Which growth options pay off, and which only look like they do
A working example of the options model built for management teams in a Growth Strategy engagement. Pick the assumptions and the options below. The chart shows the gross profit the business earns at each share of its market, and where the chosen options put it against the benchmark for the company's objective: break-even, or its current state.
The business is fictional and every figure is invented for illustration: a B2B software company with about $4.5M of recurring revenue, selling supplier onboarding and procurement software to mid-sized manufacturers. The structure is the real one. All figures are a year, before tax.
How the model simplifies the decision
Fourteen ideas, five that matter. Every option on the table was assessed; the five with the most effect are modelled, and the rest are listed with the reason they were set aside.
Ranges, not a forecast. Every option carries a cautious, middle, and strong value, so the management team sees whether a plan still works when it underperforms.
Each number says where it came from. The basis line under every option names the evidence that sets it, so a figure can be challenged and corrected rather than trusted.
Overlaps are counted once. The retention program and the customer success automation claim the same churn reduction; choosing both does not double it.
The market's stage changes the ranking. Where the category sits on the adoption curve decides which options pay: pilots lead with early adopters; partners and outbound with the early majority; retention with the late majority.
Constraints show up on their own. Past what the onboarding team can deploy, growth needs a hire for every $600,000 of revenue, or partners at a lower margin. Today's line, with no hires, goes flat.
One benchmark for the objective. Every combination is judged against break-even for a company seeking sustainable profitability, or against its current state for a company seeking a new growth curve. The benchmark rises with each option's running costs.
Assumptions
Sustainable profitability judges each plan against break-even: the gross profit the business needs to cover its costs. A new growth curve judges it against the current state: today's gross profit plus the options' added running costs, so a plan passes only if it lifts gross profit after paying for itself. The example company is short of break-even, so the model opens on sustainable profitability.
The management team's own bar for a new growth curve. A plan meets it, lifts gross profit by less than it, or fails to cover its own running costs.
From the market sizing: most combinations of the sizing inputs fall between $60M and $90M; $75M is the middle estimate.
About 16% of the SAM has bought software like this in the early adopter stage, about 50% in the early majority, and about 84% in the late majority. The stage scales each option by the multiplier shown under it, moves the point where the evidence stops, and in the late majority takes 4 points of margin off new revenue as competition moves to price. Set from the category's adoption among the SAM's firms, not read off the curve: it is a judgement, so test each stage.
Each option has a cautious, middle, and strong value; this picks which one applies to all of them.
The retention options reach their full value only if most lost renewals come from customers who never fully adopted the software. If they come from missing features, onboarding and success work recovers about half as much.
Recurring revenue today $4.5M. Gross revenue retention 75%: a quarter of revenue is lost at renewal each year. Gross margin on subscriptions 78%. The onboarding team can deploy and support about $5.2M of revenue a year; past that, each $600,000 of revenue needs one more specialist at $110,000 a year, in cost of revenue. Break-even: the business needs $4.3M of gross profit a year; its implementation services earn $300,000 to $600,000 of that, so subscriptions must earn $3.7M to $4.0M, plus the added running costs of any chosen option.
Options
A: no change. B: fix the base (retention and CRM automation). C: B plus pilot-first selling. D: B plus a BDR team and implementation partners. E: all five. Or choose options one by one below.
Options that reverse a decision already made
Shown so their effect can be seen, not as recommendations.
Assessed and set aside
Considered for this business and not modelled, each for the reason given.
Gross profit at each share of the market
With the chosen optionsToday's prices, margins, and capacity, with no hiringBreak-even, including the options' added running costs
How the chosen options add up
Green cells add growth, grey cells add none at the chosen setting, and red cells cost gross profit without adding share.
Prepared by Authgnosis Business Consulting Inc. as an illustration of the Growth Strategy options model. Fictional business; invented figures.