Joe Alsop founded Progress Software in 1981. The first year of sales was 1984 at a few hundred thousand dollars. This is the graph of profitable sales that followed that first year, covering 25 years until he resigned in 2009 when sales were $515m and the market capitalization around $1.2Bn.
We chatted over a coffee on Tuesday morning and I asked him to make some observations about scaling private businesses. I guessed a man who had driven a software company in Massachusetts from zero to $515m would have a few pointers for us mere mortals.
- Over the years I’ve used some simple tools like “Real, Win, Worth” in evaluating new business opportunities:
- Is the product real?
- Is the market real?
- Can the product win in this market, what’s the competitive landscape look like?
- Can the company win, can I execute?
- How much can I make, is it worth it?
- Can I achieve my other objectives, what’s in it for everyone?
And my general observation is that “Win” is the challenging one to correctly assess.
This is a huge subject so the observations above are just a few pointers. I will cover more detail in later posts. Interestingly I did a little analysis of the compound annual sales growth of Progress Software from 1984 to 2008.
- 1984 to 1991 (year Progress went public) – $300k to $58m – 112% CAGR
- 1991 to 2001 – $58m to $263m – 16.3% CAGR
- 2001 to 2008 – $263m to $515m – 10% CAGR
Remember any business growing at a CAGR of 25.9% will grow 10 times as big in 10 years.
The Key questions that emerged out of this discussion to help entrepreneurs scale their business:
- Is the market demand real? Is there an itch worth scratching?
- Can you build a product that can win?
- Are you managing the difficult transition from entrepreneurship to a professionally managed organization by establishing a solid management foundation thereby enabling scalability?
- Has your business outgrown key people and roles and what’s your solution?
- Are you waiting too long to hire?
- Are your lack of metrics and relevant systems holding back your ability to recognize profitable opportunities?
- As the founder can you recruit talent to complement your skills, can your ego take it?
- Are your efforts aligned around scaling aggressively but safely?
I’ll dive deeper into some of these issues in the next few months. I believe a lack of understanding of how to scale is holding back entrepreneurship by preventing owners from fulfilling the potential of their businesses.