In the current economic climate, the journey from growth to profitability is a hot topic. But how does a company achieve sustainable growth whilst transitioning into a profitable business? We brought together a panel of Engineering Leaders to discuss the core considerations...
#1: Changing mindsets & embracing transparency
When a company switches their strategy from growth to profitability, they also need to shift the ‘start-up building’ mentality to one of ‘prioritisation and efficiency’. Whilst many start-ups enjoy the luxury of scaling out, a business aiming for profitability needs to cut costs, understand changing market conditions and plan for their next funding round.
Building a more transparent culture is also key to this as people across the whole company should feel some level of financial responsibility. Whether this is being more candid about company stats or helping teams understand the 'real' cost of resources (AWS for instance), feeling ownership for expenses makes it easier for employees to understand how every decision can impact the bottom line of the business. This frugal mindset will have a positive impact on a company’s profitability as teams can start to realise that some resources (that incur massive expenses) may need to be re-evaluated.
#2: Is hypergrowth the correct strategy?
The term ‘hypergrowth’ can now have negative connotations when it refers to ‘growth for the sake of growth’ rather than having clear strategies to sustain growth & business profitability. It's important to understand the difference between a deliberate strategy of hypergrowth vs. economic profitability.
For example, scaling: if your focus is on profitability (and peak efficiency) then it is only at the ‘falling behind stage’ that you should be thinking about recruiting more people into the team. Whilst the common theme of ‘hypergrowth’ is hire, hire, hire… from a proficiency standpoint, it makes more sense to get the most out of your current team before scaling out. This idea of ‘bums on seats’ is a lot less efficient than having a few, high-quality engineers; a strategy of frugality over bloat which maintains a healthy business.
#3: Why technical debt isn't always a bad thing
Tech debt is often seen as a bad thing or a large cost to a business, however, this is not always the case. Whilst it’s important to strike a balance, when your focus is on profitability, business prioritisation decisions need to be made at every level. A common theme today is companies transitioning from a monolithic architecture to microservices far too early on, which often leads to far more problems than solutions.
Whilst Engineers may be eager to work with microservices, the cost this can incur can be huge especially if you don’t have the right talent in your team. If you’re at early stages and your monolith is working efficiently, why would you spend money to migrate it? Whilst a growing business can’t be on a monolith forever, you need to time it right and understand when the inflection point will arrive. But, in the meantime, sometimes letting poor code be poor code is not a bad thing.
#4: Boosting collaboration between Product & Engineering teams
Understanding business prioritisation decisions as an Engineer can go far in levelling the playing field between Product and Engineering teams – one of the most crucial relationships for effective decision-making.
Promoting collaboration, facilitating joint conversations, and bridging the gap between these two teams can enhance understanding and encourage better outcomes. However, you need to both ensure that Product understand the importance of Engineering in business metrics and also allow Engineering teams to gain insights into business goals. Too often, Product and Engineering are excluded from each other, when in fact being able to understand each other's challenges and pain points helps to reinforce alignment and make sure that everyone is working towards a single roadmap.
#5: Why planning for the future is so important to reach profitability
As a company heads towards profitability, strategic planning and understanding how your organisation will grow becomes crucial to ensure success. Rather than creating a structure that works for now, it's vital to set up for what your organisation will look like in a year's time, otherwise the things that make you successful now may suffocate you when you reach success. Whether this is designing a strong growth framework, considering which team members will transition into management roles or making sure you have aligning VP level positions in Engineering and Product. Hard decisions will have to be made - who will be a strong IC vs who will benefit others most? Which products will you have to invest in vs which ones may you need to turn off? Making these hard decisions is key to success when you reach the inflection point.
Whilst there is much to consider when you shift your goal from growth to profitability – these things don’t have to be mutually exclusive and you can sustain growth and become profitable. This journey, however, requires a strong combination of strategic thinking, transparency, and effective collaboration. By embracing these considerations, you can navigate the changing economic landscape and be prepared when the ‘turnaround’ happens, otherwise you may not survive your own success.
A huge thank you to Patricia Haynes for mediating the roundtable and to Engineering Leaders Nana Fifield, Aaron McTavish, Jodie O'Rourke, Ian Kershaw, Robert Heywood, Jon Thomas, Jarrad Kabral, Gel Goldsby & Rich Pearce for attending and sharing your insights on sustainable growth, scalable management structures, transparency, and the dangers of hypergrowth. 👏
💭 If you’d like to hear more about the key takeaways from the session, or attend one of our upcoming in-person roundtables, reach out to Simon Evans.
