Principle 4: Growth Cliffs
TLDR:
Growth breaks into two buckets: growing demand (new customers, products, markets, revenue streams, which sits on the top half of your P&L) and growing your ability to supply that demand (efficiency, cost, margin, time, which sits on the bottom half).
Businesses hit "growth cliffs" at roughly the same points regardless of industry, because the way you run a $2m business doesn't work the same way at $20m or $50m, and the structure that got you here stops being the most efficient way to get to what's next.
Growth cliffs aren't a sign something has gone wrong. They're a sign you've outgrown the structure that got you this far.
A quick warning sign: if you hear or say "we've always done it that way," there's a good chance your business has hit, or is approaching, a growth cliff.
Growth comes in many forms revenue, volume, profit, margin growth, market share, acquisitions. New markets, new products. Even personal growth or goals that allow you to grow the time away from the business, more holidays, earlier home times and 4-day work weeks all allow you to grow away from the business without costing the company anything.
Growth is the place you want your business to go.
Before we make it all too complex, which growth can easily get, let’s simplify growth for the purpose of trying to teach you this in less than 5 minutes.
Let’s break growth into two main buckets
The two ways you can grow your business are by:
Growing the demand for your business (new customers, new products, new revenue streams, new markets) which typically impacts the top half of your P&L or
Growing your ability to supply that demand (operational efficiencies, cost improvements, margin growth, time efficiencies for you or your staff) and these typically impact the bottom half of your P&L.
It is hard to grow both simultaneously. And definitely tricky if you don’t attack your business growth with strategic foresight.
That is why in our experience helping over 200 businesses to grow, over 17 in our wider portfolio, we have noticed a trend. Growth hits these cliffs.
If you focus on growing your demand, you will grow quite well, until you don’t. Sounds super weird. But what ends up happening is how you supply that growth - the way you resource the now growtin activities needed to be done - becomes more and more inefficient without evolving how you supply that growth. This turns up as revenue growth getting harder to maintain or the revenue grows but the margin slips and the stress increases.
The easiest way to describe it is obvious. How you run a business trading at $2m in annualised revenue will be different to a business trading at $50m.
Every business in every industry hits them. What astounded us is that the cliff points seem to be universally at roughly the same points, regardless of industry and for roughly the same reasons. The business that got you from zero to your first million doesn't run itself the same way at five million, twenty million, or fifty million.
How to navigate these cliffs are explained better in the next Principle: Resource Targeting, but the a quick rule of thumb is when you hear or say: “we’ve always done it that way” there is a solid chance your business is not growing in a way that feels effortless or easy.
Growth doesn’t happen in a straignt line
Growth happens in stages, and at the end of every stage there's a cliff edge. The common cliffs we’ve noticed are;
1-2M
8-10M
20-24M
50-60M
The structure, the systems, the way decisions get made, all of it works, right up until it doesn't - as the saying goes
“What got you here won't get you there.”
Growth Cliffs aren't a sign you've done something wrong. They're a sign you've been doing something right. It is just saying the structure that got you here isn't the most efficient for what's next.
Want to learn more about how you can grow your business? Get in touch about Business Growth School and see how we can help you grow your business, smarter.
Frequently Asked Questions
Why does my business keep hitting a wall every time it starts growing well?
That's usually a growth cliff, not a growth problem. It happens when the way you supply your growth (your systems, structure, and resourcing) hasn't evolved at the same pace as your demand. Revenue keeps climbing for a while, then either stalls, or grows while margin quietly slips and stress goes up.
At what size does a business typically hit these growth cliffs?
The exact number varies, but the pattern doesn't. Cliffs tend to show up at roughly the same points across industries, because the way you need to run a business at $2m in revenue is genuinely different to how you need to run it at $20m or $50m. What worked to get you to your first million usually stops working well before your fifth.
How do I know if my business has hit a growth cliff?
Listen for the phrase "we've always done it that way." If that's coming up in your business, especially as a reason not to change something, it's a strong signal that the structure which got you here is no longer the most efficient way to get to what's next.
Does hitting a growth cliff mean I've made a mistake?
No, the opposite. A growth cliff is a sign you've grown successfully enough to outgrow your current structure. It's a normal, expected part of scaling, not a failure. The fix is evolving how you supply your growth, not undoing the growth itself.