The End of Growth At Any Cost (GAAC): Embracing Profitable and Capital-Efficient Growth Strategies

Growth at Any Cost is done! The era of pri­or­i­tiz­ing rapid expan­sion over prof­itabil­i­ty has come to an end. It is sim­ply not work­ing any­more. Instead, com­pa­nies should con­sid­er look­ing at PEG and CEG to ensure sus­tained growth.

The End of GAAC

The GAAC mod­el, which empha­sizes rapid growth and mar­ket share cap­ture at the expense of prof­itabil­i­ty, has been a pop­u­lar strat­e­gy for many star­tups and tech com­pa­nies. How­ev­er, the chang­ing eco­nom­ic envi­ron­ment, includ­ing ris­ing inter­est rates and increased scruti­ny from investors, has made this approach less viable. Com­pa­nies now real­ize that sus­tain­able growth requires a more bal­anced approach, pri­or­i­tiz­ing effi­cien­cy and sus­tain­able growth.

The new kids on the block are PEG and CEG. You may have heard about them or may ask your­self

• Who are they?
• What is the dif­fer­ence between both of them?
• Which one will work best for my business?

PEG stands for Prof­itable Effi­cient Growth and refers to a com­pa­ny’s abil­i­ty to main­tain or improve prof­itabil­i­ty while grow­ing its cus­tomer base and rev­enue. The goal is to bal­ance growth and prof­itabil­i­ty to cre­ate a sus­tain­able, cash-flow-pos­i­tive business.

CEG stands for Cap­i­tal Effi­cient Growth, and it focus­es on achiev­ing sig­nif­i­cant growth while min­i­miz­ing the amount of out­side cap­i­tal required. Cap­i­tal-effi­cient SaaS com­pa­nies have a low cost of acquir­ing cus­tomers (CAC) com­pared to the life­time val­ue (LTV) of those customers.

Choosing the Right Approach

Whether you pick PEG or CEG depends on var­i­ous fac­tors, includ­ing the stage of your busi­ness, indus­try dynam­ics, and access to cap­i­tal. Where are you stand­ing today in your growth journey?

Start-ups and Scale-Ups gen­er­al­ly ben­e­fit from a CEG approach, as it allows them to val­i­date their busi­ness mod­el and achieve key mile­stones with­out rely­ing heav­i­ly on exter­nal fund­ing. More estab­lished com­pa­nies with proven busi­ness mod­els may opt for PEG to scale their oper­a­tions while main­tain­ing profitability.

Capital Efficient Growth in SaaS

For ear­ly to mid-stage SaaS com­pa­nies, par­tic­u­lar­ly those in the process of cap­tur­ing mar­ket share and refin­ing their prod­uct offer­ings, cap­i­tal-effi­cient growth is the way to go. This is because:

• Ear­ly-stage Fund­ing: SaaS star­tups fre­quent­ly rely on ven­ture cap­i­tal or angel investors for growth. Demon­strat­ing cap­i­tal effi­cien­cy can make a com­pa­ny more attrac­tive to these investors by demon­strat­ing that it can achieve sig­nif­i­cant growth mile­stones with­out exces­sive spending.
• Long-term Sus­tain­abil­i­ty: Focus­ing on cap­i­tal effi­cien­cy helps ensure that the com­pa­ny does not overex­tend its finan­cial resources before achiev­ing a sta­ble rev­enue stream.
• Mar­ket Adapt­abil­i­ty: Cap­i­tal effi­cien­cy allows SaaS com­pa­nies to remain agile, adapt­ing their strate­gies based on mar­ket feed­back with­out the bur­den of heavy finan­cial commitments.

Profitable Efficient Growth in SaaS

As SaaS com­pa­nies mature and their recur­ring rev­enue streams become more pre­dictable and sta­ble, the empha­sis often shifts towards prof­itable growth. This is cru­cial for sev­er­al reasons:

• Sus­tain­abil­i­ty and Inde­pen­dence: Prof­itabil­i­ty is a key indi­ca­tor of a com­pa­ny’s long-term via­bil­i­ty. Achiev­ing prof­itable growth can reduce depen­dence on exter­nal fund­ing and pro­vide more con­trol over the com­pa­ny’s direction.
• Mar­ket Val­u­a­tion: For mature SaaS com­pa­nies, espe­cial­ly those con­sid­er­ing an IPO or acqui­si­tion, prof­itabil­i­ty is a key met­ric that poten­tial investors and buy­ers evaluate.
• Cus­tomer Life­time Val­ue (CLV): SaaS com­pa­nies focus­ing on prof­itable growth tend to invest in retain­ing high-val­ue cus­tomers, increas­ing CLV and over­all com­pa­ny profitability.

How to move on from here?

Find­ing the right part­ners could be the best growth strat­e­gy for your busi­ness right now.

Work­ing with part­ners can be cru­cial in achiev­ing your growth objec­tives, regard­less of your cho­sen approach. Part­ner­ships can pro­vide access to new mar­kets, tech­nolo­gies, and exper­tise, help­ing you opti­mize your oper­a­tions and achieve your growth tar­gets more efficiently.

Part­ner­ships is not an iso­lat­ed depart­ment or sub-depart­ment of sales. It’s a part of your busi­ness that dri­ves an entire Go-to-Mar­ket strat­e­gy and inter­acts with many depart­ments beyond your rev­enue organization.

How­ev­er, like the Prod­uct depart­ment and well-writ­ten code, cor­rect­ly exe­cut­ed part­ner­ships sig­nif­i­cant­ly impact your Bowtie fun­nel & stages.

🔗 Dif­fer­ent part­ner cat­e­gories impact dif­fer­ent stages. Overview of Part­ner Cat­e­gories & Part­ner Types by PartnerStandard.

💡 If you want to gain pro­found knowl­edge about Rev­enue Archi­tec­ture and the Bowtie fun­nel, I rec­om­mend look­ing at the course Rev­enue Archi­tec­ture by WbD.

Work with different Partners to achieve your growth goals.

Partnerships can help you

• Expand your reach and attract more poten­tial clients
• Edu­cate prospects and demon­strate the val­ue of your solutions
• Dif­fer­en­ti­ate your offer­ings and make them more compelling
• Stream­line onboard­ing and ensure suc­cess­ful implementation
• Deliv­er ongo­ing sup­port and suc­cess ser­vices to max­i­mize client impact
• Iden­ti­fy growth oppor­tu­ni­ties and dri­ve long-term client success

Conclusion

The era of Growth at Any Cost (GAAC) is over. Instead, com­pa­nies should focus on Prof­itable Effi­cient Growth (PEG) or Cap­i­tal Effi­cient Growth (CEG), depend­ing on their stage and goals.

A well-exe­cut­ed part­ner­ship strat­e­gy that inte­grates dif­fer­ent part­ner types across the bowtie fun­nel stages will help you achieve prof­itable and cap­i­tal-effi­cient growth by expand­ing your reach, enhanc­ing the cus­tomer expe­ri­ence, and dri­ving bet­ter results at every stage you need.

Embrace PEG and CEG, and build a strong part­ner ecosys­tem to achieve sus­tain­able growth in today’s com­pet­i­tive landscape.