Growing Pains

Businesses are like life, they are constantly developing and evolving and like life they go through different stages and these stages can be painful, challenging and rewarding. 

This article is intended to act as a guide, a check list to provide a high level outline of each stage of a business as it grows from birth to maturity and things that need to be considered at each stage of its development. It is not intended to be exhaustive as each business is unique in its own way, in what it offers,  the markets that it addresses and how it reaches those markets  and as such needs specific tailored guidance. 

That being said in many ways businesses are the same and this is intended to provide a guide for those aspects of a business that are similar.

Birth

Starting a business can be both exciting and painful. If you left the security of a salaried job to go it alone then it can also be very frightening with many unexpected challenges. Many businesses are started by someone with a great idea or a great product. 

However, the product or service needs to be defined in detail, it needs to exist not simply in the mind of the founder. The target market needs to be researched and analysed in terms of size and accessibility. The competition needs to be investigated and the relative price points identified and the route or routes to market need to be confirmed. 

As a founder, you need to be passionate about your new product or service and you need to be totally confident in its potential for success. You also believe that you can do everything that the business needs and this is usually where the problems start. There is a lot more to running a successful business than having the original idea; there is sales, marketing, credit control, customer support, product development, people management not to mention cash flow. 

There are many skills that a business founder / owner needs to have, however one of the most useful is humility , quite simply do not believe that you can do everything. Accept what you are good at and have the time to do and then get a specialist to do the rest. 

Finally, and this factor remains critical at every stage of development; Cash is king, nothing can happen without cash except failure. The old and well-worn adage that revenue is vanity and profit is sanity remains valid. Businesses that chase sales at the expense of profit believing higher sales numbers will give them greater credibility in securing funding are mistaken. Unprofitable businesses that secure funding are the exception rather than the rule. Unless you are another Facebook. 

Always watch your cash flow, prepare and maintain a cash flow forecast and make sure that it errs in the side of pessimism rather than optimism. 

Early years 

As the business develops you will need to start to grow your team, you will need to take on;  accounts people, support staff, operations and of course sales people.  As the business expands you obviously need to expand with it, but a few words of advice and caution. Only take on people that you really need, write a full job description for each role and stick to it, ensure that you have tight employment contracts with performance milestones and don’t contract with an employment agency.

In terms of sales, make sure that you control what you are selling, over trading can be just as terminal as under trading, do not sacrifice margin for revenue and always remember that cash is king.

Re-assess your positioning to ensure that you are still on message and still relevant to the market, talk to your customers and don’t be afraid to move away from your original idea.  Monitor the competition and market trends and once again don’t be afraid to change as required just make sure that any change is thought through beyond the immediate impact. 

Finally give yourself permission to delegate, if you recruited carefully then delegation should work. Don’t micro manage, a difficult ask but important to achieve, just make sure that your reporting structure ensures that you have full oversight.

Adolescence

This is probably one of the most difficult growth stages for most businesses, it is a coming of age and for most businesses marks the transition from a lifestyle business to a serious operation. 

It is time for departmental structures, documented processes, defined reporting lines, performance targets and full delegation. Effectively it is time for consideration to be given to the insertion of a middle management layer, this in itself should a staged process starting with the departments with the most and reliable leadership  and where the need is greatest.

For a founder this is probably  the most challenging time to date, the business effectively stops being his / her baby and become a proper business, this can be a traumatic.  The transition between ‘hands on’ leadership and management and full delegation can be a shock to the system. It is however a critical step in the development of the business and it needs to be approached methodically and professionally. 

If it does not already exist, then it is time that a formal board structure is put in place with specific areas of responsibility and a defined reporting structure. These roles do not have to be equity holding positions however serious consideration should be given to share options and share incentive schemes as these can be highly effective in retaining key personnel.   It can also be very effective in increasing commitment and productivity and if handled correctly it can improve morale. 

At this stage in the business, the use of external expertise should be considered, whether this is in the form of a formal Non-Executive Director appointment or an informal board advisor. An independent perspective can be highly beneficial if only as a sounding board and is highly recommended 

Finally continue to manage the cash situation and to monitor the market.   Talk to your clients.

Maturity 

When a business reaches maturity then it has to face a whole raft of different issues and different opportunities  but that is another story for another day 

Funding 

Funding is key to the start of the business and to its continued growth. Sources of funds are many and varied, just three pieces of advice , be realistic about the valuation,  be sensible about the amount of equity that can be given away and remember if the business needs any more equity based funding then there will be a further dilution of equity across the board. 

Funding options should be considered on a project by project basis and professional advice is very strongly recommended at all stages including a Friends and Family seed funding round