Sunday, March 20, 2016

The 4 Stages From A Startup To A Sustainable Business

business-stagesAccording to most definitions, an entrepreneur is one who envisions a new and different business, meaning one that is not a copy of an existing business model. Many entrepreneurs have a passion and an idea, or even invent a new product, but are never able to execute to the point of creating a startup. Even fewer are able to grow the startup into a viable business.

As a mentor and advisor to entrepreneurs and startups, and an Angel investor, my passion is to find and nurture those entrepreneurs with innovative business ideas and acumen, to make them into successful business owners. I fully realize that for some of the best entrepreneurs, success is surviving the journey, and they can’t wait to hand off the new business and start another one.

Thus, in my view, entrepreneurship is an evolution of an idea through a series of developmental stages, culminating in a self-sustaining business. A business is an entity which exchanges goods and services with people outside the business (customers) for money, social good, or something of equal value. Here is a summary of the key stages along the way:

  1. Idea and seed stage. In this first stage, a specific idea or passion is solidified into an executable plan. Typically this is done by one or more entrepreneurs with personal or family resources, with no business entity yet formed, so they would not yet be considered business owners. Market research and a business plan should be the focus at this stage.

  2. Startup and development stage. The development stage normally begins with designing and prototyping a product or service, and creating the company legal entity. While legally the entrepreneur has created a business entity, there is nothing of value yet to own since the company has no solution to offer, no customers, and no revenue.

  3. Funding and rollout stage. At this point investors should be interested in buying a chunk of the business. It is arguably sustainable with a proven value proposition and business model for customers, and operations processes that work. The entrepreneur now becomes a business owner, and must start thinking like one to get to the next stage.

  4. Growth and scaling stage. This is the stage where most entrepreneurs exit, get pushed out, or learn to operate as full-time business owners. Business owners know that growth as a business versus a startup requires replicable and documented processes, a focus on marketing and sales, personnel management skills, and detailed planning.

Another way of determining when an entrepreneur becomes a business owner is to look for the mindset change required to build and maintain a successful business. Every entrepreneur needs to compare his strengths and aspirations to this business mindset:

  • Satisfaction from business success versus the big idea. Business owners get their satisfaction from happy customers and happy stakeholders. Entrepreneurs are more focused on thinking big, stepping into the unknown, and changing the world. They embrace risk, while a business owner seeks to reduce and manage risk.
  • Seeking a stable environment now versus a better future one. Good business owners like a predictable market where they can make calculated decisions to improve and grow. Entrepreneurs love to envision breakthroughs and disruptive technologies, with tough problems to overcome, which will allow them to create lasting change.
  • Relish repeatable activities and processes versus new challenges. Most small business owners enjoy the completion of daily and weekly tasks, and cyclical processes, like inventory and receivables. True entrepreneurs are always thinking many months out, anticipating the next opportunity and the next recognition for innovation.
  • Long-term attachment to the business versus the idea. If you see the business as the core of your worth, you will make a great business owner. Entrepreneurs see their value in the change they accomplish, and their impact on the future. True business owners dream of keeping the business in the family, and making it a long-term success.

Yes, there are notable entrepreneurs who make the transition from the big idea to a big business owner, including Bill Gates and Mark Zuckerberg. But there are thousands more whose interests revolve around being a better entrepreneur. Others start and end their careers as business owners, by buying an existing business, inheriting a family business, or buying a franchise.

So I believe the bottom line is that most entrepreneurs never really become business owners. They may step into that space for a few years to maximize the impact of their idea and personal return, but their heart is in their next venture, and that’s the way it should be. Neither money nor business success will buy you happiness if you aren’t doing what you love. You decide.

Marty Zwilling

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