Defining the actions your business needs to progress to the next stage
Starting, growing, scaling, and enabling your full business value is a series of steps. Having a business strategy model to reference them to is helpful as it helps to define the different requirements that each stage has, as well as what to do to take a step forward.
What is business strategy?
Research the topic of business development strategy anywhere online, and you’ll find a plethora of different resources on what it means and how to do it.
The reason there is such a breadth of opinion is that there is not one business strategy to meet all situations. The truth of it is that there is a very wide range of business situations, target markets, business objectives. business development goals, and so on to consider. Equally there are a wide range of solutions and strategies that could be applied to make progress against those requirements.
There is more than one way of skinning a business cat!
What this means is that it can be difficult for the owners of SMEs to draw together their options and make pragmatic decisions on what to do and how to do it.
A business strategy model that can help you define and progress your business
Over many years working with business owners at different stages of progression, I have identified that there are really 5 stages of business. These stages are linked not only to the business features but also to the mindset of the owners who are in those positions also.
Within this short blog, I will share with you a couple of the models that I use when working with clients to help them identify the position they are at currently, as well as the shift in strategic mindset required to make the leap from one to the next.
The Strategy Model for Business Progression
The model below simply defines five stages of development for a company, and how each is likely to be experienced (at a very top line) by the owners. It works similarly to the wealth models of Robert Kiyosaki (author of Rich Dad, Poor Dad and also The Cashflow Quadrant).
The important element to identify is that it is progressional, and in most cases, represents the ambitions of company owners in the SME space, although not necessarily how they see it at the outset!
STEP 1: From Start-up to Basically Functional
Where people first make the leap from employment into a start-up business setting, their priority is to quickly replace the income of the job they used to have, and to repay the investment required to launch the company. These are very much “move away from” goals, and the problem is that once they have been achieved, unless the owner mindset is shifted, the performance level of the company can stall… sometimes for many years.
Mindset at this stage: Achieve consistency in approach, and consistent, basic results.
STEP 2: From Basically Functional to Growth and Scalability
Once the business is functional (i.e. working in a relatively consistent manner, with relatively consistent, albeit modest results) the mindset shift needs to move from acceptable survival, to advancing results and performance. There are a number of factors involved, and they differ a little between professional services, product or service businesses, retail and other sectors.
The key factor here is to have some performance improvement targets, and to work the numbers, the systems and the people to enable greater output, profit, and other relevant results.
The second vital aspect is scalability. This is the ability to grow the business beyond a linear output linked to the owners personal involvement or activity. Many micro companies struggle with this aspect, and the challenge of growing past the direct involvement and input of the owner as the leader, manager, and often technician too!
Largely it is a mindset shift of saying “Where am I the bottle-neck to the business performance?” and setting a plan related to solving those pinchpoints. It doesn’t mean you can’t still be involved, but it does mean you have to stop being involved in everything, all of the time!
Mindset at this stage: Refine the business model, systems and people for growth and scaling.
STEP 3: From Growth and Scalability to Independence
Many businesses become successful in terms of profitability, cashflow and reputation. The owners become well-rewarded, and generally find a way of working a reasonably balanced week. Things are good!
There is however, one niggling irritation. The business is still reliant upon them directly at one level or another… and they don’t want that to be the case forever. At some point they want to be able to step aside and either for the business to run itself, or for it to attract a good valuation and interest from investors.
This step is about enabling the company to work without the owner’s involvement being required. This is not necessarily a full step-out, but it is the ability to call up and say you are not coming in this year, and for the business to continue positively forward.
It’s a BIG step, and means a shift in thinking that enables the future leaders, effective management structure, and all aspects of the company to potentially be handled and entrusted to your team.
Mindset at this stage: Reduce reliance on the owner. Take out bottle-necks and linchpin items.
STEP 4: From Growth and Scalability OR Independence to Exit Ready
Whilst it is not entirely essential to have reached the independence stage before preparing for sale or succession, that status is relatively importance to achieving a strong business valuation and also attracting investors; no-one wants to buy your job!
Preparing your business for exit is about enabling the two main channels.
First is apparent independence as it allows for the company to be a source of passive income and financial benefit past the owner’s direct involvement. This also presents it as an asset rather than a job for sale in the marketplace. Investors generally prefer this former situation, and if you never plan to sell, it doesn’t hurt to get the occasional offer anyway!
The second is to work on the metrics for valuation, and the preparation of a sales package that presents the case to investors professionally and with real influence. Understanding the factors that drive valuation is important to working a plan for this progression step, as the activities go beyond the day-to-day operations required for growth and scalability.
Mindset at this stage: Prepare a strong business case based on asset value not job value
What to do now...
As you will have seen in the text above, there are different mindsets and knowledge bases required to progress across the business progression model stages.
In most instances, new business owners are quite able to make a leap from start-up to basically functional with only modest external support. This is because that step really requires only a modicum of pure business knowledge, but a large amount of job knowledge.
However, for the latter three steps, there is much more required from the pure business knowledge bank, and also from different spheres of experience to job roles within an industry.
Where business owners recognise experience limits being met, glass ceilings being reached, or the stalling of progress occurring, it is time to speak with a professional business coach. Working to establish an appropriate business strategy model and strategic plan can really help!
