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4 key focus areas for tech companies scaling for rapid growth

April 24, 2023

Authored by RSM Canada LLP

Joel A. Humphrey, CPA, CA shared this article

ARTICLE | April 24, 2023

The battle of priorities can seem constant for technology companies in the rapid growth stage of their life cycle. Knowing where to focus your team’s efforts is a critical factor in determining the future success of the business.

There are four essential areas leadership teams should focus on to foster scalability during this stage. While these aspects of the business are always critical, times of economic uncertainty underscore the importance of retaining customers, optimizing systems and processes, understanding the company’s cash burn rate, and assessing the return on investment in advertising. Here’s a review of those four areas:

1 - Customer base expansion and customer retention

There are a host of factors that technology leadership teams need to zero in on if they want to boost their ability to draw new customers to the business and keep them. It’s not just about the value of the service or product you provide; understanding customer segments, verticals and geographies is also important, as is having a detailed understanding of where your company and its products may be strong or weak in the market. In addition to acquiring new customers, improving customer retention is also paramount. Customer retention requires thoughtful planning from senior leadership down through the rest of the business.

In the early stages of growth, companies should assess how multichannel acquisitions can help them boost their customer retention, determine whether their product is easily scalable and adaptable, and be prepared to adapt their offerings accordingly if they foresee potential issues with scalability. Leadership teams need to ensure the company's direct sales force is at the appropriate level, and that its pricing model is optimized and prepared for changes in the market.

A company’s ability to keep customers happy will also depend on the ease of the renewal process. It’s essential to anticipate any pushback on price increases and understand how the business approaches upselling and cross-selling within its existing customer base. A personalized, data-driven approach—harnessing, for instance, customer health scores—can help tech startups satisfy and retain existing users while also enabling continued growth.

2 - Optimizing systems and processes

Investing in an enterprise resource planning system such as NetSuite or Intacct is a crucial step toward reducing inefficiencies across the business. Customer resource management systems such as Salesforce are also key to enabling scalability.

Having ERP and CRM systems in place benefits rapidly growing technology companies across various economic environments; in boom times such software can make onboarding and expansion seamless, and in times of austerity or turnover these technologies can help retain the integrity of systems. Many early-stage businesses have homegrown billing applications that only a handful of team members may be familiar with; that’s not sustainable for any business looking to accelerate its growth. ERP systems like NetSuite have billing and revenue management modules that can provide greater efficiency.

Ensuring that back-office functions are ready to grow alongside the rest of the company isn’t always at the top of leadership teams’ priority lists. But it’s an important point nevertheless; having accounting, IT, human resources, security, data management and other back-office systems integrated and prepared for rapid growth ahead of scaling up can help teams avoid pain points later. Consider the fact that 63% of the tech companies that have had initial public offerings since 2011 were companies that used NetSuite, according to Oracle. Having an optimized ERP system can help companies plan with confidence.

Outsourcing some of these functions to a third party can be a useful solution for leadership teams especially when companies are in the startup or rapid growth stages and may not yet have the staff to support back-office functions. 

3 - Understanding cash burn rate

In an unpredictable economic environment, rapidly growing technology companies need to have a clear understanding of their cash burn rate. This is crucial information for growth-stage investors and essential for the business to be able to plan for the immediate and near-term future. This cash burn rate information typically includes a detailed understanding of a company’s fixed vs. variable cost structure, and can help leaders determine which levers to pull to reduce spend in a cash crunch.

When companies are launching new products, they should use their burn rate as a key metric that can help guide decisions around hiring, prioritizing offerings, understanding liquidity challenges and developing targets for future milestones. 

4 - Assessing marketing ROI

Tech companies in the rapid growth stage are trying to build greater brand awareness with the goal of attracting more customers. Growing the customer pipeline and lowering the cost of customer acquisition are crucial initiatives for high-growth companies in the current macro environment. Companies need to regularly assess the return on marketing and advertising investments. It’s also important to evaluate potential referral programs and channel reseller programs, which can help boost marketing efforts without adding more in-house work.

In addition, businesses should ensure sales teams are properly equipped with advanced analytics tools to measure and understand the impact of digital marketing efforts in relation to new customers and new business.

"Many early-stage businesses have homegrown billing applications; that’s not sustainable for any business looking to accelerate its growth. ERP systems like NetSuite have billing and revenue management modules that can provide greater efficiency."

Monica Smith, Technology consulting senior director, RSM US LLP

A proactive approach is essential to all the areas above. Technology companies should not wait until a time of crisis to upgrade their systems or develop a new strategy for customer retention. Businesses that move quickly and decisively to adapt their operations in these four areas will be set up for greater success as they grow and expand.

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