In part 2 of this series on the 4 stages of growth, we will discuss the pressures your B2B start-up or SME can experience as you progress through the third and fourth stages: Spreading and Corporatization.
Businesses at this stage typically have 30 or more employees. The aim of this stage is about making growth part of the DNA of your start-up or SME. However, it is at this stage where many start-ups or SMEs find growth slowing or even completely stopping.
The main reason for this is that bringing order to the chaos of the formation stage by establishing processes and systems can inhibit the flexibility and creativity of your business and its ability to innovate.
Key Characteristics of the Spreading Stage include:
- Strong recurring revenues that provide financial stability
- An established organizational structure that identifies your people and where they fit within the company
- A team of manager to build and maintain different functions within your business as well as help create systems, processes, focus and efficiency
Pressures that start-ups and SMEs can face in the Spreading Stage include:
- Increased overheads due hiring more staff, investment in technology to support larger teams and managing customers
- Reduced flexibility due to the established organizational structure that stifles innovation by hindering the ability to respond quickly and in an unstructured way
- Hierarchical Decision Making where staff must now work through others to get things done
WHAT TO DO
- Obtain external guidance on how to:
- Manage finances
- Establish effective hiring policies
- Retain quality people
- Review your strategy
- Revisit your company’s purpose and how it should guide your company structure
- Review your vision and mission
- Make sure they are realistic, clear and well communicated
- Involve your people by asking them to reflect on the company purpose and their place in helping to achieve it
At this stage, you are running a start-up or SME that has grown significantly up to about 100 people. The business resembles more like a mini-corporation.
Your business is structured around vertical lines of capability such as:
- Sales and Marketing
- People and Culture
Other key characteristics include:
Looking for Secondary Opportunities: As your core product offering matures and revenues from new and existing clients soften, you are thinking about how you can leverage existing customer relationships to grow new lines of revenue.
Geographic Expansion: Your B2B start-up or SME will seek to do business in other geographic markets. This may involve developing sales channel partnerships with complimentary businesses as well as setting up offices in new locations.
Product Lifecycle Management: While your original products and services are still relevant, you will need to develop a process to renew and manage the lifecycle of each one. By this we mean systematically improving your offers through controlled development and upgrades.
At this stage your business in reality has surpassed being a start-up or SME.
Some of the challenges that will come into play include:
- Red Tape: The efforts spent developing processes and documentation to drive efficiencies and manage risk may result in a high degree of policies, procedures and bureaucracy
- Loss of innovation: Similarly, the increased focus on process, structure and efficiency can stifle innovation and creativity
- Loss of People: This will undoubtedly occur for a variety of reasons such as your staff pursuing external opportunities for advancement, better remuneration or cultural fit. Be sure to monitor and understand why people are leaving so you can identify ways to improve employee retention.
WHAT TO DO
The key to being successful in the Corporatization stage is to be able to establish the processes and structure needed to have a larger employee base without letting bureaucracy inhibit your start-up or SME’s ability to innovate.
Factors that drive successful corporatization include:
- Developing formal product management lifecycles to inform decisions on investment
- Focusing your marketing efforts to support your extension into new markets
- Create formal quality and risk management techniques
- Develop employee benefit programs to attract and retain the best talent
TAKE ACTION NOW
Review your business to:
- Identify which stage it is currently at and the pressures that exist
- Develop actions and strategies to address them during your annual planning cycle
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