Venture Maturity Levels
From the moment you make the decision to start a business, you are in the so-called “business life cycle”. This leads you from the idea to the foundation to the growth and maturity phase.
It can be said that managing a startup or scaleup is a challenge at any point in time. However, a look at the individual phases of a company’s life cycle makes it clear that there are a number of specific challenges that your company must successfully navigate. In fact, market penetration requires a different approach than growth or market share retention, for example. Therefore, you should be flexible in your thinking and adapt your strategy accordingly.
According to the latest startup Genome Report, an estimated 90% of startups already fail primarily due to so-called self-destruction. So then, it’s the founders’ own bad decisions or lack of preparation, rather than so-called “bad luck” or market conditions, that are responsible for the ruin. By understanding each stage in the lifecycle of your business, you can gain a head start by already being familiar with the potential challenges and obstacles of each stage.
Simply put, as your business grows and evolves, your business goals, priorities and strategies change – and that’s why it can be helpful to be aware of what stage of the business lifecycle you’re in.
So in this blog, we’ll walk through the elementary stages of your business journey and enlighten you on important fixed points and challenges within each stage.
The stages of your corporate journey
Phase 1: Seeding and development
This is the very first phase of the business lifecycle, even before your startup officially exists.
You have a business idea, and you’re ready to take the leap. But first you need to assess how viable your startup will be.
At this stage, you should therefore seek advice and opinions on the potential of your business idea from as many sources as possible: friends, family members, colleagues, business partners, or industry experts to whom you may already have access. Ultimately, the success of your business depends on many factors – including your own skills, the readiness of the market you want to enter, and, of course, your financial foundation (how can you finance the launch?).
In a way, this is the soul-searching phase. Here you take a step back and consider whether your business idea is actually feasible and what changes it needs to actually start successfully.
Phase 2: Founding your StartUps
Once you’ve thoroughly vetted and tested your business idea and are convinced it’s ready to go, it’s time to make it official and launch your startup. Many believe that this is the riskiest phase of the entire lifecycle. In fact, it is believed that mistakes made at this stage will affect the business for years to come and are the main reason why 25% of startups fail to reach their fifth birthday.
Adaptability is key here, and much of your time at this stage should be spent tweaking your products or services based on initial feedback from your first customers. In fact, you may end up making so many changes to your offering that you begin to doubt your business idea. The most important advice at this stage, therefore, is to fight through the fuzziness and interpret it as a natural given rather than a failure. Don’t lose sight of your compass and rest assured that clarity will come again.
Phase 3: Growth and establishment
By the time you get to this stage, your business should already be generating a consistent revenue stream and regularly attracting new customers. Cash flow should gradually improve as recurring revenue helps cover current expenses, and you should look forward to seeing your profits slowly and steadily improve.
The biggest challenge for entrepreneurs at this stage is dividing time between a whole new set of demands that require your attention: Managing increasing revenues, taking care of customers, dealing with competition, accommodating a growing workforce, etc.
Therefore, to fully realize the potential of your business at this stage, you should hire bright minds with complementary skills.
It’s important that you begin to establish your role as the leader of the company at this stage. While you’ll still be on the front lines often enough, realize that your growing and highly skilled team will take over much of the work that was previously firmly in your hands. So it’s now your job to provide real order and cohesion by mobilizing and recruiting your teams according to clearly defined and communicated goals.
Phase 4: Expansion
At this stage, you may feel that running your business has become almost routine. There are employees to take care of the areas you no longer have time for (and therefore shouldn’t be managing), and your company is now firmly established in the industry. Now you should think about how you can take advantage of that certain stability by expanding your horizons through broader offerings and entering new regions.
Companies at this stage often see rapid growth in sales and cash flow now that the concept is established, but be warned not to get too comfortable: If you’re not moving forward in business, you’re moving backward, and without a constant, almost nervous itch or desire to expand, complacency can set in that can result in the failure of your business.
Of course, there are two sides to this coin as well, and the other is the danger of expanding too carelessly. While there is no crystal ball, and it is very difficult to predict the outcomes of your ventures, you can give yourself the best possible chance of continued success through careful planning. Therefore, take a close look at your resources, be realistic about effort, costs, and potential returns, and always keep in mind how expansion might affect the quality of service you provide to your existing customers.
Also, remember that while having a successful business model behind you is undoubtedly an advantage, it is no guarantee that it will work in other markets or that new offerings will bring the same success. The corporate graveyard is littered with companies that tried too hard and failed. Your job, therefore, is to take on new challenges and keep expanding, but with thought and careful planning.
Phase 5: Maturity and possible exit
Having successfully navigated the expansion phase of the business lifecycle, your company should now be generating stable profits year after year. While some companies continue to grow sales at a reasonable pace, others struggle to achieve the same high growth rates.
One could say that entrepreneurs are then faced with two options: Either they push for further expansion or they give up the business.
If you decide to expand further, you need to ask yourself the same questions you asked yourself during the expansion phase: Can the company handle further growth? Are there enough opportunities for expansion? Is your company financially stable enough to survive an unsuccessful expansion attempt?
And most importantly, are you the kind of leader who is up to the task of further expansion at this stage? In fact, many companies change leadership at this stage and recruit an experienced CEO who is better suited to the new challenges.
Also: many founders also want to move forward at this stage by selling their company. This can be a partial or complete sale, and depending on the type of company (e.g. listed or private), the negotiation can be a whole new journey.
Navigating through the life cycle of a company
Not all companies go through all phases of the corporate lifecycle, and those that do don’t necessarily go through them in chronological order. For example, some companies may experience astronomical growth right after they are founded and the founders decide to cash out immediately and go straight to the “exit” phase.
For many businesses, however, there will be some similarity to the phases defined above, and knowing this can help you anticipate what’s coming next and how best to prepare yourself and your team to maximize your chances of success. Making the right decisions at each stage, however, is a challenge for which the usual mix of gut instinct and practical business sense is required.
However, the question now arises as to how you can achieve the greatest possible degree of maturity within these steps. In the following, we will therefore show you nine important points that you can use to give your startup the necessary maturity!
1. The business model
While a StartUp is a phase of finding a repeatable and scalable business model, a company becomes a mature business when you know exactly how to create, deliver and capture value, and most importantly, make money.
A company remains a startup until it decides on a profitable and scalable business model that it wants to operate for the long term.
When you start a business, as a founder you have a set of hypotheses about all the components of the business model: how do we build the app; what should go into the initial budget; where do we find capital; how do we define the customers/users, the distribution channel, the price and position of the product, your partners, and so on.
As a founder, you should quickly verify that the model works by observing whether customers behave as you predicted. However, in most cases, customers do not behave as predicted.
To accelerate this process, founders do the following:
- Gather customer references: If you can’t get their support, it could be a sign that the business isn’t developing at the pace you predicted.
- Introduce your prototype to real customers: Gather feedback from consumers at every stage of your business cycle.
Once a startup has a positive cash flow, it means that the company is generating more revenue than it is spending in a given period of time; or simply put, you are taking in money.
The fact that the company is not profitable does not mean that it is not growing or performing poorly. Some of the most famous startups in the world are not profitable, and others took many years to turn a profit.
Companies trying to manufacture and sell a product that is new to the market take at least three years on average to become profitable. This can be attributed to expenses such as hiring experienced employees and marketing costs. Therefore, to accelerate the profitability process, you should focus on established revenue streams.
Also, don’t just try to attract new customers, but focus on the regular customers you already have.
You can also implement a referral or loyalty program and try marketing strategies based on past buying behavior to encourage repeat business.
3. Sales planning
Mature businesses know the importance of revenue planning. A company that accurately forecasts its revenue has moved beyond the start-up phase.
It’s amazing how quickly startup companies can move from growth orientation to profit. Investors usually give a new direction when the user base reaches a reasonable threshold and the competition no longer has a grip on the market. Regardless of the trigger, startups are “mature” when they start planning their revenues.
To speed up the process, you should minimize risks in the following ways:
- Work on a risk management plan
- Take out insurance
- Limit high-risk customers
- Train your employees so you can focus on quality, not quantity.
4. Set team management
In the beginning, you may not need a system to manage your team of 5 to 10 people. You set tasks and discuss them in messenger services, meetings, or video calls.
However, as your team grows, without established management processes, you will miss tasks (which can lead to lower quality), miss deadlines, and take other unnecessary risks.
This is how you speed up the process:
- Communicate regularly with your team. It’s about engaging with everyone and clearly articulating your vision
- Start implementing tools for task management, scheduling, file and document retention, resource planning, file sharing, and bug reporting.
- Create process documentation. The documents provide employees with a standard that aligns all work for consistency, reduces errors and confusion, and ultimately eliminates inconsistencies. This creates efficiency and reduces the need for excessive training and retraining.
5. Development of a knowledge management system
Knowledge management is the process of centralizing all the knowledge about the company into a single system that brings together all the expertise of employees and makes it easily accessible.
A missing system can lead to longer and inefficient processes, lost revenue, lost customers and employee turnover.
To speed up the process:
- As a founder, write down your knowledge of the product, business logic and key terms and share it with employees
- Involve employees in gathering and sharing knowledge
- Organize the system clearly so that everyone can easily find and understand what he or she needs to complete a task.
6. Defined organizational structure
A StartUp must be flexible and changeable to be successful in the early stages. However, without strict discipline and structure, it is impossible for a new business to develop into a thriving operation.
The organizational structure is the relationship between the different roles in an organization. The structure consists of the roles and decision rights that help you achieve the goals, vision and mission of your organization.
To speed up the process:
- Define the roles based on what needs to be done. One person can fulfill multiple roles.
- Consider the area of responsibility and decision-making authority
- Create a role description. You should be able to use this externally (for recruitment) and internally (for alignment, accountability, evaluation and development).
7. Team of professionals
Without great leaders and the right people, even the best idea will fail. It’s okay to look for experts among your friends and acquaintances, but don’t limit yourself to that source.
To speed up the process:
- As you actively grow, focus first on recruiters and technical staff you can hire.
- Try to hire promising talent from the start
- Network and build trusting relationships not only with potential investors, but also with talented individuals, your potential employees and partners.
- Gather connections on social media
8. Ongoing optimization
It often happens that the development of a company is in the hands of the CEO, founder or business owner. In order to ensure that his company develops continuously, he is in regular exchange with the department heads.
To speed up the process:
Implement quality control procedures or even hire a dedicated person to do it. In this way, you can endlessly drive the development and growth of your business.
Your brand is not just your unique logo. It’s a system of names, products, fonts, voices, logos, colors, positioning and reputation that make up a company and how it’s perceived.
When you’ve built a brand that speaks for itself, you own a mature business. You then care less about the brands you’ve worked for or with. Now your own brand comes first. People who don’t know you recognize your business and want to work with you.
This is how you speed up the process:
- Choose your focus and personality. No brand can be everything to everyone, especially not in the beginning.
- Work on your name so it is easy to pronounce and remember.
- Take the time to choose appropriate colors and fonts
- Think about your current mission and values based on your company history and future plans.
- Be consistent: everything related to your business should fit perfectly into your style guide as an example of your design elements.
To become an established, profitable company, you should clearly recognize the difference between StartUp and Maturity. Only then you will be aware of the next steps on the way to a stable company and you will be able to accelerate your startup. Up4d accompanies you on the exciting journey to a successful company and is actively available to you in all phases.