Nick Powills: How To Manage the Stress and Unpredictability of Riding Out the J-Curve

We are in the middle of the j-curve.

The j-curve is what happens when you ditch stability for risk—with the hope that the upside of the risk is greater than the drop-off of stability.

In private equity purchases, the ideal purchase point is at the last minute before bottoming out—especially after studying the upside of that purchase. Business X does $5 million in annual sales in 2018. In 2019, Business X does $4 million. In 2020, they are tracking to do $4.3 million and have a technology solution with untapped potential. Cash flow issues limit the potential success of Business X, thus PE firm, Y, picks it up at the $4 million point and net of 15% , infuses the business with enough capital to hire the team to grow the business—with a plan to double volumes and net profitability. They buy when the curve is sliding, not when it is climbing.

Get it? 

So, in our business, in 2019, we have strategically invested into three key categories—people, process and tech—with an ultimate plan to grow.

First, people. We have increased the bodies, the average salary and the benefits. We have installed scorecards; redefined roles and responsibilities; and added a bench. These investments cost money, thus, profitability decreased, with the plan that we could give our clients a superior experience.

If we can increase the value of a given client’s experience, then, they should want to grow their businesses with us—thus creating more work. When you hire in a bind, you make poor decisions. Thus, we have worked on our bench by trying to attract level-up talent.

This talent should affect our processes—making them stronger and more scalable. The investment in process takes resources, too—like implementing a CRM system to better organize our entire operations. 

Lastly, we have invested in our tech. Tech is the future of everything. The goals have been two-fold—simplicity and transparency. Both should help us climb back up the j-curve.

We are not investing in the business for the hell of it. We are investing to create a better future and a future where our people and our brands are happier. 

But, the j-curve has stress tied to it. Why? The change in norm and profits can be worrisome. But, as long as the plan is sound, then the climb can be incredible.

That’s what we are banking on. 

Be willing to invest (risk) for the chance at return (growth). Growth rarely comes simply.