Going into business is the easy part. Staying there – that’s the hard part!
As budding entrepreneurs join the ranks of business owners, most manage to survive through the end of Year One. By Year Three, however, data shows that 44% are no longer in business – their businesses have failed. By Year 10, 70% are no longer in business.
How do businesses manage to be among the 30% that survive long-term? Understanding the characteristics and challenges of the three major development stages your business will experience will help your business survive and thrive.
In today’s column, I will share advice I offer in workshops for business owners whose businesses are in varying stages of development.
The business development stages:
All start-up businesses experience three distinct stages of development: the Startup, the Survivor, and the Success Stages. As the statistics mentioned earlier bear out: only 30 of 100 business startups will survive long-term. Of the 30 that survive, even fewer will achieve the definition of a successful business.
What is a successful business?
The goal of any business owner is to become successful. We don’t define success by business’ revenue or the number of employees it has. Our definition is simple yet effective: A successful business is an organization that consistently makes current customers happy and gets new customers while earning a profit.
What does it mean to have a successful business? It means that it can survive in the owner’s prolonged absence. On a daily basis, its operation focuses on making current customers happy while obtaining and absorbing new customers. And finally, a successful business makes a profit. Profit means that there is cash left over to save or reinvest in the business after all the bills and the owner are paid.
Stage 1 – The Startup Stage
The Startup Stage is entered when owners take the plunge. They begin to offer their product or service for sale to the public. Unfortunately, this is also the stage where enthusiasm and excitement often distract owners from asking some basic business questions about the viability of their business idea or concept. My advice to budding entrepreneurs is to step back, take a breath, and then ask and answer these basic questions.
Five Key Business Viability Questions to ask (then revisit often):
Answering these questions will require you to think seriously about your business. It will provide the information you need to determine if your business concept is viable and provide the framework for a business plan. Revisiting these questions throughout each stage of business development will provide direction and critical information for continuing to survive and succeed.
Additional characteristics of owners in the Startup Stage are that they often experience poor cash flow and high debt. They are also frequently the primary worker in the business.
Your Goal at the Startup Stage: To survive.
Stage 2 – The Survivor Stage
Making it to The Survivor Stage means you have survived in business long enough to generate a positive revenue, but little to no profit.
Characteristics of the Survivor Stage include:
The Survivor Stage is where most business owners who make it through the Startup Stage end up, often indefinitely. Most owners in the Survivor Stage work more hours and earn less income than their counterparts working for others. They are strapped for both time and cash, which makes it very difficult to step away from the task at hand to plan and execute a pathway to success.
Transformational Stage: The Survivor Stage is also called the Transformational Stage of business development. Owners must realize that the survival skills they used to make the cut are not necessarily the same skills that will take them to long-term success. Change is often necessary at this stage if the business is to succeed. Business owners must change – transform – the way they view and interact with their business, its employees, and its customers.
In this stage, time management and delegation become critical issues. This is also the stage where systems, formal steps and procedures, are introduced and developed to replace the habits and personality of the owner. It’s also a good time to revisit the 5 key Business Viability Questions.
Your Goal at the Survivor Stage: To transform surviving into a successful organization that keeps current customers happy, gets new customers, and earns a profit.
Stage 3 – Success Stage
Congratulations! Your business is an organization that consistently makes customers happy, gets new customers and earns a profit!
Characteristics of the Success Stage include:
Smooth Sailing … Caution!: Business owners in the Success Stage can often become distracted by the sense of smooth sailing that accompanies success. Often, entrepreneurial excitement, energy, and competitiveness that led to success have cooled. The systems that replaced your habits may have degraded to bureaucracies and policies that are no longer customer-centered. If these symptoms exist in your business, you need to take steps to reinvent an entrepreneurial, customer-focused culture.
In the Success Stage there is often abundance of what you had little of before – money. As a result, there may be a tendency to throw money at challenges rather than face them head on. There can also be a temptation for the owner to develop a lifestyle which oversteps long-term financial reality or to invest in projects outside of the business’ core competencies or mission. My advice is to keep your Money-Head. Keep focused, and stay lean, effective, and efficient. And, again, remember to revisit the 5 Key Business Viability Questions.
Your Goal at the Success Stage: To decide whether to maintain or grow. Owners of mature businesses must also decide whether to reinvent, relinquish, and possibly even retire the business.
Business is a challenge. Going into business is easy. Staying there for any length of time is hard. Entrepreneurs face challenge after challenge after challenge as their businesses evolve. Armed with knowledge of how businesses evolve and what to do during their evolution ensure that your business not only survives, it prospers.
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