If you are looking to join a firm that is either planning to go public or be acquired, how do you analyze the risk level?  It used to be that a “startup” was a small firm, low in employee count, where there was a clear risk.  These days firms can have hundreds of employees and have good funding.  Other firms are very small and fortunate to be cash flow breakeven.  Neither of these scenarios guarantee success.  You might ask – what are the signs and data that a sharp candidate can leverage?  Especially to analyze how the future looks before signing on or taking that leap?

Bright future? Photo courtesy of Pixabay.

The most basic analysis in the business world is the SWOT analysis.  If you aren’t familiar with a SWOT analysis, it is a common topic covered as part of a Business degree.  And it is a topic that is complex enough for an entire post, if not a semester length course.  A few good posts to read on this topic are here and here.  Either way, an analysis like this shouldn’t be too hard to compete.

But for a quick introduction, the S and W stand for internal factors of Strengths and Weaknesses.  The interviewer will probably try to sell you on the firms Strengths.  You might even get details that are not in the public if you listen carefully and ask properly crafted questions.  It is possible that the role you are being hired into is heavily understaffed and that is a current Weakness.  The firm’s blog posts and any news about them can help on the internal factors.  You’d probably also hear plenty on it’s perception of its Strengths when you interview.  (And when your interviewers are too candid this can give a lot of insights into Weaknesses.)

Then the O and T are external.  They are Opportunities and Threats.  A good indication of Threats and Weaknesses can be found by researching the competitors.  Features they highlight that the primary firm doesn’t talk about might be a Weakness.

Another area you should investigate is how big are the barriers to entry.  Is there something that keeps other firms from entering the space, or when they do – would slow them down?  Does the firm you are looking at have patents or IP that would be challenging for a competitor to get around or duplicate?  Is there a substantial “first mover” advantage for them or one of their competitors?  And by all means – being “on premise” is not much of a barrier to entry.  Even the claim that “the competition moving into our space (on-prem) is acknowledging that their cloud architecture isn’t secure” is a complete fallacy.  If compliance issues require certain firms to not use cloud based solutions, then the competition is basically making an offering available to meet legal requirements.

Another area that takes some thought is to look at the Microeconomics of the firm.  There is a lot you can learn from public information.  Take a look at the firm’s pricing model.  Is there a controllable relationship between costs and revenue?  For example if a CDN has a pricing structure that is based on traffic volumes it is much more likely they can control their costs and when the time comes work toward building up consistent, if not considerable profits.

If the firm has most of its business in “all you can eat” buckets they might be “buying” customers with low prices.  They have no real control over what their variable costs will be per customer.  When this firm wants to go public or gets acquired you can be sure there will be painful adjustments in their future.  (To be clear “adjustments” is a euphemism for cost cutting.  And cost cutting often leads to employees being “managed out.”  Which is another interesting euphemism.)  Beware of firms that compete mostly on price. It is a terrifying race to the bottom.

There are two warning signs that I’ve learned over the years that are very subtle.  One is if a firm has regions that are very effective or ineffective in ways that defy logic.  When you see news that many times in their newsfeed that the “Central” region has taken the top sales honor for a larger firm it is a big red flag.  There is so much more tech business available on the East and West Coasts.  It is fine if the firm is small, headquartered in the Central region and has yet to expand to the coasts.  But when the firm is larger and older there is no reason that the Central region should frequently be the top contributor.  It probably means that its competitors got started on one of the coasts and are taking large parts of the market share.  And they will soon spread to the Central regions.

Another interesting red flag is to see what career history the Account Executives have.  If a good number of them were SDRs in the last role at another firm you have to wonder.  Why didn’t they get promoted at the last firm?  In this economy firms often hire away SDRs as AEs when they can’t attract experienced sales people.  There are plenty of SDRs that have yet to mature and truly learn what they are doing.  They’ll jump on the opportunity to get “promoted” and “prove” they can do it – only to find that their previous employer understood what it would take and they hadn’t yet achieved that level.

Each of these points could be a post of its own.  But hopefully they’ve planted the seed that there is a lot of investigation that you have the power to do.  And if you do join – this investigation will help you with whatever strategic decisions you make for the company once inside.