Many successful early stage companies focus all of their time and effort on product adoption and monetization. Ultimately, it is the right thing to do. After all, if you don’t have a minimally viable product or platform, you really don’t have much of a business.
Once you have product traction, having the right foundation in place can differentiate you from your competition, as does your ability to execute. As a company matures, there is an innate need to build out a platform to support growth and create a framework for success. Many companies view this as a dreaded, but necessary investment in overhead and/or G&A. We had a similar view here at Kurtosys but, if done correctly, the right investments can fundamentally change the trajectory of a business.
Upward progress and looking ahead
At Kurtosys, we have scaled our business by 80 – 90% per year since 2012. We have created a great platform that solves significant business problems, and we have successfully monetized our platform. Our challenge was that we didn’t have a great deal of financial insight into the key drivers of the business. Realizing this gap, the company embarked upon its journey to hire its first CFO, and as a result, I joined in September 2014.
I believe that truly great organizations are built around not only financial reporting against meaningful financial metrics, but by taking those metrics and insights to implement operational changes. In order to move down this path, the first step for Kurtosys was to develop meaningful financial reports that the management team and employees could use to manage the business. The finance team began by developing and distributing reports that identified performance by operating unit and that provided visibility into profitability by product, by project and by customer.
Once we created these reports, we distributed them to all of our employees on a monthly basis, thereby creating an atmosphere of transparency that had not previously existed. These actions fundamentally changed the way that we operate as a business. We have created accountability within our management team, and we have given our employees the power to make changes. With real financial metrics, we could identify many of the ways that we needed to improve the business. We developed a plan, prioritized tasks and pushed forward.
Some of the changes we made to the business were easy to make — they ranged from consolidating server capacity to fundamental changes within our account management strategy. Some of the changes were really hard, took courage, time and the patience of our loyal clients. We worked through it together as a team and, as a result, we expanded our recurring gross margin % by 2,500 basis points in nine months.
A little investment in G&A can go a long way! Now we are working on a plan to continue to expand our margins, reinvest in the business and, of course, provide the best possible service to our clients.