When you start a business, one of the things that you might wish for is to achieve the Hockey Stick Curve.
This term is usually thrown around in business circles to explain a sharp rise in profits.
But why is it called the “Hockey Stick Curve?”
Since a hockey stick has a curved shape, a graph depicting your profits that slowly rises and then suddenly spikes upwards would be referred to as the Hockey Stick Curve.
So, how the graph would look is that it would have a period of flat growth (symbolized by the “stick” of the hockey stick) and then it would display the curve that shows a period of rapid growth in the way that a hockey stick curves at the end.
Although experiencing the Hockey Stick sounds exciting, such as if you’ve launched a product on the market and see that its sales have exploded overnight, there are some important things to know about the Hockey Stick Curve.
- 1 The Four Major Stages Of Business Growth
- 2 Hockey Stick Curve Conundrum: Rapid Success At A Cost
- 3 How To Prepare For The Hockey Stick Curve
- 4 What’s The Hockey Stick Inflection Point?
- 5 Related Questions
- 6 Conclusion
The Four Major Stages Of Business Growth
There’s much more to a business’s growth and potential for growth than the Hockey Stick Curve.
In the book, The Hockey Stick Principles: The 4 Key Stages Of Entrepreneurial Success, Bobby Martin, who co-founded two successful startups, analyzed the revenue growth of 172 startups in a variety of sectors and found four important stages for business growth.
The Tinkering Stage
This is when business owners start to explore how well their business idea could work and they commit to developing their company.
The Blade Years
This stage refers to the years during which entrepreneurs are trying to make their business work. It’s marked by successes and failures, but revenue is usually low during this time.
It’s called the “blade” years because it’s symbolized by the flat blade of the hockey stick, but it’s the most important time for business owners.
Everyone focuses on the rapid growth of a company, but the Blade Years enable you to lay down a foundation for success because it’s during this time that you’re putting in a lot of the work and learning about business in order to set your company on a strong footing.
The Growth-Inflection Point
This is when the company’s income starts to increase. A danger is if it happens too quickly, which can cause the company to end up failing.
This is because companies might invest large amounts of money to encourage quick growth but if the revenue increase isn’t in line with their business’s functions, then they’re not growing in the long run – they’re spending a lot of money that will put them in debt.
The final stage is that of consistent growth. This is caused by controlling the growth inflection phase effectively.
During this stage, company owners will have quite a few important questions to ask themselves when it comes to their leadership positions, such as if they should hire a CEO to manage the company for them.
It’s worth mentioning that not all companies will experience Hockey Stick growth. Some will have constant growth while others will experience ups and downs.
However, out of the 172 startups that Martin studied, only 11 failed to experience hockey stick growth.
Hockey Stick Curve Conundrum: Rapid Success At A Cost
Although experiencing the Hockey Stick Curve in your business sounds like a wild ride, it’s worth bearing in mind that it can also cause problems.
Let’s take the example of Groupon, Inc.
This company achieved $1 billion in sales and it was the first company to achieve this at the fastest rate in history – it only took Groupon two and a half years!
In 2010, Groupon had sales of approximately $300 million, then the following year it produced $1.6 billion in sales as it experienced the Hockey Stick Curve.
While it achieved mammoth success during this time, it’s worth mentioning that in both 2010 and 2011 Groupon experienced net losses that were around $400 million and $275 million respectively.
What caused this?
Factors such as marketing and selling expenses were to blame, as Investopedia reports.
That’s something to bear in mind if you’re anticipating Hockey Stick growth for your startup: there will be losses.
How To Prepare For The Hockey Stick Curve
If your business is currently in the “flat blade” stage, you might be wondering how you can jumpstart it into the Hockey Stick Curve phase so that you can start increasing your profits rapidly.
There are some important things to note about what you can do during this time.
As we mentioned earlier, what Martin called The Blade Years are really essential to laying the groundwork for your Hockey Stick phase and company in general.
It’s also worth doing some important tasks during this time, such as identifying the things that are working for your business and where you can improve, taking feedback seriously, making changes that need to be made, and enhancing your business message.
This is hard and it takes a lot of effort, both on your part and the rest of your team, which is why so many startups don’t actually succeed or experience hockey stick growth.
In fact, over 90 percent of all startups fail, as Innovation Footprints reports, and interestingly this is as a result of self-destruction instead of competition. This just shows how important it is to do the hard yards.
Here are some other important tips you need to ensure if you want to prepare your business for the Hockey Curve stage.
- Have a plan and stick to it. From the start, you need to ensure that you have a business plan in place so that you can track and monitor your goals so that you meet crucial timelines instead of lagging.
- Don’t change your idea. One of the things you might be tempted to do is change your entire focus if you don’t achieve what you want right away. But keep the vision for your business and focus on your growth, instead of trying to find a quick way to increase your revenue overnight. Remember: changing your vision can make you seem confused or flighty to investors. Focus on stability.
- Tweak your strategy. Now, just because you’re maintaining your overall vision, that obviously doesn’t mean you shouldn’t change your strategy. If something’s not working, you need to toss it in favour of something that does work. This is where feedback comes in. Especially when taken from your customers, feedback is a vital part of ensuring you find the best possible strategy to increase your success.
- Ensure you have enough money… and spend it on the right things. Did you know that 29 percent of startups fail because they don’t have enough cash, as CB Insights reports? Make sure you have a plan from the beginning for how you intend on funding your business. Then, be smart with your money so that you can inject it into the best initiatives, such as software to track your money and investing money into acquiring customers.
What’s The Hockey Stick Inflection Point?
Hockey Stick Curve graphs also have inflection points.
You might’ve heard this term but not known what it is. An inflection point is basically identified as the point on the graph where the flat period starts to increase.
This can be influenced by a variety of factors, both internal or external.
As an example, the internal factor that causes increased sales of a product could be a change in price.
On the other hand, an external factor could be a regulation that caused a new need for the product on a mass scale.
For example, the Covid-19 virus that has resulted in the regulation of wearing a mask could be an external factor for a company’s rapid sales of and demand for, face masks.
What causes hockey stick growth to flatten?
Hockey stick growth can’t last forever. Sooner or later, it will start to decrease and flatten. This can be as a result of various factors, such as market competition.
What are common reasons why startups fail?
The most important reasons are a lack of demand in the market, not having the correct team on board, and pricing issues, as CB Insights reports.
Everyone wants their startup to succeed and experience rapid growth.
In this article, we’ve looked at this rapid growth as it’s often referred to as the Hockey Stick Curve.
But, while everyone wants to hit that curve and experience larger profits, what most people don’t consider is that the Blade Years of their company are even more important.
In this article, we’ve looked at what you need to know about the Hockey Stick Curve and Blade Years so that you can maximize your profits while ensuring a successful long-term future for your startup.