We’ve seen it too many times: entrepreneurs continue to operate their growing businesses as if they are start-ups. The entrepreneurs don’t understand that businesses move through different stages as they grow, and that certain work needs to be done at each stage to keep the business growing. If the entrepreneurs do not do this work, their businesses will not continue to grow – they may even fail.
A few entrepreneurs are satisfied with “lifestyle businesses” that provide enough revenue for them to live on, but don’t grow beyond a certain revenue level. Most entrepreneurs we know, though, want to create ever-higher marketplace value by continuing to increase revenue goals, pursuing new ideas or lines of business, and even positioning their companies for sale.
At Vecker, we have studied what business leaders need to do at each stage of business growth, from the initial idea to creating the desired level of marketplace value. We have identified the work that needs to be done at each stage to keep the business moving toward its goals, and have helped multiple business leaders plan and implement this work in their own established companies. Part of the work involves helping entrepreneurs turn themselves into business leaders with the knowledge and skills to grow their businesses at all stages.
We have identified four fundamental stages of business growth:
- From Idea to Business. The work at this stage involves developing a business model around the idea and then creating a business plan to start operating in the marketplace. Doing this right is harder than most entrepreneurs think it will be. The entrepreneur needs to be able to explain exactly what the business does and how it works. The entrepreneur needs to understand how to manage at this stage and how to implement the work that needs to get done. Perhaps most importantly, the entrepreneur needs to be able to react to the marketplace and adapt to new demands and customer needs. The entrepreneur is focusing on operations, simply to start to get the results that suggest the business could be successful.
- Building the Business. At some point, the entrepreneur senses that the business can grow. At this point, the entrepreneur must start to think more broadly about what is needed to actually build a business. It’s no longer enough to operate in start-up/entrepreneur mode. Rather, the new business leader needs to start building an organization, getting basic governance in place, hiring and managing a staff, and developing that managerial processes to make sure the work gets done. This is the stage at which the most extensive changes need to take place, both for the entrepreneur personally and for the emerging business.
- Leading Growth. At a certain level of revenue (perhaps $5 million – $10 million), the business leader needs to make a decision about growth. Is the leader satisfied with the now-established business? Or does the leader want to grow the business further? Many leaders want to continue to grow their businesses, but they find that they cannot get the growth by doing the same types of work. For established businesses, growth comes through understanding how the work needs to change and having the ability to implement this new work. Often, there’s a pivotal event – a new customer or opportunity or idea – but this pivotal event needs to be managed to create sustained growth. At the same time, the leader needs to continue to build the processes and structure of the business, without creating issues that interfere with growth. New types of decisions need to be made (they’re different from the ones the leader has dealt with so far) and options clarified, so the leader can select the right paths forward.
- Creating Marketplace Value. There is a difference between building a business and creating value in that business that is recognized by the marketplace. We’ve seen many entrepreneurs build businesses and then find that they can’t sell the businesses – they can’t find a buyer who perceives that the business has value itself that can be sustained to lead to further growth. Business leaders who want to create marketplace value need to focus on strategy, vision, and the processes and structures that sustain growth. They need to focus on the set of decisions that lead to long-term continuity of the business, instead of just short-term revenue or results. They need to build out all aspects of the business, so it becomes a defined, complex, highly-functional entity with a dedicated staff and strong position.
When the Vecker team works with established, growing companies, we help define what needs to be done to move from business stage to business stage. We help the leadership team develop vision and strategy for business growth and then plan, execute, and evaluate the work to implement the strategy. We work with leadership team on identifying the decisions that needs to be made and selecting the options that keep the business moving toward its goals. We focus on building the business itself – structure, operations, and staff – to create recognizable marketplace value.