Scaling your business with a sustainable growth framework
You need to walk before you can run. And to run faster and further, you’re going to have to invest time and energy into getting you to your goals.
I spoke to an entrepreneur who sticks by building his business the same way you would train for a marathon. Running 10km is your first hurdle. Once you have that, then you slowly increase a few kilometres the next week, then drop down, then add more. This two up, one down ladder is the perspective Jon Morris brings to business. But instead of weeks it’s years, and instead of kilometres, it’s dollars.
By incrementally investing every year, the company got a bit bigger and a bit bigger and a bit bigger until he grew it from a humble $12,000 in sales in the first year to $24M when he eventually exited.
Learn how he’s taken that perspective and turned it into an applicable growth framework to help business owners scale their companies.
What would you say was the biggest thing that drove you to start a business?
It's funny because I came from a long line of entrepreneurs. Everyone in my family has their own business—my mom, dad, grandpa, and grandma; you name it. Since then, I've always wanted to have my own business, too: I've loved the idea of taking something small and turning it into something big. That's why when I graduated from college in 1996, I started to create a computer company, even though I knew nothing about computers. I started building websites (mind you, the ugliest ones), and I got asked a lot—okay, so you're building our website. How would people find it?
Just with that, my journey in the digital marketing industry began.
It wasn't supposed to be an agency. That wasn't the plan. When my friend and I joined an annual business competition in Chicago during my internship, the original plan was far from starting an agency that would teach small businesses about the ins and outs of digital marketing. But as the seminars went on, I was tapped on the shoulder by the companies that we were teaching: Instead of teaching us this stuff, why don't you just manage this for us?
It dawned on me that there was more demand for me doing it than us teaching it, I had to give it a go.
That ten grand that we won in the competition? We used it to start Rise Interactive. With a whopping $12,000 in sales in my first year, it was totally as bootstrapped as you could possibly imagine.
OK, now you’re a start-up...What’s your secret to unlock the ability to scale your business and finally, transition to growth?
First, answer this question: What type of CEO are you? Are you Start up, Growth, Mature, or Mega CEO? If you still don't know which one suits your style, you have to understand which type you are to know how you will direct your business.
Basically, Start up CEOs are the know-it-all and most involved—accounting, cooking, delivery, sales, you name it. I used to be one, where I was the pulse of everything in the business.
However, when an employee came to me and said, "you have to let me make my own decisions", I realised that I had to be a different type of CEO. From deciding whom to hire, whom to promote, and whom to fire, I just had to make a shift to transition our business from the start up to growth—to recognise the fact that I can't be involved in everything. That's why I built a leadership team, whom I empower to make those decisions. Your role in your business doesn't mean to take and do everything; your job is to steer the ship. Trust your people. Train them. Mentor them. Help them. One rule to scale your business? Evolve as a CEO—not only will your business thank you for it, but your people will too.
In the midst of growth, Rise Interactive was unstoppable. When I was in the business for only a year, my clients in the first 11 months grew 95% on average, their gross margin improved 20%, and their profits grew 125% on average. To add, we grew from 97,000 to 850,000 from 2020 to 2021.
Evolve as a CEO —not only will your business thank you for it, but your people will too.
You’ve been growing your business, employees were starting to add up. When did you think that it was time to entertain the thought of selling your business, and your exit strategy?
My exit strategy was simple—I was going to die one day. [laughter]
Kidding aside, I got to the point where I wanted to invest in sales, marketing, and technology. Since 98% of all agency transactions fall within around 5x to 15x EBITDA, and an industry benchmark is that EBITDA should be 20% of revenue, I figured I had to focus on between 0 and 5% to invest back into business. With me investing this in the business, it wouldn’t only maximise its value, but it would also fuel growth. Taking a minority investment from the largest printer in the United States, Quad, I knew this strategic investment would hit two birds with one stone for us: To add some capital and open the door to opportunities for investing in technology.
I knew the partners that I liked, and I wanted to be with—the ones that were going to take care of this baby that I was growing. Quad met the criteria. There were a lot of opinions in the M&A market at that time, but I decided to sell the majority of ownership of Rise Interactive in 2018 to Quad without an advisory firm.
Upfront plus earnout: That was my exit structure. When I sold the majority of Rise's ownership in 2018, there was more earnout to be if I only stayed longer, but I knew it was time to leave.
I always referred to the first business day of the year as 'game day', I always felt excitement on the game day.
But that year, 2020, I just wasn't excited.
It felt like it wasn't new, nothing special. That's when I knew I wanted to take a different ship and leave—I wanted to move on and do something different.
What’s your best piece of advice for entrepreneurs?
I've always believed in the saying, "It can't be a goal unless you put a budget against it". Do you want to grow? Learn about gross margin and make it as high as possible—and invest in sales and marketing. Actually, just invest as much as you possibly can. If it doesn’t work, don't give up on it. Ask yourself, what worked? What didn't work? Keep on trying. Get smarter as you invest. With those two things, it's possible to scale.
Lastly, focus on building something special. If you take care of your customers, build a robust financial management system in place, and establish a good sales and marketing infrastructure in your business, it's enough. Focus on that journey—focus on maximising the value of your business. If you do so, the number of people calling you to buy your business will naturally happen—and you won't have to worry about it.
This article is based on an episode of Buy Grow Sell by Exit Advisory Group — the Australian podcast on acquiring, growing & exiting a business where you'll hear stories of business owners. The show is hosted by Simon Bedard, CEO of Exit Advisory Group. Subscribe via Apple, Spotify, or wherever you listen to podcasts to hear discussions with business owners about all aspects of buying, growing, and selling a business.