Start-ups: 80% of Your Growth Depends on This
Most businesses fail within a few years of starting up. Often, it's because they haven’t successfully identified a market or crafted a good enough plan to capture it.
That doesn’t have to be the case, says Les McKeown, a business consultant and serial entrepreneur who spoke at Inc.'s GrowCo conference on Thursday morning in New Orleans.
Instead, you can actually manage your business along a predictable curve of seven stages that will not only let you grow, but scale. On stage, McKeown talked about four of these stages, why they're critical, and how to manage your business as you hit each one.
“These are very difficult and dangerous and [stages], when an organization’s existence is at risk, even when everything seems like it’s great,” said McKeown, noting that he's founded 42 companies himself.
Stage 1: Early struggles of the start-up
The founder is often a visionary with millions of ideas, driven by a sense of purpose and the need to define a particular market he or she wants to develop and capture. Entrepreneurs with new businesses must devote themselves at this stage to finding profitable and sustainable markets, and ones that will allow them to quickly replace seed cash with a constant stream of revenue. “This is the most dangerous point and there’s a very high mortality rate,” McKeown says. Today’s glorification of the start-up and start-up culture is dangerous, he says, because it encourages irresponsibility. In fact, starting a business is all about hard, relentless work.
Stage 2: Finding the Fun
After about three years of constant struggle, you’ve found your market and your niche. Though your market share is likely to be miniscule, you’re having a blast stealing business away from much larger competitors, and surprising new customers with how great you and your business’ products are. “This is all about sales, and it’s not hard to have triple-digit growth because this is coming out of nothing,” McKeown says. At this stage, you should be compiling the company myths and stories and building the brand.
Stage 3: Bringing in the "Operator"
Company founders are visionaries, skilled at discovering new markets, communicating great ideas, and having the chutzpah to make things work. But these visionaries don’t often make good managers of the ordinary details that make a business run day-to-day.
Now it’s time to bring in someone McKeown calls the “operator,” someone who’s passionate about making the business work. “If you were a banker and a visionary came along and asked you for money for the start-up, and all they had was visionary tendencies, would you give them money?” McKeown asked rhetorically. No, he says, but the same banker might fund you if you are working with a good operator.
Stage 4: Bringing in the “Processor"
Your business continues to grow, and it’s likely the Operator has become an important right hand man--a “Big Dog,” as McKeown says. That’s when businesses are likely to hit another snag--you’ve become big enough to fail, whether that means screwing up an important order or delivering the promised goods late.
What you need here is a partner who can apply systems and processes to your organization. This might be a chief financial officer, or a chief technology officer, or some other manager. But this person is a delicate addition to the team, because number one and number two may tend to blame the processor for making changes to the status quo. “There is a need for a processor, but the visionary and the processor don’t play well together, so the processor is on thin ice,” McKeown says. Similarly, the operator may blame the processor in the beginning if the new system has bugs that need to be worked out.
At the end of the day, 80% of your company's growth is going to rely on how well you can manage the tensions between the number one, the number two (often the operator) and the processor.