car; the race car represents a fast-paced company.
Also Read: How to balance rapid growth and sustainability as a startup founder
A driver in such a race car requires a large windscreen (forward-looking information) to see what is ahead. If a driver only uses the rear mirror (financial reporting packages), obstacles are only discovered after the fact, which is too late. With vital, timely information, high-growth companies can build strong teams that can execute the company’s strategy and drive growth.
High-growth companies can continue to create value and drive growth in the long run by staying ahead of the curve and adapting to changing market conditions.
The Check
Examine and extend the daily, weekly, and monthly reporting packs and board reports for future-oriented financial and operational information.
Check #3: Long-term asset focus
“Do we have a long-term asset focus, or are we just chasing revenue or share price fluctuations?” or “Are we concentrating on assets and their protection and growth as a business?”
CEOs who only look at the share price and base all of their decisions on short-term share price movements are setting the business up for failure. The share price is determined by business results and the market’s belief in future success. Financial results are the result of a company’s investment in assets and moats, which ensure future financial success and drive share price growth.
A large and growing customer base, recurring revenues, a strong brand, a clear value proposition, a competitive technology platform, a world-class team, and other assets all contribute to future results.
The Check
Examine the daily, weekly, and monthly reporting packs, as well as board reports. Is the emphasis solely on delivering financial results against budgets or also on constructing assets and moats to protect the assets? Is the incentive structure geared towards asset creation or short-term financial results?
Check #4: Mega-culture
“Do we have a true mega-culture that fuels and protects our growth?” or “How do we fare in a BBQ or hotpot test?”
Creating a mega-culture is critical for building a successful and sustainable business. A mega-culture is a culture that is deeply embedded in a company’s values, beliefs, and behaviours and permeates all aspects of the organisation.
It necessitates a clear and understood company vision and direction that cascades down into individual focus and reward systems, the presence of a high-performance team (not a work group, but a team), leaders who serve rather than managers, clear company values, and company confidence. This type of culture inspires and motivates employees, fostering creativity and innovation and driving long-term success.
The Check
Pay attention to what employees and leaders say at company events, such as a company barbecue. Pay attention to how they describe their company, their peers, and their leadership in social settings outside of work, such as a barbecue dinner. Only in such circumstances are people truly candid about their feelings. If, after hearing the speech, you feel compelled to join, the company has passed the BBQ or hotpot test.
Employees who are excited to bring their loved ones to the event and discuss their work reflect the company’s strong and positive culture. If, on the other hand, employees are hesitant or dissatisfied with their jobs, it may be a sign that the company’s culture needs to be improved.
Check #5: Solid investor support
“Does the company have complete investor support?” or “What story does the share price or the investors tell?”
Also Read: Why Japan’s tech leaders are eyeing Thailand as a 2023 growth market
Investor support is critical for high-growth businesses. Investors can help you achieve your goals by providing capital, expertise, and industry connections. It is critical, however, to select investors who share your values and future vision. Investors who share your mission and values are more likely to support your long-term, sustainable growth.
A long-term, depressed share price indicates that there is an underlying issue. While managing the share price should not be the primary focus of a company’s leadership, strong asset creation and investor relations should result in an appreciation among investors or, where applicable, the capital market.
Investors dislike shifting sand and changing stories, so consistency is critical. Investor confidence requires evidence that the strategy works as well as clear progress reports with well-defined metrics.
The Check
Check the share price of publicly traded companies to see why it has reacted to certain news in the way that it has. Speak to key shareholders and try to understand how they see the business for all companies, listed or not. Have they grasped the direction and value creation? Is the investor relations messaging consistent, or are we changing direction, and message, on a regular basis?
Final thoughts
In summary, the five-point health check for hyper-growth businesses is an efficient and proven tool that can help business leaders and coaches assess the quality and health of a fast-growing company quickly. By using this tool, leaders can ensure that their business is on the right track towards long-term success.
Note: “Hypergrowth” means annual revenue growth of 40 per cent or more.
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