When exactly does a business go from being a start-up to an established entity? Many argue it’s when you hit what Alex Wilhelm of TechCrunch dubbed the 50-100-500 rule: if your organizational revenue exceeds $50 million, you have 100 or more employees, or your value is $500 million or more. Others point to more subjective milestones.
In truth, you’re the final arbiter on when to stop calling yourself a start-up. Still, once you feel confident that this transition is underway, it makes sense to start thinking about the implications for how you will lead and how your company will operate moving forward.
Put another way: You’ve been relentlessly working in your business; now it’s time to take a step back and start working on your business.
Unfortunately, that shift in mindset and approach is often easier said than done. My years of working with founder-led companies have taught me that, for many leaders, the harried, all-hands-on-deck environment of a start-up feels comfortable. What comes next is uncharted and, therefore, unsettling territory.
Here are three key actions to focus on as you navigate this transition.
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Make Longer-Term Thinking a More Central Part of Your Strategy
Start-ups often prioritize short-term wins and rapid iteration to gain traction quickly. In my experience, this is particularly true when a start-up is self-funded, and, therefore, reliant upon organic growth to fuel reinvestment. However, a short-term focus can lead to feast-or-famine cycles — especially in industries sensitive to regulatory changes or rapid fluctuations in market conditions. Long-term sustainable growth demands a shift in how you plan.
So, assess your company’s strengths, weaknesses, opportunities, and threats (SWOT) at least once per year. Explore key performance metrics, interview your customers about their needs, pull benchmarking data from around your industry, and research trends that may reshape your current markets or lead you to consider new ones.
Then, establish meaningful long-term goals for your company or modify existing ones. Be sure to define the “why” behind what you’re trying to achieve, like diversifying the markets you serve. The reason you’re pursuing this goal must matter, or you’ll lose your drive when the going gets tough.
Finally, create a clear road map to your goals. For instance, to accomplish your diversification goal, you’ll need to create a multi-year plan showing the target revenue growth and revenue diversity for each year of that plan. You must identify your clients in each new market sector and the size and type of projects you’ll perform.
Core strategies provide direction while allowing for calculated adjustments as the market evolves.
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It’s no secret that operational excellence enables sustainable growth. During a business’s start-up phase — when speed and experimentation are the watchwords — it can sometimes be pushed to the back burner; however, as a company matures, you must move away from ad hoc policies and outmoded metrics.
Start by standardizing your operating procedures. Identify each process you already have in place throughout your organization — looking for sub-optimal ones and process gaps. If your projects consistently miss profit expectations, for example, you may have a disconnect between your estimating and project management processes. Optimize these processes and create new ones, if necessary.
Smart tools can help confirm company-wide process compliance and make tasks less labor-intensive and more accurate. Remember that your people will need training to ensure new ways of doing things become second nature.
Next, audit your KPIs and internal metrics. The measurements that matter during a company’s start-up phase may differ from the ones that become most vital once a business is well-established. Take profit, for instance. Initially, a start-up founder might choose to operate a business at a loss — at least for a time — because he or she is investing in the company’s future, rather than its present profitability. However, established companies can’t survive continued negative cash flow. Your essential indicators may vary depending on your industry and other factors, but the take-away remains the same: Identify the most important measurements for your strategic goals. Run regular analyses of these metrics and adjust your strategy as needed.
Empower Your People
In today’s dynamic business environment, employee engagement and commitment are more important than ever to an organization’s well-being. Hiring and onboarding new people can cost your company twice as much as keeping your current workforce, and frequent turnover disrupts operations. However, the sense of excitement that keeps workers dialed in during a company’s start-up phase is not sustainable in the long run. As a business scales, you must find new ways to maintain employee satisfaction. The key? Empowerment.
When your people believe that you — their employer — have faith in their judgment and abilities, they will feel more ownership over their roles in contributing to the company’s success. So be proactive in delegating responsibility and granting autonomy — and celebrate achievements. When your organization has a great quarter or lands a big project, highlight the admirable actions of the people who contributed to those outcomes — reframing the act of doing the right things every day as wins.
Provide employees opportunities to learn, grow, and advance in their careers. Training and mentorship programs help ensure a pipeline of up-and-coming leaders, and surveys show that providing clear paths for career progression reduces turnover.
Create an environment where team leaders regularly share information about the business with their people and encourage feedback. If a team member has an idea for an improvement or innovation, hear them out. If the idea has merit, a test group should compare methods. Then, your company should adopt the best method, document it, train employees, and adjust supervisory structures to accommodate it.
Chad Prinkey is the author of, Well Built: How the Top 2% of Construction Contractors Create Superior Value, Profits, and Excellence.
The post How to Stop Running Your Growing Business Like It’s Still a Start-up appeared first on StartupNation.
