Hockey stick growth is a pattern where company growth is slow until an inflection point is reached and the growth becomes exponential. The line connecting the numerous data points resembles the shape of a hockey stick, which gives the concept its name. Hockey stick growth is, therefore, a term used to describe a line chart in which there is a sudden sharp increase after a period of relative dormancy. The hockey stick growth chart commonly displays the revenue growth pattern of a start-up company. However, it can also measure bounce rate, customers, sales, or any other growth-related business metric.
- Understanding hockey stick growth
- The four stages of hockey stick growth
- How can hockey stick growth be facilitated?
- Key takeaways:
- Connected Business Frameworks
Understanding hockey stick growth
Amazon experienced a period of approximately thirteen years before there was any appreciable increase in revenue. The company reached an inflection point around 2007, with linear revenue growth becoming exponential. Global eCommerce marketplace Groupon experienced a similar increase but in a much shorter time. The company earned $100,000 revenue in 2008, $14.5 million in 2009, and $312.9 million in 2010. The following year, sales revenue increased exponentially to $1.6 billion.
The four stages of hockey stick growth
Author and entrepreneur Bobby Martin conducted a study of 172 start-ups to determine how hockey stick revenue growth could be replicated.
Martin, who analyzed companies such as Amazon, Netflix, and Google, found that revenue growth follows a typical pattern across four crucial stages:
- Tinkering – the initial stage where entrepreneurs commit to taking a new idea seriously by developing it into a viable business.
- The blade years – these are the first three or four years where the founders work long with little to show for their efforts. The blade years are characterized by limited revenue growth, but Martin also noted that some companies may not be making any revenue whatsoever.
- The growth inflection – or the point where something in the start-up achieves critical mass. The business model is refined, scalable, and there is a small yet appreciable increase in revenue growth.
- Surging growth – in the last stage, the rate of revenue growth continues to increase as the business model starts to scale.
How can hockey stick growth be facilitated?
Martin also acknowledged that stage two was the most critical for an emerging start-up, with the blade years having the ability to either make or break a company.
With that in mind, there are ways a start-up can maximize the odds of success:
- Have a plan – it is critical to create systems and processes from the start, whether that be the hiring of a project manager or the commitment to a well-defined schedule. Once the initial euphoria of a new venture starts to wane, a robust plan gives the entrepreneurs direction and helps them stay motivated.
- Commit to the vision – part of the robust plan mentioned above should be to detail a concise picture of where the company is headed. Entrepreneurs need to stick to this vision, especially when the temptation may be to pivot or shore up revenue streams.
- Create an income plan – 29% of all start-ups fail because they run out of money. Companies should determine how they intend to fund operations before embarking on the project work itself.
- Smart resource allocation – many entrepreneurs balk at a time-saving software subscription but are only too happy to take a prospective client out for lunch. Early-stage start-up companies require intelligent and frugal resource allocation.
- Create an enthusiastic team – a task easier said than done but nonetheless extremely important. This begins with identifying talented individuals and having the foresight and decisiveness to invest in their potential. Once the team is assembled, expectations should be made clear with periodic updates to ensure the work is progressing well.
- Hockey stick growth is a term used to describe a line chart in which there is a sudden sharp increase after a period of relative dormancy. The chart displays the revenue growth pattern of a start-up company but can also measure related metrics such as bounce rate, customers, and sales.
- Hockey stick growth has four stages: tinkering, the blade years, the growth inflection, and surging growth. Entrepreneur Bobby Martin discovered these common stages after analyzing 172 start-up companies.
- The odds of hockey stick growth occurring can be increased by having a plan, committing to the company vision, creating an income plan, smart resource allocation, and creating an enthusiastic and invested team.
Connected Business Frameworks
Read: BCG Matrix
Read: Balanced Scorecard
Blue Ocean Strategy
Read: Blue Ocean Strategy
Read: Pestel Analysis
Read: Scenario Planning
Comparable Analysis Framework
Business Model Canvas
Read: Business Experimentation
The speed-reversibility Matrix, by FourWeekMBA will help you understand how to allocate the resources based on the worst-case-scenario-test.
Read: Blue Ocean Strategy
Read more: BCG Matrix
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