The Most Important Number…
Suppose you look at a company that you may be interested in joining or investing in. Note that you do not know ANYTHING about the company. In fact, you don’t even know what stage they are in or even what they do! It could be a small startup or a very large multi-national. They could be selling sausages over the Internet or wood-made tennis shoes in Starbucks stores in Europe!
You are meeting with the CEO for the first time and you are allowed to ask him or her just ONE number. It could be ANY number about the business, like for example, number of Russian employees, number of patents filed, any financial or related number, etc. Anything.
Here is the question: what one number would you ask the CEO?
We conducted a brief poll last week and received over 50 replies with a wide variety of responses such as, for example “How long do you want to stay at this company?” or “What is your “profit per employee?” or “Customer NPS (net promoter score) versus competitor peer group?” Interesting answers.
Of course, there is not a single number on which you should decide to join a company or make an investment. Having said that, we believe that there is a number that is the most important number in assessing a company: it is its annual year-over-year revenue growth rate. Interestingly, 9% of respondents from our informal poll gave the answer we were looking for.
Why do we think our answer is the right one?
High revenue growth makes a company relevant. It opens up financing options. Competitors take notice. If you are the fastest growing company in your sector, you are taking market share from others, you attract talent, you can raise money and you are increasing exit value for your shareholders. It’s all about momentum. Does a company growing at 3% a year excite you? If a company consistently grows at 19% quarter-over-quarter, it doubles its revenue year-over-year. Now, that’s interesting! You don’t need to ask if they have a good management team or a good product, the number speaks for itself. In fact, you don’t need to know anything about them. There is however, an interesting follow-up question that you should be asking. Figure out what the answer is on our next blog…
Thoughts? Perspectives? We look forward to hearing from you!
Up and Right!
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