Understanding "Inflection points" And How They Can Affect Your Business

By: Ray Gross, Triton VP Advisory Partner and seasoned executive with extensive experience in turnarounds, reengineering, and restructurings of public and private companies ranging in size from 20 million to 2 billion in revenue.

Most businesses will hit one or more inflection points in a life cycle. However, many businesses will either not recognize they have hit this point or may recognize they have but not take action.

An Inflection Point can be defined as "a point in time when a business meets a challenge or a series of challenges and does not possess the talent and, or resources to meet these challenges". For example, many start-up companies will hit an inflection point as it begins to stretch beyond the skill level of its entrepreneurial founders. Failing to recognize that a company has hit an inflection point or failing to take action if it is recognized may be the most common reason why businesses fail.

Inflection points are not just common in small businesses. Challenges of this nature affect businesses of all sizes and in all industries.

So what are the signs that a business is approaching or at an inflection point?

  • Growth has stalled or has begun to significantly decrease
  • Increased customer attrition
  • Losing market share
  • The company is falling behind technologically
  • Unexpected employee turnover
  • Significant capital constraints

As an example, in 2001 I was asked by a group of investors to take a look at a company in the electronic security industry. This company had grown nicely from inception in 1990 to 1998 by utilizing a strategy of acquiring small local security monitoring centers in various markets. Each acquisition brought along a steady base of existing alarm companies that utilized these centers for critical event monitoring (dispatching police or fire in emergency event conditions). In total the company acquired nine centers.

During this period, the company had grown its revenue by five times and was one of the largest firms of its kind in the industry. However while revenue had grown, their expenses were out of line. They had not integrated the acquired companies, and local management ran their operations much the same as they did prior to the acquisitions. By 2000, the company was experiencing significant client loss, further increases in operating expenses and were beginning to see competitors pass them by from a technology standpoint. It was obvious this company had hit an inflection point.

The existing management team did a fine job sourcing out acquisition candidates and closing up those transactions. They feel short, however in the experience of properly integrating the acquired companies, as well as the overall operational management of the entire company. The good news was that management did recognize that they had hit an inflection point and did not possess the internal ability to do what was needed to meet these challenges. The reigns were handed over in late 2000 with a mission of reengineering the business to a point of sustainable profit and creating operational leverage to support new growth opportunities. In eight months we consolidated the monitoring centers down to two, streamlined all operating functions, and developed an industry leading technical support structure. By 2002 the company was growing efficiently and utilizing a strategy that incorporated acquisitions as well as internal growth. This company realized a positive result due to their ability to recognize they had hit an inflection point, admitting they lacked the skills to meet the challenges and took action.

Unfortunately most of these cases do not end in a positive result.

So assuming a business has recognizes they have hit an inflection point, what actions should they take to address the situation


  • Identify the apparent signs
  • Quantify the changes in the business that have led to this point
  • Gain agreement from all primary stakeholders that action is required in order to meet the challenges they now face
  • Seek professional assistance to assess the situation and help determine what actions are required

    • Seek professionals that maintain skills sets that are in line with the needs of the business at this point
    • Perform diligence on those identified to provide assistance
    • Check prior client referrals

  • Sources:

    • Advisory firms
    • Individuals and companies involved in related associations or organizations such as the Turnaround Management Association
    • Law firms and recruiting firms may be a source of referrals for professional assistance
    • Certain Small Business Associations (SBAs) may provide contacts for professional assistance

  • Agree to work with those that will be tasked with making the changes or determine that it is best to hand the leadership of the business others for the long term benefit of all constituents

The moral of the story is most companies will hit one or more inflection points and at any stage in a business’s life cycle. Successful companies will recognize the signs, admit that they do not possess the skill level to meet the challenges and take action.