Have you ever heard of the phrase “Valley of Death”? Erik was introduced to it in the Entrepreneurs’ Organization (EO) that provides a lot of learning opportunities that he takes advantage of because they’re very relevant to running a business and can be applied immediately.
One of them was about cash flow and how as you grow your company, your cash flow requirements change and grow. So the Valley of Death is from the book Scaling Up by Verne Harnish. It shows that as your business’s revenue increases over time, you’ll reach a certain point where the revenue will probably drop off as you go to the next big threshold.
For example, your revenue will probably climb to about $1 million then likely plateau out and then as you continue to scale up towards $10 million, it won’t go laterally to that point, it’ll probably drop below $1 million before it gets there. It plateaus out again at $10 million as you continue to grow beyond that point. The valley of death is there because what got you to that point probably won’t work to get you to the next point; you’ll need to make systematic changes in how you operate your business, changes in your policy, changes in people, possibly even changes in the industry that you’re in.
We are at $1.4 million in annual revenue right now coming out of a quarter where we lost a lot of clients and, as a result, had a lot of lessons learned and made a lot of process changes. We really had plateau’d out and potentially even went down before this period where we are on the incline. Erik believes that Array Digital hit the bottom of the Valley of Death between $1 million and $10 million. In order to get to $100 million, your business will have to go through these plateaus where things feel stagnant. It just means you have to pivot, make some changes, and keep learning in order to continue growing.