The SaaS industry has increased in size by around 500% over the past seven years and is thought to be the most important tech in business success. In the UK alone, there are currently over 2,000 SaaS companies with a combined revenue of $26.6 billion, and 158,000+ employees. That’s incredible.
So, in such a competitive and fast growing space, what can SaaS companies do to build a strategy for hypergrowth?
You may find it interesting to know that the term “hypergrowth” first appeared in the April 2008 issue of the Harvard Business Review, which defined it as “the steep part of the S-curve that most young markets and industries experience at some point, where the winners get sorted from the losers.”
But building a strategy for business hypergrowth is somewhat different to the traditional growth model. Let’s take a look:
TRADITIONAL PROCESSES FOR BUSINESS GROWTH
The traditional business growth cycle can be divided in to 5 key stages:
Already being in existence assumes that the business has already thoroughly researched their market, product placement, audience, USPs and developed a GTM (go-to-market) strategy. In this stage the main problems of the business are obtaining customers and delivering their product or service.
The goal? To remain active in the market.
Businesses at this stage are yet to stabilise either production or product quality; and, sadly, many never become viable.
A good customer base that is sufficiently satisfied places businesses in the survival stage. The key concerns during this phase are balancing the relationship between revenue and expenditure.
Many businesses spend their lifetime at this stage, unable to grow in size, earning marginal ROI and eventually disappearing from the marketplace.
At this stage, business owners will choose expansion vs stability/profitability.
It’s likely that, by now, the owner has gone through the phase of hiring people to help run the business; giving them more flexibility to step away. Many companies spend their lifetime in this phase, while others consolidate resources for growth, take more risks and invest more time.
The question at this stage is how to grow quickly. Business owners will often delegate responsibility and will need to keep an eye on cashflow, investments and speed of growth in order to succeed.
5. Resource Maturity
This stage is all about balance. Ensuring the business has enough tools and staff, in order to cope with growth and change in demand, is essential.
BUILDING A HYPERGROWTH STRATEGY
Traditional growth usually has a CAGR of up to 10%; whereas businesses that experience hypergrowth maintain a 40%+ average annual growth rate for more than one year. Businesses looking to achieve this level of growth need to consider the following as a part of their business strategy and growth plans:
Markets and Clients
Market research is a huge portion of any new product or service, and SaaS is no exception. Thoroughly researching your product/market fit will determine most of your success.
Some products and services just aren’t scalable. Consider this when developing your product.
A solid foundation for growth needs operational efficiency, which means finding more efficient and optimised workflows for your back office functions.
This is a crucial element of any successful business plan. Because hypergrowth is a form of extremely rapid growth, the risks can change just as rapidly. It’s important to try and identify and assess the likelihood of potential risks, as well as the impact they could have and how you’ll treat them.
For a business looking to achieve hypergrowth, hiring should be your number one priority. And remember that to some team members, hypergrowth will be the most rewarding journey of their lives. To others, it will be totally overwhelming. Ensure you create a culture that caters to both where possible.
Finance will likely fall under one of your areas for risk when producing your strategy for hypergrowth. Consider the need for proper financial processes and accounting functions. When hypergrowth kicks in, companies need capital to ensure they can afford the build-up in working capital, equipment, hiring and capacity expansion.
The technology you use as a business will impact the scalability, operations and risk factors. Investing in technology that can scale with your business is really a significant hurdle for any company.
The ability to adapt to internal and external challenges is especially important during a hypergrowth phase. Everything moves much quicker, so it’s important that the business is agile enough to navigate through at the same speed.
Being customer focussed is essential to the success of any business. Zoom, Zapier, Stripe and many other brands that have experienced hypergrowth have one thing in common: they are customer driven.
They achieved hypergrowth by listening to the needs and concerns of their customers, optimising processes for their happiness, their success, and adapting to their changing preferences.
THE CHALLENGES BUSINESSES CURRENTLY FACE
As of 2022, globally, the SaaS industry is worth over $170 billion. In such a fast-growing, competitive industry, business owners are facing a number of different challenges.
The story of Monzo in the financial sector is one that has left the high-street banks feeling threatened. Launched in 2016, the business grew its customer base by 75% within 2 years alone, signing up 20,000 new users per week. In terms of market share, at least 15% of new current accounts are opened through Monzo and its users spend around £4 billion through its cards. That’s hypergrowth.
And although there are sector specific challenges, a broad overview of the difficulties businesses are facing right now looks more like this:
- Talent shortages across most industries, which affects a company’s ability to scale
- Increasing cost of living which, in turn, is accelerating the costs of suppliers, production, logistics, salaries etc…
- The ability to raise capital that will allow for growth
- The potential of recessions which may impact a business’s survival
Of course, most of these challenges are manageable with a good, solid business strategy for hypergrowth.
Here at Strive, we source top tier sales talent for hyper-growth tech companies. To learn more about how we can help your business scale, contact our team on 0203 983 0770 or email firstname.lastname@example.org.