There are occasions when your new General Managers role is into a new company, a startup or off-shoot of a successful business. As a new GM how can you create a successful business?
Scaling a business to success is the key challenge in all start ups and for all businesses.
After doing some reading and research, here’s my view of a process through the complete lifecycle of a startup company to give you a clear direction to follow as you intelligently scale your business.
Let’s start with a quick overview of the three stage of building a successful business:
Stage One: A “Start Up” Business (No Control, No Freedom).
At this early stage, you’re designing and planning your new start-up or business. Typically this is the role of the founder. Maybe you’ve been hired by a serial founder of companies to set up the business.
At this stage, you’re gathering your initial team, raising any required start-up capital, and executing your launch plan. Your focus at Stage One is to plan your new business and get immediate market feedback to learn if your business concept and model is economically viable. The key feedback is to test your product or service to see if you can sell it at a price that allows your business to be profitable.
Focus; Planning Your Business and Proving It’s Viable
Key Activities; Planning; Funding; Launching.
The 4 Action Steps You Must Take in Stage One
Action Step 1: Clarify your basic business idea. Is it distinctive amongst similar business ideas, relevant to customers, motivating to customers to buy enablng you to earn a profit?
Action Step 2: Conduct your market research. Prove its distinctive, relevant, motivating and profitable.
Action Step 3: Write your business plan ‘draft.’
Action Step 4: Test your product or service to make sure it will sell. Make your frist sales and start making some money.
Stage Two: “Owner Reliant” Business success (Control, But No Freedom)
The business is now launched and your are in “sell, sell, sell” phase.
This means as the business leader or GM, you run a business that is working– but only as long as you do. Now you have a business to control, but with that control comes long hours and the sense that all the decisions, all the risks, all the responsibility–all of it–rests on your shoulders. Every day, you have to keep going because if you stop, it all ends. You have the control, but no real freedom.focus has now shifted from getting your business from launch into securing your early clients and becoming profitable. This is the time when you can really leverage your ability to change and adapt, keeping costs low and your business lean.
Early Stage Two: Making Your Business Sustainable
Focus: Securing your early clients and becoming profitable.
Leverage Points: Your ability to change and adapt, keeping costs low and your business lean.
Fresh in the marketplace, an Early Stage Two business has just started actively marketing and selling its products/services. This is the time to learn your business and market, and if needed, discover and cure any fatal flaws in your business model or in the way your targeted customers perceive the value you’re creating.
Your early focus while launching a business isn’t on building the perfect product or service, but rather on figuring out how you can get people to buy.This is the time to discover and cure any fatal flaws in your business model or in the way your targeted customers perceive the value you’re creating. Too many entrepreneurs get caught in the trap of making the perfect product, but never actually sell the product in large enough numbers to ensure a profit.
Know that at this stage in your business’s growth, you’ll be wearing just about every hat in the business. That’s okay for now, but as you move toward Middle Stage Two, you’ll need to find ways to enhance your personal production for the business by hiring staff and building basic business systems. Remember, an Early Stage Two business is working to generate sales, establish a market position, and become a sustainable business.
Three Priorities of an Early Stage Two Business
- Priority #1: Sell, Sell, Sell!
- Priority #2: Start Creating Simple Systems and Structure to Operate Your Business.
- Priority #3:When Your Business Can Afford It, Begin to Build Your Team
Middle Stage two ; Building Out Your Business’s Core to Reduce Its Reliance on You and to Become More Sustainable and Scalable.
Characteristics of a Typical Middle Stage Two Business:
- Business revolves around the owner.
- Owner must show up each day or the business suffers from your absence.
- Owner hits a revenue plateau; can’t work any harder or put in any more hours.
- Outside world – especially customers – identify the business with only the owner.
Why is it that most business owners never make it past Middle Stage Level Two? Because these owners are entrenched in the traditional way of building a business for control and active cash flow based primarily on their personal production.
Not only do they quickly max out on personal production, but what’s worse is that every day, more and more of the know-how to run the business gets buried deeper in one person’s head—instead of being captured in written processes, procedures, and systems.
Moving from this a business leader needs to…
Focus: Establishing your business’s foundation; building your business’s core systems and structure
Key Leverage Point: Leveraging your time so you can invest at least 20 percent (one day a week) out of doing the work of your business into building your business’s core
Sadly, these typical Middle Stage Two business owners stay stuck at the tactical level of doing the job the business requires instead of creating the time and space to step back and build the business itself. Middle Stage Two requires building your core systems, business controls, and team. The challenge is doing that while balancing the business’s need for you to continue to lead its daily operation. This is a delicate balance between what your business needs today and what it will need tomorrow.
At Middle Stage Level Two, here are the four priorities to build out the baseline systems to create a sustainable business:
- Your “Master System”—the system of all your systems. And by system its the process by which the business works, not how YOU work the business. This may be through hiring people or in out sourcing processes, but you have a stable system. This Master System involves how you organize, store, access, and update most of your business systems.
- Your “Core Systems.”This includes 4 key systems:
- Your system to generate leads (Lead generation);
- Your system to convert leads into sales (Lead conversion);
- Your system to fulfill on customer orders and deliver on client promises (Fulfillment of your core product or service);
- Your system to collect on payments you’re owed (Accounts receivable).
- Your big-picture strategic plan. This includes your business priorities, plan of action, and branding and market positioning.
- Your initial team. These are the early team members you’ll lean on as you grow your business. You’ve still got to hire cautiously due to both cash flow concerns and your business’s immaturity, but now is the time to begin hiring high order talent—slowly and deliberately. You’ll also start systematizing the “Team” area of your business by developing written job descriptions, a draft organizational chart, and a formal hiring process.
This is the biggest leap for most start ups. Once you have achieved this step, you have the makings of a scalable business.
How does a founder transition to a sustainable and scalable Stage Three business?
Advanced Stage two: creating a “Rapid Growth” Business
Focus: Increasing your capacity and scaling your business
Key Leverage Point: Your key team members’ time, talent, skills, and focus
Characteristics of a Typical Advanced Stage Two Business:
- It’s becoming more and more systems driven. (At least one or two of the five main areas of your business are managed by people other than you.)
- Your revenue is starting to climb.
- Your business may feel like it’s bursting at the seams.
One of the key steps at this point in your business’s development is to enrol your team into assisting you building the systems, controls, and scalable solutions. Your team moves from being workers doing what you want to partners enabling you to take the business to the next level. As management guru Peter Drucker once said, “The founder has to learn to become the leader of a team rather than a ‘star’ with ‘helpers.'”
Reaching Stage Three requires finding and enlisting key members to “own” parts of your business. More important, it requires you to let go of control so your business can thrive without you.
Rather than have all roads lead back to and through you like a hub in the middle of a wheel, encourage your team to work with each other directly. Grow their capacity to make their own decisions and take the initiative within the company knowing that they have as much understanding in the business vision and fundamentals as yourself. Remember, a business dependent on its leader–you–for its success becomes a prison that traps you. Plan for your great “prison escape” now by building your management team. Before long, you’ll have key leaders in each of the five core pillars of your business: sales/marketing, operations, team, finance, and executive leadership.
In addition, make sure that your leaders and team members have a unified vision of what the business is, where it’s heading, and how you plan to get there. This lets you set clear priorities, assign responsibilities, and hold each other accountable for results.
Level Three: The “Exit Stage” Business (Total Control, Total Freedom)
How to Know When You’ve Reached Level Three?
First, you’ll have solid performers in place in four of the five core areas of your business who are able to lead the business in this area, if not necessarily lead the whole business. Second, you have the strategy, systems, and traditions in place to hire a replacement for yourself if you choose. That means your business thrives even if you were only there two or three days a month.
Here’s how you can measure if you are at level three…
1. Your business success is independent of any single team member, including you, the owner. The business runs smoothly whether the owner is there or not over an extended period of time (based on sound systems, team, intelligent controls, and scalable solutions).
2. It has clear processes and procedures to run five key areas: sales/marketing, operations, people management, finance, and business leadership.
3. You have an enterprise-level dashboard (or performance measurement and assessment process) that allows you and your team to know the status and health of your business at any given moment.
4. Finally, you have the clear traditions and culture to help keep your business true to its vision, mission, and values even after you aren’t present every day.
You’re the owner of a business that runs without needing your presence and efforts every day. You’ve got the team and systems in place so your business’s success is independent of you. Working for your business is now a choice, not an obligation or a requirement.
This is the key and critical difference between a stage two and three business. The traditional stage two approach is for you the leader to work harder, to do more–to work at the job of your business to ensure the business grows. The Stage Three solution is for you to do less and get your business to do more.
Okay, here is a deeper look at the Stage Three options.
Focus: To determine your desired “exit” strategy and clarify your personal role.
Characteristics of a Typical Level Three Business:
- The business is run by a competent and winning management team independent of the owner/Leader (who may still fill one of the roles, but who has a replacement groomed and ready to step in).
- The business runs smoothly whether the owner/leader is there or not over an extended period of time (based on sound systems, intelligent controls, and scalable solutions).
- Its clients look to the business, not the owner, to fulfil promises.
The 3 “Exit” Strategies for You and Your Stage Three Business:
Exit Strategy 1: Sell
Once you’ve built a Level Three business, you’ve created a valuable asset with clear market value. Selling your company is your way to harvest the equity you’ve built. If you are the leader rather than the owner, selling could mean its time for you to go, you have done your job and are ready for a new challenge.
Exit Strategy 2: Scale
In the context of exiting, scaling means that you, the business owner, firmly decide to stay actively involved in the business and grow it magnitudes bigger.
It may seem strange to call scaling an exit strategy, but many entrepreneurs who’ve built a Stage Three business don’t want to leave or sell it. Rather, they want to grow it more, which we call scaling your business. This means you take a $15 million company and grow it to $150 million or $1.5 billion. This option gives you the greatest financial reward, but it also requires your continued commitment, often over five or ten years or even longer after your business has reached Stage Three. Here you take the typical strategic options- grow the range of products, grow by purchasing competitors or complementary businesses, grow the channels of distribution, or expand the area of your business expanding regionally nationally or internationally.
Exit Strategy 3: Own Passively
Once you’ve taken your business to Stage Three, you can transition to a more passive role–owning the company without running it every day. If you choose this exit strategy, you’ll enjoy the ongoing cash flow from the business without regularly coming into the office. You’ll still have responsibilities, but from an owner’s viewpoint, not a CEO’s or a manager’s viewpoint.
Building a successful business needs a process, a clear understanding of what needs to be done well at each stage of the enterprise. While it takes work, creativity, and perseverance, the stages are well defined, here. Where entrepreneurs fail is when they fail to fully understand where their business is in the process or fail to focus their full efforts on what needs to be done at that stage.
Good luck on your Three Stage journey and remember, no matter how tough it seems at any given moment, or how much you want to say that you just don’t have the time to develop your business as a business, it takes massively more time to stay stuck as an owner-reliant Stage Two company.