The CEO of this services firm with $17M Annual Revenue brings in new management with a mandate to grow the company while he slows down to prepare for retirement. Four years later new management has achieved Annual Revenue of $54M with an opportunity pipeline forecast of at least 25% growth for the next three years. The CEO steps back into hands-on management and forces resignation of the new management so that he can “get control.” Five years later, Annual Revenue is down to $19M and forecast to fall further.
After Company Two developed a unique service, it obtained a small contract as a subcontractor to a major prime. Government customers liked the unique service and demanded more – eventually leading to a 5-year IDIQ subcontract to the Prime. Company Two’s Annual Revenue climbs to $10M and stays there for 5 years. Meanwhile, leadership drops all significant business development activities to focus on providing its unique service. In a re-compete for the prime contract, Company Two’s Prime loses and the new Prime does not subcontract to Company Two. In desperation, Company Two retains outside help to prepare proposals for new contracts. Despite winning 5 of 7 proposals submitted, none of the new contracts has the financial strength to produce even 20% of the Annual Revenue of the prior five years. Company Two shuts down operations.
With aggressive leadership, Company Three grew a contract portfolio from $0 to over $1B in four years. Seeking a mature and comfortable business position, the owners changed leadership and the new leaders pause business development efforts to consolidate operations. Annual Revenue falls every year over the next 10 to well under $30M.
The owners had rebuilt a small firm with historical roots into a reliable business with a core clientele. Seeking to increase top-line revenue, they invested in a new business development program and doubled revenue within 3 years by adding new clients and winning a major Prime contract. Recognizing their limitations, the owners brought in new leadership skilled in operations and long-range planning and then stepped into the background. Revenue continued to grow and tripled by the end of the fourth year with positive long-term projection.
These four stories are true, the facts cited are what actually happened and the amounts are accurate.
In the first three cases, the firms stopped aggressively pursuing new business to focus on the near term. All three companies grew revenue under forward-looking leadership and yet after this success, the owners reverted to unproductive approaches and chose a path to failure. In retrospect, a continuation of their highly successful business development initiatives would have enabled these three firms to survive and possibly become major market leaders.
In the fourth case, the owners recognized their limitations to achieve long-term growth, followed their new leadership’s growth plan, and focused on business development.
The Lesson: One of the greatest risks a company can take is pausing or stopping a successful business development program.
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