A start-up is like a teenager, it is a temporary state. Those years are fraught with instability and unpredictability. According to startup guru Steve Blank, a start-up is a company in search of a viable (profitable, scalable, defensible) business model.
A more specific definition is the 50-100-500 rule from TechCrunch writer Alex Wilhelm. A company is no more a start-up but a mature business when:
- $50 million revenue run rate (forward 12 months)
- 100 or more employees
- worth more than $500 million
However, you can behave like a teenager in your adult years as well. Some companies call themselves start-ups even after they obviously became an enterprise. Why do they follow the tactics?
- They try to cultivate a «Start-up» culture, values, and mindset.
- The audience or market may be patient with start-ups and they excuse their mistakes, while a mature company loses this advantage.
When a company starts acting like a corporation, you will…do things differently just because of the tagline of a corporation attached to it.
Here we describe what you should pay attention to if you want to accelerate your start-up and join a mature companies’ club.
Business model
As a start-up is a stage for searching for a repeatable and scalable business model, a company becomes a mature one, when you clearly understand how you create, deliver and capture value, and most importantly — make money.
An entity remains a start-up until it decides on a profitable and scalable business model they want for the long term.
Starting a company, as a founder you have a series of hypotheses about all the pieces of the business model: how do we build the app; what to include in the initial budget; where to find capital; defining the customers/users, distribution channel, price and position of the product, your partners; etc.
As a founder, you should quickly validate whether the model is working by watching if customers act as you have predicted. For the most part, though, customers do not behave according to predictions.
To accelerate the process, founders do the following:
- collect customers’ references. If you can’t get their support, it might be a sign that probably the business will not scale at the rate you projected.
- expose your prototype to real customers. Collect the feedback. If it doesn’t relieve the pain, no business model will save you.
- ask for feedback on all stages. A LOT.
Profitability
Once a start-up becomes cash-flow positive, it means that the company is generating more revenue than it spends during a given period of time; or to put it simply, there’s money in the bank.
The company’s non-profitability does not imply that it is not growing or performing poorly. Some of the world’s most famous start-ups are not profitable, and others took many years to turn profits.
Companies trying to make and sell a product that’s new to the market could take an average of at least three years to become profitable, due to expenses like hiring experienced talent and marketing costs. In contrast, home-based businesses that start small can quickly grow and generate profits.
Just consider B2B SaaS VS an e-commerce company.
To accelerate the process: Focus on established revenue sources.
Don’t just try to get new customers; instead, focus on the core customers you already have. You can implement a referral or customer loyalty program, as well as try out marketing strategies based on previous purchase behaviors to encourage repeat business.
Revenue planning
Mature organizations know the importance of revenue planning. A company that accurately forecasts its revenue is one that has exited the start-up phase.
It is startling how quickly start-up companies can transition from growth focus to profit. Investors usually impose new directions when the user base reaches a reasonable threshold and competition loses its grip on the market. Regardless of the trigger, start-ups are maturing when they start planning their revenue.
To accelerate the process: Reduce your risks.
- Work on a risk management plan
- Buy insurance
- Limit high-risk customers
- Train your employees to focus on quality, not quantity
Set team management
In the beginning, you might not need a system for managing your team of 5 to 10 people. You set tasks and discuss them in messengers, meetings, or video calls.
When your team is growing, without set management processes, you will miss tasks (which can lead to lower quality), deadlines, and take other unnecessary risks.
To accelerate the process:
- Regularly communicate with your team. It’s about being engaged with everyone and clearly articulating your vision
- start implementing tools for managing tasks, planning, keeping files and documents, resource scheduling, file-sharing, bug reports
- сreate process documentation. The docs provide employees with a standard that leads the whole work to consistency, reduces errors and confusion, and ultimately eliminates inconsistencies. It creates efficiencies and reduces the need for excessive training and retraining.
Develop a knowledge management system
Knowledge management is the process of centralizing all knowledge about the business into a single system, bringing all employee expertise together, and making it easily accessible.
Lack of the system might lead to longer and inefficient processes, lost sales, lost customers, and employee turnover.
To accelerate the process:
- as a founder write down and share with employees your knowledge about the product, business logic, main terms
- engage employees in knowledge collecting and sharing
- organize the system clearly, so everyone can easily find and understand what they need for completing a task
Defined organization structure
A start-up needs to be flexible and unstructured in order to succeed early on. However, without strict discipline and structure, it’s impossible for a new business to evolve into a prospering company.
Organizational structure is the relationship between different roles in an organization. The structure is the roles and decision rights that help you achieve your company’s objectives, vision, mission.
To accelerate the process:
- define the roles based on what is needed to be done. One person might fulfill several roles
- think about the scope of responsibility and the level of decision-making authority
- create role description. You will use them externally (for recruiting) and internally (for alignment, accountability, assessment, and development)
Team of professionals
Without great leaders and then the right people in place, even the best idea is going to struggle. It is fine to look for experts from your friends and acquaintances, but, please, do not limit yourself to the source.
To accelerate the process:
- When you are actively growing, first of all focus on recruiters and tech employees, who can hire.
- Try to hire promising talent from the very beginning
- Network and build trusting relationships not only with potential investors but with talented individuals, your potential employees, and partners
- Simply collect connections in social media — it will help to find a good talent faster
On-going optimization
It is a common situation when the development of a company is concentrated in the hands of the CEO, founder, or business owner. To assure that his company is continuously developing, he maintains regular communication with department heads. When he switches to another question, the flow becomes static.
To accelerate the process:
Implement quality control practices or even hire a separate person responsible for it. This will help you set endless development and growth of your business.
The details about how to set up the process of quality control.
Brand
Your brand is not just your unique logo. It is a system of names, products, fonts, voices, logos, colors, positioning, and reputations that make up what a company is and how it is perceived.
If you have built a brand that speaks for itself, you own a mature company. You care less about the brands you worked for/with. Now, your own brand comes first. People you do not know recognize your company and are seeking to work with you.
To accelerate the process:
- Pick your focus and personality. No brand can be everything to everyone, especially at the start
- Work on your name to be it easy to pronounce and remember
- Leave time to choose appropriate colors and fonts
- Think about your current mission and values, which comes from your business story and future plans
- Be consistent. Everything that involves your business should fit perfectly into your style guide as an example of your design elements.
Conclusion
To become an established profitable company, you should clearly understand the difference between start-up step and maturity. So you know the next steps on the way to stable business and are able to accelerate your start-up.
