Orders of magnitude: how companies differ at scale
January 18, 2023
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I am furious.
Looking at my career history, there’s a huge hole.
I’ve worked at companies with annual revenues of approximately $2M, $20M, $2B and $20B.
But I’ve never worked at a $200M per year company to complete the set. Damn. If you run a company like this, call me.
These companies differ by orders of magnitude in their annual revenue. That changes everything else about the business too. Supporting $2M in sales is qualitatively different than supporting $20B in sales. When you grow by 10x, everything fundamentally changes.
I know the popular narrative is “haha big company so slow.” For the most part, that’s true, but it’s only half the story. That slower speed is a function of the impact you can have, both when things go wrong, and go right. I’ve worked on initiatives that take weeks or months to get to market, but when they do, 50,000 customers sign up in the first week. That's an impact on a scale you don’t usually have at SmallCo.
The reality is that being ‘big’ changes the whole mindset and culture of the company -- and it should!. When you’re at $20M of revenue, a project that generates another $10M is transformational; when you’re at $20B, an extra $10M is a distraction.
Here’s a breakdown of the major differences I’ve seen. I’ve also included some additional context, because these companies were also in different industries, and at different levels of maturity and so on. I’ll refer to these companies as their approximate annual revenue, e.g. $2M, $20M, $2B, $20B.
$20M: Property Management
$2M: 3-10 during my time
$2M: Two co-founders with roughly 75/25 equity split
$20M: Founder owned c. 85%, new CEO owned c. 15%
$2B: Mutual company -- technically no shareholders
$20B: Public company
$2M: International (because we were remote)
$20M: UK (regional)
$2B: UK (national)
$2M: 10-100 clients
$20M: 15ish contracts on the go at once
$2B: Hundreds of thousands
$2M: Two co-founders who tell us stuff on daily calls.
$20M: Chairman, CEO and CFO sit on the Board. I sometimes sit in on the finance part of their meetings. The Senior Leadership Team, which is the Board plus the CEO’s direct reports, meets once a week (although I never attended).
$2B: Executive Committee and Board, Audit C’tee, Remuneration C’tee, Risk C’tee, and so on. “The Board pack” is a mythical document to which I am not privy.
$20B: I know there is a Board, because I hear the CEO and CFO talk to Wall Street once per quarter. I’m sure there are numerous committees and governance processes, but I’m not close enough to it to know any more than that.
My relationship with senior management
$2M: I live with one co-founder in the building next to the other. We all go for dinner a couple times a week, which is awesome. Co-founder teaches me, the other co-founder and the other employee about wine one time.
$20M: I’m on first name terms with all of our senior managers, because I report to the CFO. When I leave, the Chairman asks me to go for a pint with him, which is great fun.
$2B: I’m on first name terms with the CFO and have met the others in a meeting or two here or there, but they don’t know who I am.
$20B: I report to someone who reports to someone who reports to someone who reports to the CFO who reports to the CEO. I’m on first name terms with some of the leadership team of my business unit, which is c. 2% of global turnover.
Product development cycle
$2M: Founder 1 says, “I think X could be a good idea.” Founder 2: “Sounds good, pitch it on your next 10 sales calls and if people want it, we’ll figure out how to make it.”
$20M: Owner thinks we could expand into a new service area. He knows a guy in that space who makes a lot of money. CFO and I do some modelling of margins and overheads, and check out competitor annual reports and accounts. We hire a consultant with some experience to help us implement.
$2B: “Innovation team” exists, mainly to set up partnerships with other companies, whose products we white-label and sell as our own.
$20B: Business case must be developed and signed off by senior management. All risks have to be documented and either accepted, mitigated, or measured. It is accepted that we dip our toe into the water first to get test data, which show how profitable the initiative could be.
Time spent on stakeholder management and alignment
$2M: None required: we’re all working together on the same kitchen table.
$20M: Some, but we can clear up almost anything with a meeting or a call
$2B: Regular business partnering meetings, committees, finance reviews, all exist to keep everyone on the same page
$20B: Large amounts of time dedicated to crafting good powerpoint decks, telling key business stories, talking through departmental goals at all-hands meetings. It is a significant faux pas to show some information to a stakeholder’s boss without showing it to the stakeholder first.
Finance team and infrastructure
$2M: Co-founder does the books once a month. A tax accountant exists somewhere. We track gross margins on a spreadsheet.
$20M: Finance team of 5. I know everyone very well because half of them report to me. We have an ERP system, with purchase orders and invoices for pretty much all expenditure. One of my key accomplishments is introducing proper budgeting, forecasting and reporting. A local audit firm handles corporation tax, year-end audit and filing statutory accounts.
$2B: Finance team of 60ish. I know everyone’s name, but not much more. Whole teams are dedicated to tax, forecasting, reporting, systems, and compliance. In-depth ERP system and Purchase to Pay system.
$20B: Finance team of ~1,000 (I think). There are whole teams I don’t know. We have an entire tech and development team within Finance, just to develop finance apps for us to use. Our business unit runs its own Finance team of around 35.
$2M: Not sure we ever received an “invoice” when I was there, and if we did, I never saw it.
$20M: AP clerk processes all invoices. They get printed and go in filing cabinets.
$2B: Purchase to Pay system matches invoices against purchase orders automatically and calculates accruals for us.
$20B: No idea -- it’s all outsourced to a third party. I never get close to it. I saw an invoice once.
$2M: Co-founders presumably check the bank balance every so often to make sure there’s enough in there, and ideally more than there was last time they checked.
$20M: Every morning my first task is to text the bank balance to the CEO and CFO. We’re fine on cash, but occasionally delay paying a couple of invoices until we’ve been paid by the client first. We had a $500k overdraft facility at our disposal if we wanted it (but never used it).
$2B: Cash Control team of 7-8 FTE. I don’t know what they all do but they all look very busy. I know we have multiple bank accounts that might be as much as $20M overdrawn but as long as the total balance across all our accounts is in the black, we’re good.
$20B: Treasury function is a huge team, which includes raising money from the markets. They come up with internal frameworks to ensure different business units are charged and credited appropriately for how they use capital. Part of my job is just to understand these frameworks and explain them to other people.
HR team and infrastructure
$2M: lol nope
$20M: Team of 3 who handle some stuff. For example our HR Manager introduces a “pets at work” policy one day, then tells us that on Monday she’ll be bringing her puppy to the office. This is well received.
$2B: Large function with many separate bits to it. All training, business partnering, payroll, contracts etc. is handled in house.
$20B: Huge global function -- some business units have their own local HR to account for national or regional employment laws.
$20M: In January the boss sits me down and tells me I’m getting promoted. I kind of know I’m doing a good job but it’s still a surprise. We agree on some objectives for the next 12 months (that we never look at again).
$2B: Annual review to look back on prior year performance and set objectives for the next 12 months. Employees are all rated. We re-review objectives periodically and at half-year.
$20B: Incredibly important process that directly links to annual bonus. Time is spent ensuring the function’s objectives link to the department’s objectives, which link to the team’s objectives, which link to my and my team’s individual objectives.
Tech stack and infrastructure
$2M: Gmail, Basecamp, Dropbox, Slack, and a few other SaaS apps. I make a niche for myself by using Zapier to automate stuff between apps, which is cool.
$20M: MS Office is king. We have our own server, managed by a third party company that supply all our hardware too. We have one IT guy for a while until he leaves, then we just pass more to the third party co. As Head of Finance, part of my role is managing our Active Directory and setting up mobile phones for new starters because I’m “good with computers.” All major apps we use (including business critical) are 3rd party.
$2B: MS Office is still king, although when I started we were still using Lotus Notes for email (in 2011). IT function takes up the entire basement floor (which is illustrative of their position within the company). On-prem data centre doubles as heating for the swimming pool. A friend of mine joins the IT graduate scheme and is excited by one project of hers, which is to “make a list of all the different applications we use”, because no one knows. Most apps we use are 3rd party with some integration. A few core business critical apps are developed in house.
$20B: Company is in the throes of migrating from MS Office to GSuite, with the aim of entirely exiting all enterprise data centres within a couple of years. All business critical apps built internally, as well as many non-critical apps (e.g. our talent management system). We cannot hire developers fast enough, in every single part of the business.
$2M: Above market
$20M: Below market
$2B: At market
$20B: Above market
$2M: Large, if the company grows and I play a crucial role in shaping it.
$20M: Small, but clearly visible. It’s a company doing a great job in a fairly niche market, and I can see how my work is making us a better company on a day-to-day basis.
$2B: Large, but almost completely unclear.
$20B: Large, but almost completely unclear
What do I mean by large but unclear? As an example, I’ve produced pieces of work that go to our senior leadership, and hopefully influence their thinking. If the company ultimately, say, changes a growth strategy, or pursues a new line of business, how much of that is due to my work vs. other factors? It’s hard to say, but if I have impacted their thinking in a way that leads to totally new markets opening up, then the impact of my work is massive.
Level of autonomy
$2M: Huge, so much so that it’s daunting for me. I could have turned this role into a C-level job if I had had the skills and drive to do so, but I didn’t at the time.
$20M: Large. Had the freedom to change processes and implement what I thought was best, and as long as I kept my boss up to date, so he could keep his boss up to date, then we were all good.
$2B: Low. It was a risk-averse company, and I worked in a well defined, junior-level role. I carried out the tasks assigned, in the manner assigned.
$20B: Medium. My particular role and level of seniority affords me some autonomy in what my team goes after, although I need to make sure that lines up with what my boss and the rest of my immediate team need. There are many processes that are far too well defined for me to have any tangible impact though.
Which one is best?
That depends. It depends on what you want, what stage of your career you’re at, your family situations, and many other things. None of these are necessarily better or worse than the others, but they are different.
The analogy of an oil tanker vs. a speedboat is a good one here. The speedboat is more agile, nimble, and probably more fun. The oil tanker is huge, and takes ages to speed up, slow down, or change direction.
So it depends on your goal. If you want to whizz around near to shore with a few friends, have some fun, then the speedboat is awesome. But if your goal is to ship a million barrels of oil halfway around the world, then the oil tanker is really fucking good. You’ll need to spend time to hire, train, and manage the crew, but if you do, you can do big things.
You just have to know what you want.
I want to make money
Go and work for BigCo. The pay is better, and the company is probably more financially stable. You’ll do a good job, be paid well, and probably work with some great people.
I want work-life balance
Work for a smaller company (but not a startup). The money isn’t as good but you can still do a great job, be well-respected, and not have the pressures that come with other jobs. Although the benefits and flexible working may not be as good, I’ve found that’s mitigated by reduced workload and expectations.
I want to make an impact
Work for either a startup or a huge company. At a startup, your company could change the world if it gets huge. You can directly see the impact of your work, and you can fairly immediately make the business better if you want to.
At bigger companies your impact is much more diluted and tangled up with that of other people. That can be frustrating, but if you manage to get everyone pulling in the same direction -- which will take time and energy on your behalf -- then you can put a lot of resources behind something and have an impact at scale.
I’ve just graduated from college/grad school and don’t know what I want
I’ll give you the advice that James Altucher once gave me:
find something your [sic] mildly interested in and work for a mega corporation. What's your favorite TV show? Who produces it. Work for them. They are obviously good at what they do. Its never bad to be the janitor at the best company in the world. You learn how to clean up their shit. Which makes you CEO-level for just about any other company. This is really true.
I want to start my own company one day
Any of the above could work. I’d lean towards BigCo for a year or two, then keep moving down in company size until you’re ready to make the jump. As per the above advice you’ll learn how big companies run, as well as the reality of life in smaller companies. (Health warning: take this with a pinch of salt as I have never started a company.)
All that said: your mileage may vary, and I don’t claim to have all the answers. As with many things, you might need to try a few different things before you find what you really like. That’s OK -- that’s life.
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