I wonder if people would be kind enough to challenge and/or discuss my current thinking. I am considering future options for my business because, whilst we’ve had very good growth, some reasonable margins and some client success over the last few years, there appears to be a risk of stagnation. Reasons for this are perhaps common to small business in general. These reasons include not enough invested in a systematic sales and marketing operation, a lack of a true international presence, a small client base (10), long lead times for sales and to be honest perhaps a little reluctance on my part to fully reinvest the profits banked so far (although please note I do continue to invest a proportion of profits).
One option therefore is to dilute equity and take on an investment partner to invest significantly in the business to take us to the next level. Other options include continuing the path we are on, which would mean small growths and declines year on year.
I believe there is a compelling story that will interest some significant players in the industry we operate in. We have grown around 50% year on year for the last 4 years (£2.05m 2011 revenue) and have 22 employees, we have no debt and a relatively strong cash position on the balance sheet (£1m). We operate as a Data Warehouse provider in the Pharmaceutical industry and indeed own several large blue chip client Data Warehouses based in the UK and abroad, which we service for the clients in the Cloud. Each client we have is in the Top 500 companies of the world by revenue.
Beyond the service operation, the add-on revenue options are significant and include software applications we also own for Performance Management, Key Account Management, Sales Force Coaching and Employee Reviews as well as professional consulting services around Analytics (e.g. Sales Targeting, segmentation, field force sizing, etc.). We have sticky retention rates for our clients and continue to grow the business in each client account with typically repeatable frameworks. There is also limited competition in the niche we operate in, and we tend to have a unique positioning in the offering when we do compete.
So far, I think we have proven the business model and I believe the potential is strongly supported by the evidence. Basically by owning the means for a company to access their data and, providing a cost effective quality service operation, I believe we end up having a very close strategic partnership with the client.
However, it remains just that - potential - unless, I think, we bite the bullet and scale up, which therefore should take significant investment, right?
To explore the investment option I need to decide how this investment should be spent so that we can accelerate the growth 2-3 years out. I believe there needs to be significant investment primarily in sales, marketing with an international presence in the US, Asia Pac, Germany and Latin America. Some of the investment could also be spent on setting up a Graduate program to train intelligent grads in the repeatable technologies and processes we use so that the resource will come on stream with the growth.
So I’m really looking for people’s opinions – is this a sensible approach or would people take a different path? If so, where and how would people allocate the investment?