Take your start-up company to the enterprise level

Moving up from mom and pop status can be challenging. Photo: various sources

MANILA, June 16, 2013 – If your start-up business is becoming a success, taking it to the next level will usually prove to be surprisingly difficult. That is because the business has now passed the survival stage and may now be looking to become a significant player in the market, assuming that’s what you, as the founder and owner, aspire to become.

But this phase also requires some serious soul searching. It also marks the point where any business owner will need to decide whether to stay as a mom and pop store or become that major industry player. If you decide in favor of mom and pop, you still need to keep a sharp eye on your competition, but you no longer necessarily need to strive as endlessly as you have before.

If you plan to head for the next level, however, your first success plateau marks the point where you are forced to make the transition from the old to new. And the new will force a series of hard decisions, the phase where the real growth pains of a business begin.

Before moving up to the next level, there is a presumption that a vision of the company is already set and embraced by everyone in the organization in order for the company to move forward. The corporate core values and competencies have already been solidified and are adapted by everyone, from company management to the rank and file, since small businesses tend to start and grow with just a few dedicated and committed individuals at least at the outset.

Personnel issues

As has already been indicated, a start up business gearing up to expand must have  on board a team of talented and skilled individuals. Such personnel, whether existing staff or new hires, play a huge role in a small company’s operations. This core group of key people will form the internal engine that helps move the company forward.


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In hiring and promotions, however, management should however be cautious as to not be blinded by talent and skill alone. These are qualities that can be learned and developed but should not be the sole determining factor on who stays and who leaves. Attitude, specifically, a positive attitude, should also be a prime consideration for an ambitious start up when hiring and recruiting new talent. An employee with a good working attitude who also shares the company’s vision will help lower the cost to acquire such talent from outside.

Cost is not just monetary in this context, because management will also invest time and effort to train a new individual. For that reason, a promising existing employee who’s already plugged into the growth program, is often the best “hire,” as he or she already possesses the company vision and can learn to help the company grow from a higher or management vantage point.

Looking outside for such individuals, although it is sometimes necessary, will often “cost” more than an internal promotion, given the the time and the effort (and cost) that is also needed to improve other business operations such as product quality and service as well as  revenue generation.

A successful but still relatively new business is a like a team that has made the playoffs for the first time. Some players are happy just to be there, while others, the great ones, are setting their sights on the championship trophy. A successful, growing enterprise always has plenty of the latter.


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Internal or bank-funded expansion

Depending on the ambition and grit of the business owner who runs the company, every successive business goal will be different. Some CEOs are satisfied with taking a piece of the pie in the marketplace. The bold ones, though, are not content with just a slice of market share. Instead, they want to dominate their market.

If you are one of those aggressive, world-beating CEOs, the first thing that you need at this point is funding. But at this stage, this poses a dilemma.

On one hand, the company is looking to expand and needs to pump up its revenue. On the other hand, a small business owner is still instinctively inclined to wait this period out,  prudently saving up money to hedge against any potential loss a failed expansion might pose while accruing capital for expansion. The problem here, though, is time itself. While you’re busy retaining profits to eventually forge ahead, chances are you might miss a magic opening for opportunity, allowing one of your competitors to make the first, and possibly, winning move.

On the plus side, internal funding for growth doesn’t risk the loss of control to outside investors. A new entrepreneur will often try to avoid this risk. So self-funding, funding via a small bank business credit line, or both, is often a good option, at least initially.

Internal funding is not that much of a problem for an entrepreneur looking to grow his business, assuming he or she has already achieved some level of success as well as profitability. Revenue should not be the sole basis for determining the health of a business because it is recorded by past events, not current actuals or future projections. Cash flow and profitability are better measurements of success and sustainability.

The challenge, though, is how to monitor and track your cash flow, revenue and profit. Companies should always be aware each quarter as to how sustainable their cash flow really is with regard to the next.

For that reason, it is good business practice to forecast the trends of the industry in order to see whether that industry’s level and quality of goods and/or services still tracks with what their customers need. If a company spots a declining trend in orders or inquiries from their customers, its staff should investigate whether the company is losing customers due to operational or quality issues, or if the over all need or supply is not what is used to be.

Create a system for tracking everything. To achieve the next level of success, the company should have a smoothly functioning system in place for accomplishing this objective. This system varies depending on the nature of the business, but it should be in place before entertaining any thoughts of expanding. It does not need to be perfect, because there will always be room for improvements but it is important that that system is adhered to by all involved in the organization. This system will be the test how strong the company structure is.

This first expansion scenario is not a threat because the solution remains within the company’s hands. Changes and refinements in operations or management style or both is what is needed to reach the next stage. Contingency plans, perhaps including additional bank credit lines, should also be in place.

Outside funding

Playing with in the majors is a whole new ballgame. Bigger, better more vicious competitors and customers will eat you up if you do not know what you are getting yourself into. Investors, known as “venture capitalists” are the normal friendly predators who typically knock at any start-up businesses’ door. And sometimes a small business will approach them.

Big businesses generally love to invest in promising start-ups, particularly in an improving economy where money is easier to move. It may be tempting for a small, growing company to do a deal with them, too, especially if they are dangling that proverbial carrot over your head.

The decision to strike a deal with venture capitalist should be thought over and considered very carefully, however, because once they invest in you, they have the right to see your financials which begins to get them inside your carefully-guarded corporate tent. Not trusting outsiders too much, at least initially, is a great precautionary move because you may never know their true motivations. As always, “trust, but verify” wherever and whenever you can.

Marketing

Marketing your successful start-up in a larger arena as it grows is not extraordinarily difficult. Chances are you have already a solid customer base that you want to grow, likely the reason you wanted to expand in the first place.

The first marketing effort an expanding start-up undertakes obviously involves their product or product line first and foremost. Once that first batch of customers proves to be satisfied with the products and services you provide, referrals and good customer feedback will inevitably follow.

As your company grows, customers outside your network will start to pay attention, and at this point the marketing strategy must begin to change and evolve. The next wave of customers are now aware that you have something good going on but are still not advocates of your brand.

For that reason, a long-term marketing strategy should be already be in the works at this juncture, ready for completion and implementation. This strategy should include a brand content strategy, building and strengthening strategic partnerships with your networks and customers and being fully committed to your company’s vision, the latter of which should start appearing in individual product campaigns as well, giving you that critical corporate “look and feel” across all product lines.

Every potential entrepreneur should always bear in mind that growth pains, while sometimes extraordinarily challenging are not the hard part of moving up to the next level. As every parent of a 2-year old child knows, the stress of raising children is not waking up at 3 a.m. in the morning just because the baby is awake.

Real stress becomes evident a few months to a year or so later when that precious bundle of joy begins to walk and learns that destroying small objects and wrecking the house can be great fun. In many ways, an enterprise is just like that in its first years.

A brand new company is challenging and often fun, even if you’re working 18-hour days. That’s because you’re working for yourself, a few select employees, and your collective and personal vision for the future.

But it’s that tricky next-stage path, when your company’s sustained growth and product arc starts to appear on the horizon, when the going can get really tough and when things can start to fall apart or get out of control. Forging a new path for a bigger, growing company with a real future is like mastering the art of walking before you begin to run. If you master both arts, you’ll have gone beyond corporate survival and will be preparing yourself for the big leagues.

 


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Johann Carpio

Johann has a degree in Philosophy and Human Resource. He is a business development specialist at Xight Interactive

 

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