There is a natural cycle for businesses that flows through three broadly-defined stages of maturity: Small, Medium-sized and Large. They each have measurable attributes that reveal where your company is in its journey and help to plot a safe course to achieve your goals.
For example, YoY ARR Growth, Net Dollar Retention, and the Rule of 40, which according to the experts [1][2][3] collectively indicate a company's readiness to scale and the efficiency of its growth. We utilize this in our own framework and have done some research based on theirs and have made the following observations:
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Small Businesses: Likely to have variable YoY Revenue Growth due to their early stage, with NDR being a critical focus as they build their customer base. They may not meet the Rule of 40 as they invest heavily in growth over profitability.
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Medium Businesses: Typically see steadier YoY Revenue Growth and have a stronger focus on maintaining high NDR as they expand. They aim to balance growth and profitability, approaching or meeting the Rule of 40.
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Large Businesses: Often experience moderate YoY Revenue Growth due to their scale, with a significant emphasis on maintaining NDR to ensure customer loyalty. They are more likely to adhere to the Rule of 40, balancing efficiency and expansion efforts.
These can be helpful benchmarks when contemplating how to optimize the performance of your business. Furthermore, we believe that lessons learned and leading practices are portable across industries. And that they can be applied across industries at any stage of the life cycle to businesses at every scale to derive superior outcomes - without reinventing anything.
