How do you know if a job is worthy of your time and hard work? How will you know if another opportunity might have yielded a better return? How do you know whether you are being set up to be the proverbial canary in a coal mine by your new employer? They may be sending you into the mine to see if you live. They may be doing this to help themselves determine if they will live. It happens all the time in smaller companies. Many have been in business for awhile with some success but stalled for some reason. These firms may have tens of millions of dollars in revenue and some EBITDA. They provide jobs for employees and value for customers.
If the company has been around for five, ten years or more and has stalled, watch out. How many years a company has been in business is important. There are any number of firms that have been around for a dozen years who call themselves start-ups.
Ah, sorry. No way.
A start-up is a lab in search of a scalable business. If the company is pivoting to new markets or developing new products, it may still be new. But if the company is serving the same market with the same products and services, it isn’t a start-up.
There are many of these businesses out there; many are VC-backed. It is often because the investors have become married to their initial investment. They often are well beyond the life of the funds’ goal.
Time in business and the amount of revenue are key indicators. They speak to the health and future success of the firm. If a company is running at $20 million in sales and 20 years in business and calls itself a start-up, that’s bad. Be careful if you find yourself considering a job at a company like this. It’s ok if the company is moving its products to a new market. But I’d prefer it if the company had developed something new for the same market or a new market. If you start to hear that there is a need for new marketing and sales talent, look out. First, check the profiles of former employees on LinkedIn. How many came and went? Were they successful at other places they have worked? These are critical questions whose answers might prevent you from committing career suicide. At least you will avoid a situation where you would have little chance of being successful.
These companies have product problems. They have likely run out of market to sell to. They have taken their share of the addressable market. Or they may have poor products and services that don’t sell. It’s easier for the CEO, particularly if he or she is the founder, to blame it on the sales folks. They fire them, and the company goes and hires new talent. It happens all the time in sales. There are some important questions you can ask that can help you avoid a career mistake.
Look at the chart below. Imagine the rectangle is the market that the company’s products and services play in. It might be a $10s of millions market, a $100s of millions market, a billion, or more. Whatever it is, inside of the market I have put an S-curve. The S-curve is an environment where, early on, growth is slow. Over time growth increases rapidly before leveling off. The question you need to ask is this:
Where is the company on the S-curve?
You want to be on the bottom of the curve. If you are beyond the middle of the curve, you won’t be there for exponential growth. I was there for the ride while a member of the management team at Albridge Solutions. The first couple of years were tough sledding, and we almost didn’t make it. We had a $100 million market and no competitors. We experienced the growth part of the curve over the next five years. After some analysis we realized we were approaching the top of the curve. It is here where the nominal growth rate will kick in. The rate is usually in the single digits. You can make a living here, but it is not fun. We decided to sell Albridge to a strategic buyer for more than $300 million and move on.
Once you know the size of the market and where the company is on the S-curve, you need to ask the next two questions.
How long has the company been selling its existing products and services? What is the company’s revenue?
I would argue that five years or more selling legacy products will start to tell a story. The founders may say they are at the bottom of the S-curve in a big market. Be careful here. In short, they may have sized the market wrong. Or they may have inferior products. Or both. If a company has been around for a long time selling “older” products with weak revenue growth, think twice. You will have limited upside hanging your hat there.
When assessing a new opportunity, always research the market size and where the company is on the S-curve. Combining this with revenue and years in business is a powerful way to assess a business.
My best, Chris
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