Fit for business
Do you feel secure or uncertain about your start-up undertakings?
The moment you make the decision to set up a business, you’re in the “business lifecycle.” This will see you journey from idea to starting, and if successful to development, through to the growth and transition phases.
Many who had been through the business lifecycle journey agree it takes a special kind of person to be an entrepreneur - to come up with an idea and transform the idea into flourishing businesses. When you consider that anything between 60 and 90 percent of startups doesn't make it past their fifth birthdays, it's worth taking the time to ask why?
Below, we are listing some of the important considerations and the questions that one needs to ask during the five key stages of the business life cycle.
If you fail to plan then you are planning to fail.
Stage 1: Seed and development
So, you’ve had a great idea for a business – congratulations! You’re officially at the seed stage. Now you need to plant that business seed and start to nurture it so that it can grow into a successful business.
This first stage of the business entity lifecycle is sometimes called the seed stage and sometimes the development stage, depending on the sector and the industry. It’s where you take your idea and start to assess whether it’s worth developing into an actual business. A business plan soon follows once key target areas are identified and a strategy is developed.
It’s here that you ask yourself:
- Does this concept, product or idea fill a need in the market?
- Will it be accepted in the market?
- How do I establish a business structure?
- Will this idea yield me any profits?
Although your product or service is small right now, never forget about what it could become. Even Facebook started as a thought – and you may need help in being able to imagine the true potential (and scalability) of your business idea.
Once you’ve analyzed the market and the concept and decided that it’s still worth pursuing, your seed is in the ground and you move on to the next phase of business entities.
Stage 2: Beginning - Start Up
Most entrepreneurs in this stage have decided to start a business and are actively building their market and offers. You might not have many or any customers, but you’re no longer sitting on the side about being an entrepreneur. It is crucial for startups to be incredibly resourceful and flexible regardless of funding – it’s a matter of testing and learning, and trying again, knowing that you are unlikely to have everything perfect from the outset. Startups must be committed to iterating until they get it right. You need to think about what’s truly innovative about the business, whether the products or services are sustainable, scalable and how large their potential market is. Other questions to ask include:
- How much money do you need (short-term and long-term)?
- How is financing organized in the short and long term?
- What kind of organizational structure do you need?
- What kind of resources and talents do you need to reach your goals?
- How do you attract and retain talent over time?
- What kind of technology do you need for your operations as you start out, and at future points in the business lifecycle?
- What regulatory requirements should you be monitoring (e.g. direct or indirect tax, accounting, social security, legal and payroll)?
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. Preparing well helps you do so successfully.
Stage 3: Running - Scale Up
The business takes off and the process of expansion begins. Entrepreneurs need to think about their growth strategy, including what’s driving growth and what the future direction will be. Regarding the upcoming challenges, entrepreneurs should consider:
- What are the operational consequences of the expansion?
- How do you expand talent?
- What is the tax strategy?
- Is new financing needed and, if so, how should it be structured?
Decisions need to be made quickly to expand the business to new markets. This means updating the strategy and hiring new talents to reach the growing phase and meet potential new investors.
Stage 4: Growing - Stay Ahead
Reaching this phase means that the business is generating income and attracting new customers consistently. The start-up should now improve operations and minimize risks. In a first step, this means identifying and mitigating key risks. Other questions to ask include: How can you optimize profits and reduce operational costs?
- How can you improve supply chains?
- How can you improve governance?
- Can the legal structure of the organization be improved?
- Does the company need to set up an employee stock plan to retain talents?
- Is there a consolidated reporting requirement for the top management, owner(s) or investors?
- Should you consider reporting according to international accounting standards?
- How can you gain tax efficiency?
- Do you need new technology to support current and future growth?
At this stage, monitoring the risks and operations is essential. Indeed, these components may positively or negatively impact the valuation of the start-up today or tomorrow.
Stage 5: Reinvent or Transition
Over the years, financials stabilize while operations become more complex. The potential transition phase has been reached and it is time to plan the future. It’s natural to want to maximize the value of the company, but how can this be achieved? It’s important to think about:
- What is the value of the company or assets?
- If you are planning an IPO, what are the information requirements?
- What kind of transaction would be required?
- Who can perform transaction due diligence?
- Who can support you in compiling documents for this transition?
Transition is the most challenging step in this journey. It can bring changes for the shareholders, investors, stakeholders, employees, management, and operations.
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!
June 6, 2018