This may be the first day of a new venture, or it may be your 500th. You may have done this sort of thing before, or you may be standing at the doorway of a completely new, and completely terrifying, business adventure. Wherever you are on the business growth spectrum, one thing’s for certain: You probably couldn’t have gotten to where you are today, without a little help from your friends (and business partners, and investors, and mentors, and that strange fellow in HR that believed in you when nobody else would).
We’ve worked with businesses from all angles of the growth spectrum – startups who are taking advantage of huge growth potential, larger organisations who are ready to invest in a smaller company, businesses who are looking to change course, and individuals who are looking for a successful exit strategy that will see long-time sustainability for the business they’ve worked so hard to build.
So, just where do you actually fit on the growth spectrum, and is what you’re experiencing, characteristic of where your business is today?
Finding yourself in the Seed Stage of business life means that you have an idea, and you need a way to get it off the ground. You may need access to some initial finance to help you, and you’re looking for ways to test your business idea, and identify the channels that would deliver the best opportunity for your seed to grow. Although exciting, this particular part of the growth spectrum is where your confidence is tested. You have a great idea, but can you nurture it enough to turn it into a viable business?
- Many seed-stage companies will have to overcome quite a few challenges – especially things like defining exactly what the value of their proposition holds, understanding whether their product offering is right for their market, defining what that market looks like, deciding on one niche opportunity or a small collection of niche offerings that would solve a particular problem.
- Because you are at the very beginning of your business plan, the chances are that you haven’t yet secured the right finance to invest in a huge amount of resources. Be careful, then, not to spread yourself (and your time and money) too thinly, but rather stay focussed on what your product can do, and what that growth plan looks like.
- Although your product or service is small right now, never forget about what it could become. Even Amazon started as a thought – and you may need help in being able to imagine the true potential (and scalability) of your business idea.
What you need to be focussing on:
- At this stage, you want to make sure that you match the business opportunities available to you, with your skills, experience and passion. Identify exactly what it is that your product does, and how much value it delivers to your prospective audience.
- Get to know your target market – find out what drives them, how they purchase, how they make decisions, and how easy it would be for them to adopt your new business idea. All of this will shape the way you plan to scale your business up for the future.
- Think about your business ownership structure: Your business, if successful, will need a solid vision and growth strategy, not to mention a sturdy leadership team that shares your passion for long-term success – so you’ll want to start keeping an eye out for, and surrounding yourself with, professional advisors and business mentors who are able to guide you towards growth.
Your Finance Sources:
- Many businesses in this stage do not have the luxury of outsider funding – unless their product or idea is so unique that an investor has believed in it that much that they’re taking a risk, simply based on an idea. Most investors would want to see some trace of business continuity and development before they plunge their pounds into your business concept. So, your money sources in this part of the business life cycle will most likely come from cash that you’ve saved up as well as investment from family and friends who believe in supporting you, and your new venture.
- You may have the opportunity to obtain funding from government grants as part of greater development plans to build innovative businesses, like Innovate UK.
A startup business means that you’ve successfully made it through the Seed stage, and you have a proof of concept. In fact, you have more than a proof of concept, you have a product defined, a target market identified, you probably have an initial business plan and an idea as to where you want to go and how you plan on getting there. But you’re by no means out of the business woods yet. This is, unfortunately, the make or break phase for many businesses, with some of mistakes made in this phase, being experienced long into the growth cycle of the business. But, it’s hardly something to be scared of – rather, something to embrace and plan for. With the right planning, the right support, the right funding and an honest, transparent look at what you’re trying to achieve, you’re destined for greatness.
- Failing to fund a business sufficiently is probably one of the biggest mistakes a startup can make. Under-estimating the amount of money a business needs to grow is a very common trip hazard – let alone the time it’s going to take to get your product to market. The biggest challenge at this stage of growth is making sure you don’t burn through what cash you have. Learning to identify how to spend your cash, and more specifically, identify the returns on the money you spend, is crucial to surviving this phase.
- For many startups who have survived the initial part of this business cycle, they may be somewhat confident that they’re still afloat and that customers are actually spending money on what they’re selling. But there’s a risk – over-confidence. Remember that the market is constantly fluctuating, flexing according to customer wants and behaviour – and this stage of business will test your product’s longevity and its capability to flex along with those changes, and still stay on course for growth.
- Raising funding (and the right amount of funding) is another challenge that you’ll need to overcome at this stage. Options of funding may seem readily available, but remember that you’re up against many other startup businesses who are also trying to make their mark on the business map, and looking for the same funding opportunities as you.
What you need to be focussing on:
- Once you’ve got some money in the bank, you’ll probably be looking at ramping up your marketing efforts. Make sure you align yourself with someone who understands what your business needs, translates your growth plan into valuable language that means something to your target market, and most of all – has the experience to help you capture attention, build your brand, and develop your identity.
- This is where you as an individual, and you as a business, need to start focussing on building your network. Attend meetings, swap contact details, seek out potential partners, look at new routes to markets through joining up with affiliates. You will need to establish a strong customer base and market presence, which means that you need your biggest supporters reinforcing your business message – and nothing speaks stronger than loyalty, great reviews and strong references.
- You’ll need to start thinking about your internal team too. Now that you’re starting to solidify your footing in the market, you need to start thinking about your dream team, your perfect company culture, the army of people working in your business and working on your business, that will deliver and return for you.
- Keep an eye on your cash flow, and track your progress carefully – but don’t go it alone! If you haven’t already, find an accountant or financial advisor who is able to provide the reality check you need to balance out vision against spend, growth potential against bottom line.
Your financial sources:
- Not too dissimilar to the Seed phase, you may have access to government grants and startup funding schemes. However, many businesses in this phase start to capture the attention of so-called Angel Investors and very early stage corporate venture investors – especially if you bring, along with your business, previous experience and skill that gives them reason to back your initiative and see long-term growth.
- Crowdfunding is a popular source of finance for many startups who are entering a new market. Somewhat saturated, however, crowdfunding still provides access to peer finance for businesses who do not yet have the right channels in to investors and business loan initiatives.
- Your customers now start to become a keen source of finance for you, as your business starts to enter into delivery. Recurring revenue streams enable monthly bills to be paid, and the savings pot to be topped up – again, providing a great reality check on the successful marriage of Business Idea and Business Deliverable.
Growing your business through the startup phase, and into a stage where regular cash is coming in, you are being recognised as an influencer in your market, your brand is identifiable and you a solid amount of customer (and brand) loyalty, is an exceptionally exciting phase. You’ve made it – and you’re growing. Your equation works, and the market likes what you have to offer. For many businesses finding themselves in this phase, this is where the chart often takes a drastic curve upwards towards the sky.
As the leader of your business, this is where you start to take authority of your marketplace. You have nailed your product, your core processes are in place, and you’re ready and confident to expand, with even more help from your friends, investors and corporate venture capitalists. You’re not completely out of the woods yet, but your revenue stream shows solid growth.
- If there’s any truth in “the more you make, the more you spend”, then the Growth phase of business would definitely apply. You’re growing, and the more you grow, the more your customer expect you to deliver quicker, faster, easier. And inevitably, that costs money. Coupled to that, as your business grows, there will be a wider range of issues that now bid for more of your time and money. You’re going to be faced with the unenviable task of trying to manage business of today, while focussed on business of tomorrow. You’ll need to learn how to delegate – and rely on a core team of people who believe in your business vision – to ease the load.
- The focus on having the right team around you is now becoming critical. Not only within your leadership team, but even further along. Functionally, you need to be agile, and commercially, you need to be ready – having the right expertise that is able to adapt to change, familiar with pressure and accepting of opportunity is crucial to building a productive team that you’d be proud to introduce to your investor.
What you need to be focussing on:
- You need to start reviewing some of your core procedures. You may want to test some of your current operational infrastructure to check whether it still supports the growth opportunity available to your business – and you may want to look at evolving practices which no longer suit the phase of growth where your company finds itself. Operationally, you need to have a business structure that is sound, and solid, but agile enough to adapt to change when necessary. You may need to set up new accounting and management systems as you start to spread your vision cross-border, and you may need to look at new ways to deal with your customers, and sales, in order to continue delivering what they expect.
- An increase of growth is an increase of sales – you will need to know that your team is able to handle an influx of new orders. Coupled to ensuring that you have the right culture, you may want to spend some time focussing on developing your team for your next business growth phase just enough to not over-complicate, but to capitalise on sales opportunity.
Your financial sources:
- This is where life gets interesting. You’ve proven that you have what it takes to keep your business floating. You’ve proven that your business is one to take note of – and that’s tempting to investors. As a result, you funding sources start to open up to you in this phase. You may be looking for straight-forward investment through private or corporate investors.
- You may be toying with the idea to take your business public through pursuing an IPO, and listing it on the Stock Exchange. Doing this brings an entirely new set of challenges and administrative tasks – but offers unprecedented opportunity that solidifies your business as one that has a strong market presence and represents huge growth potential.
- You may also be looking at partnerships and future exit strategies through Mergers & Acquisitions. Perhaps your dream was to build a business to a point where you are able to merge with a larger brand, either continuing on with the partnership, or taking the opportunity to exit successfully.
- Having a successful track record of growth, banks would now feel more comfortable with providing the finance you need to take your business to the next step too.
No, this is definitely not your ultimate end-goal. We say that because no business should ever have the dream to simply reach a destination, and feel comfortable that they’ll remain there, in the same capacity, until the end of time. Just look at the likes of Toys R Us, Maplin, Countrywide Stores, Blockbuster. Becoming a mature company means you have successfully navigated the passages of growth. You are established as an economical stalwart and have a significant portion of market share that casts shade in the presence of your competitors. You’ve done it, congratulations. But there’s work to be done. You’ll be facing a set of challenges far more difficult to turn-around – and it’s this phase that truly tests every decision you’ve made, every penny you’ve invested through each of the other stages of your business.
- You run the risk of being overshadowed by the exciting, the new, the cool. Innovative businesses are popping up daily and capturing the attention of your target market – simply because they’re doing something differently. Your challenge will be surrounded around Innovation: Doing something new and exciting that keeps you running as quickly as your smaller, more nimble, competitor – without compromising your established brand presence and customer loyalty.
- Making a change and adapting to something often takes a lot longer than some of your competitors – that’s partly because you have established solid business processes that require substantial manipulating to support operational changes.
- Being a mature business means that there is less room for additional growth. For many, it is difficult finding new customers and trying to find a new way to distribute goods, or attract new attention, is tough.
What you need to be focussing on:
- Being a mature business that has successfully navigated growth, you’re at risk of resting on your laurels during this business life stage. You have worked hard and have earned your position as a market leader, but the marketplace is relentless, and fiercely competitive. Your focus needs to be strongly locked on innovation. Customer buying habits change in a second, and staying at the forefront of their minds is critical if you intend to hold onto the market share that has taken you years to solidify.
- Remember the bigger picture: Never think that you are free of any risk of business distress – regardless of how many years you’ve been in business, how much money is in the bank. It just takes one innovative entrepreneur, like Netflix, to completely transform a market and render your product, and your service, completely null and void. Focus on the parts of your business that are stuck in a rut, teams who are not comfortable with change, and processes that are not agile enough to deal with innovation.
- Always keep improving what you have. Your drive should be centred around increasing productivity – whether that’s being able to deliver more for less, deliver more per person, or to outsource that which is not critical to your business make-up – giving your teams the capacity they need to produce the best results for your customers, and your growth plan. Look at things that could be automated and improve productivity by engaging with your teams and finding solutions together.
Your financial sources:
- You have a steady income now, hopefully, and your customer base in your largest source of income. You have also taken the opportunity to invest your profits into other individuals, organisations and technology that is yielding their own set of results – whether this be through corporate venture initiatives, funding opportunities for startups, public listings and other investment opportunities.
- Your profits and the interest gained on this should be something that continues to add to your bottom line
Renewal / Decline / Exit / Expansion
Some call this phase the Expansion Phase, some refer to this as Renewal, others refer to this as the Declining business phase – bringing along with it a host of negative business connotations in tow. This phase, whatever you choose to call it, refers to life after maturity – and in the natural cycle of things, usually indicates some sort of exit or evolution that provides life to a new cycle of startups.
While many pick each of these phases out individually, we look at these individual phases as an opportunity for you, and your team, to cash in on the years of hard work you’ve put into growing the business to where it is today – whether that be through a sale, a merger or a shut down.
Not a negative phase by any means, for many businesses, the dream to become a 100+ year old family business simply isn’t in the growth plan. Although many would love to boast a banner stating “Since The Epoque of the Dinosaurs”, for many business leaders in this phase, it’s simply about reaching a phase of productivity that affords themselves, and their teams, a successful next step – in whichever direction that may be.
- If you’re planning to expand into new markets (even internationally), you’ll be up against the challenge of innovating like a Seed-stage business, and moving like a High-growth one. You may need to review the team that works with you on your expansion, and sense-check their capability to be as nimble as you need them to be – regardless of your next steps.
- If your plan is to sell up and move out, you’re going to require a realistic valuation of your business. You may have taken years of hard work to build your business to what it is today, but being honest about the true value in the current marketplace is critical to seeing any kind of hopeful resolution that delivers commercial reward.
- If you plan to close down your business, you will be faced with financial and psychological challenges of having to do that. Working with your teams towards a positive resolution will be critical if you aim to leave a positive legacy in the market.
- If your business is in the decline phase of life, then no doubt you’ll be facing severe financial concerns that lead to negative publicity, unhealthy corporate culture and increased stress.
What you need to be focussed on
- If you are planning on expanding into new territories, you need to be completely focussed on partnering and aligning with businesses that complement your existing experience and capabilities. Look at what Ikea did with TaskRabbit – a beautiful marriage of supply and production. Moving into unrelated business areas can prove disastrous for any mature business looking to expand.
- To avoid a declining business, or to attempt a business turnaround, you’ll need to be focussed on understanding how long the business is able to support a negative cash flow and what the necessary actions would be to implement a business turnaround. You may need to ask yourself what the true next step for yourself really is – and whether that answer lies within an Exit.
Regardless of your business phase, and whether you choose to move to the next stage or not, one thing is certain – you’re not going to get there without the right support. Understanding your next step is critical to helping you make the right decisions that will get you there. Ensure that you align yourself with the right business partners who have demonstrable evidence of having been there, and done that. Whether your business is a glowing success, or a dismal failure depends on your ability to adapt to changing life cycles. Choosing what you focus on and how you deal with challenges is your key to making the right step, in a direction that suits you, and your business, best.
If you’re ready to move towards the next growth phase, and you need help to get you there, then talk to us about helping you do that, positively!