In the United States alone, around 600,000 new businesses are started by entrepreneurs each year. Few of them, however, succeed; according to the Small Business Association, 30% of new businesses fail within their first two years of opening – 50% fail during the first five years, and 66% fail during the first ten. Many of these businesses fail because they lack financial support or operational understandings; in essence, they lack an understanding of where they stand in their growth stages, so they end up misguided in their efforts, focusing on the wrong aspects of the company at the wrong time. We have established the gravity of misunderstanding one’s growth stage; it is clearly important for any executive team or business owner to understand where they are in their company’s growth.
AdvisoryCloud, an online platform that connects companies and advisors around the world, outlined the five main stages that every company undergoes to help business owners better self-assess. Let’s review the stages to help you understand where your company stands and which aspects you should be focusing on. If you are able to recognize the stage that you are on, you can identify how you should be delegating tasks, whether you need to take a step back and focus on a prior stage of growth, and whether you are in a position to begin seeking mentorship from other experts.
Stage 1: Development… Turning Your Idea into a Business Plan
“Failing to plan is planning to fail.” – Alan Lakein
Ideas come and go, and many are never realized as something concrete. Therefore, the first step of starting a business is creating a business plan that will empower you to turn your ideas into reality. This is a step in which you should not rush. Take the time to ensure that you are outlining and assessing both your short-term and long-term objectives.
If your company is in development, it is important to confirm that your business plan covers all aspects necessary. This will be beneficial especially when you are seeking funding for your business. Some sections to make sure you include in your plan are the executive summary, which includes an outline of what problem you are solving; identifying your market; identifying your team; and, creating a financial model, to name a few.
During this phase, according to AdvisoryCloud, you will want to ask yourself the following questions:
- Will this idea be well received in the market?
- How do I establish a strong business structure?
- How does the product/service compare to the competition?
- Will this idea be profitable?
Once you have diligently completed your business plan, it is time to move to stage two. Know that you may already be there!
Stage 2: Startup…Turning Your Business Plan into a Reality
“Some people dream of success, while other people get up every morning and make it happen.” – Wayne Huizenga
The startup stage is the most challenging and is the stage in which a majority of companies fail (hence, you want to have a detailed business plan before getting started). The startup phase is essentially the launch of your company, a time in which you are starting to sell your products and/or services. There is no one-size-fits-all way to approach this phase of building your business. Everyone works differently, so focus on the progress you have made thus far before deciding what comes next. Some aspects you could focus on include raising money and/or seeking investments, hiring a team of employees, managing expectations from sales and cash flow, establishing a customer base, landing new accounts, or building a market presence.
During the startup process, you want to ensure that you are establishing your company – both in the market and with your financial model. Most companies lose money at this point, but it is a time of investment – they are building the foundation for the future of their business. If you are working on your launch, you want to be careful not to jump to stage three too quickly, which is often a cause of diminishing returns for companies. Be sure that your foundation is solid before proceeding.
Stage 3: Growth…Fine-Tuning and Preparing for the Future
“Growth and momentum are what a startup lives on, and you always have to focus on maintaining these.” – Sam Altman
You will know your company has reached the growth phase when it is in the green – that is, making money and retaining clients. In accordance with reviews of AdvisoryCloud’s outline, the growth stage is a time to focus on fine-tuning your business model, identifying new markets, and preparing to scale your business.
During this stage, although you may be excited about the positive cash flow your company is experiencing, it is also an essential time to use your profits to continue to invest. Base your investment decisions off of an honest assessment of where your biggest challenges lie. Maybe you want to streamline your operations or expand you customer base? Whatever it is, it is imperative that you do not slowdown in stage 3 and instead identify how you are going to use your proceeds to expand further.
Stage 4: Expansion…Growing Your Business
“Risk more than others think is safe. Dream more than others think is practical.”
Now that you have ironed out all of the kinks, it is time to grow your business. By this point, you should have your operational processes in place and your team established. Therefore, during the expansion stage, you are aiming to expand your customer base and increase your revenue stream.
Avenues through which you can expand include adding new products or services, advertising and selling more products to existing customers, expanding into new territories and new customer markets (for example, geographically and/or to a new generation), acquiring complimenting businesses, and/or implementing smart hiring practices.
Stage 5: Maturity…Maintaining Profits and Development
“No company can afford not to move forward. It may be at the top of the hill today but at the bottom of the heap tomorrow if it doesn’t.”- James Cash Penney
A company that has reached stage 5 is established in its industry and is now dedicated to maintaining profits; the business owners are still focused on expanding but generally witness a slower rate and are more dedicated to the maintenance of market share. Staying up to date on advancements in your industry will be necessary to ensure that your products and/or services do not become obsolete. If your company is in the maturity phase, you could be focusing on staying ahead of the competition, finding new areas for growth, managing investors’ expectations, and reintroducing innovation.
Why Understanding Your Company’s Growth Stage is Beneficial
As you can see outlined above, there is a variety of challenges that any company can be confronted with. You have probably also figured out that trying to force progress and move too quickly from one stage to the next is a recipe for disaster. Therefore, if you understand where you are and what your focus should be on, your chances of success are higher.
If you are stuck in any stage and find that you are unable to come up with a creative solution to moving forward, know that you are in good company. Few people reach success without mentorship, and seeking assistance from seasoned experts may be the best solution for you. Today, many companies build in mentorship by putting together advisory boards to help develop a strategic team that can combat the challenges every new business inevitably runs into. In the past, finding the right fit for members of an advisory board was difficult. Choices were limited to locale and the existent relationships or connections the founders of a business might already have. Fortunately, innovation and technology have broadened the path. Thanks to platforms like AdvisoryCloud, companies can now transcend those old boundaries and build an advisory team with the simple click of a button.
Benefits of an Advisory Board
Building an advisory board is not cheap, but it can be an invaluable financial investment; at the end of the day, most business people report that the board has helped push their bottom line by more than they could have possibly done on their own. An advisory board provides a fresh, outside perspective, offers business development opportunities, and improves strategic development. During every stage of a company’s evolution, a strong advisory board can help maintain momentum and build a platform for future success. If you are truly invested in figuring out what is next for your company and are interested in pushing it beyond what you thought was possible, consider building your own advisory board today.