For founders building in supply chain, reindustrialization and manufacturing, the biggest mindset shift is moving your North Star from ARR to BACKLOG. This isn’t the first time I’m saying this (publicly):
In Hard Tech, a leaky bucket is your base state. Most customers aren’t on long-term contracts, and there’s no real lock-in early on. You have to deliver product consistently and at scale. If you can’t, customers churn.
The fix is your backlog. The rate at which you turn that backlog into revenue is your throughput.
Revenue = Backlog × Throughput Rate
To grow revenue, you either grow the backlog or raise the throughput rate. Your operating profitability comes down to how well and how consistently you convert backlog into revenue while operating as close to your theoretical max throughput rate as possible.
Fast revenue growth is great, but it burns down your backlog. To keep growing, your backlog has to grow at least as fast as your revenue.
The same goes for throughput. If you invest to push orders through faster, you have to refill the backlog just as fast to keep up your growth rate. This is also where capital is most often destroyed.
We often hear “suppliers take forever to fill orders.” In our experience, that’s on purpose. They’re managing their backlog to keep several months of revenue visibility at the throughput they can actually deliver.
You can invest in capacity. But if you don’t have the backlog to fill it, you take a massive capital charge and destroy equity value.
To win at scale:
- Keep refilling the backlog
- Grow production capacity carefully
- Balance betting on future demand with new capacity against protecting margins by extending the backlog
The biggest legacy players got that way from managing these intersecting variables thoughtfully.
Don’t be so quick to dismiss them, learn from what they do well then make it an order of magnitude better.