The secrets to handling rapid revenue growth

Organizations with exploding revenue growth have what many might see as a “champagne problem,” as Holly Grey, CFO of penetration testing company Horizon3.ai, described it.

Anyone popping a bottle of bubbly—which is under tremendous pressure, mind you—is aware of what can happen if they botch it. CFOs whose companies are experiencing hyper growth must balance that growth with the appropriate organizational support, experts told CFO Brew.

Grey, who joined the company last year, described Horizon3’s revenues as “going up and off to the right.” She’s helping Horizon3 leaders continue the balancing act that began before her arrival. “You have to prioritize a little bit,” Grey said, describing the balance between revenue growth and organizational discipline.

What are some of the components that Horizon3 balances? There’s product and the go-to-market strategy. But then there’s the support framework.

“You’ve got to make sure that you’re appropriately staffing the support organizations to make sure you’re able to process all those transactions,” Grey said. “And then also in the middle is making sure you’ve got the right customer support mechanisms in place to make sure you keep euphoric customers, because happy customers are renewing customers.”

Potential pitfalls. A revenue increase shows “an organization’s success in meeting the challenges posed by its environment,” according to an article published in the American Journal of Theoretical and Applied Business back in 2018. At the same time, according to the authors, “growth also signals a need for new strategies appropriate to the often very different creature the organization has become.”

Some common “organizational growing pains,” according to the authors, include growth in sales but not profitability, not enough “good” managers, a lack of follow-up when plans are made, and the all-too-familiar issue of so much to do and so little time to do it.

Take Tesla’s 2018 developmental hurdle as an example, when demand for its Model 3 hit overdrive. The company enjoyed record profits but also navigated what CEO Elon Musk called “production hell” as it struggled to match the demand.

The AI arms race presents another big growth challenge for companies all along the digital infrastructure supply chain.

RapidRatings, a financial health data and analytics company, recently analyzed roughly 5,000 companies in the complex network developing AI data centers—ranging from software developers to electric-power distributors, according to James Gellert, RapidRatings’ executive chair. The firm ran a stress-test scenario assuming a 50% revenue increase, and found the number of companies it considered financially “high risk” increased 18% for public and 56% for private firms.

A big boost in revenue “flows down into the other elements of the business that [organizations] are then going to need to invest in, many of which the revenue won’'t fully take care of,” Gellert told us. For example, companies will need to invest in equipment and materials ahead of time “in order to win that revenue…Often that will mean an increase in a cash need. So they often are going to have to borrow,” he said.

The robots are here to help. Grey said Horizon3’s finance team is involved in efforts “across the board” to “leverage technology to help with supporting that incredible scale that we’re experiencing.” The technology is meant to automate more basic finance tasks, so that Grey’s team has more time to focus on the challenges associated with Horizon3’s growth.

For instance, the company introduced technology to handle customer invoices. Grey said that when she joined, one person was handling that work, capping the maximum number of transactions the company could process in a given time period. Now, finance folks have more time to “to attack those bigger projects that everybody had on their radar screen, but just zero bandwidth to address that,” such as reviewing current processes and ensuring there’s proper security protocols around the data those processes rely on.

“That audit and analysis [work] really has to be done by a staff member, and very quickly spirals into cross-functional discussions,” Grey said. Technology is “creating the bandwidth, because that’s all the people needed.”

Grey’s philosophy has been to put the technology infrastructure in place to support growth beyond what the company expects, because it often takes a year to implement. Understanding this, she challenged her colleagues to “think much bigger, because we’re going to be there before we know it.”

“I said to the team, ‘This is where we build the infrastructure that’s going to support us for 5x the growth we are today,’” she said.