Master Exponential Returns, chapter overview by Kate McKeon

If you can master exponential returns, you can experience the growth required to hit a billion dollars in revenue. It seems intuitive that you can experience exponential return initially. Afterall, going from $1 in reveune to $100 is certainly a great growth rate, albeit at a smaller scale. The question is, can you still grow at an exponential rate, say 80% annually when you hit the $100 Million in revenue mark? For most companies there is a natural ceiling on their revenues. This probably has more to do with those in charge than it does with the market of choice. Whether it be a psychological reason such as a natural mental barrier that prevents one of the company leaders from making the next growth pop (i.e. settling for acceptable returns), or a business choice of working only in one subset of the market and not expanding to other subsets, very few markets are themselves contrained – it is the players within them who are constrained.

What does Thomson say regarding exponential returns?

Consistent, early positive revenue and profitability is necessary, even for the High Technology and Pharma companies. Those most successful self fund research and development to accelerate their own growth. They also contain expenses to 20% of EBITDA. They take early positive cash flow and scale it massively.

In essense, create a high spread between your Return on Invested Capital (ROIC) and your Cost of Capital so it only makes sense to reinvest in your own operations. This is the path to a billion.