An uncompromising focus on growth can take companies in the wrong direction. Take office-sharing company WeWork. Once valued in 2019 at $47 billion it filed for Chapter 11 bankruptcy on Monday. Once lauded as the "fastest-growing company ever," it has since lost about 98% of its value after going public in 2021. The key is to find quality, sustainable revenue. Here's what that looks like:
1. It's predictable. It's always easier to forecast if you can be confident that 90% of last year's customers and dollars will be back this year. The money should come from returning clients willing to spend the same amount.
2. It's profitable. A benchmark for a good margin varies by sectors, but quality revenue tends to be higher-margin. Aim for gross margins of at least 70%.
3. It's diverse. While early-stage companies may often have a couple of customers that make up a large portion of revenue, over time you want to build a diverse base. None of your top five clients should make up more than 15% of revenue.
The above leadership tip...
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