Growing Pains

Companies have significant early-stage milestones that mean a transition for the founder or company owner, and the lifeline looks somewhat like this:

Concept Stage – Initially the focus is all on the idea, the product, the technology – will it solve the problem, will customers buy it, what are the performance expectations, what are the cost limitations?

Business Stage – The focus changes to the validation of the business model – financial planning, legal requirements, how to market the solution, commercial and production constraints. Consultants and Advisers are often involved to help a first-time founder understand the impacts, and they may need someone to take over the technical development as they manage the business not the product. Incubators are set up to help technical founders transition to become CEO’s. Most start-ups fail because they get this stage wrong.

Launch – The focus is on the messaging and communication – marketing and advertising, including of the business itself to potential investors, means that the skill set required is more cultural than technical. It is the time for capital raising to support getting the idea built and sold, which is going to be more expensive than you expect. Accelerator programs are designed to assist at this stage.

Commercial – it’s all about the customer – getting into production for hardware is a very different and more involved challenge than for a software or service delivery and cashflow management is key. There may be suppliers, distributors, resellers and other external parties attached to the business at this stage. Managing customer feedback and satisfaction requires a different focus.

Growth – Recruitment and expansion – There is a big difference between managing a small company with staff on equity arrangements and who have grown with the company, and the human resource requirements of a business with recruits who are looking for a job not a lifestyle. With increased headcount comes significant administration, legal and financial commitments. The management of 10 staff is more than twice the requirement of the first 5.

Globalisation – In addition to a whole raft of differences in bureaucracy between different jurisdictions, there are currency, time zone, freight, language and cultural differences that can create new problems. Whether to manage everything from one location, or to create satellite entities is a balance between being close to the end user, and remote from the HQ.

IPO or exit – whether the company gets sold, or goes public, there are a whole set of new responsibilities with taking the company to the next level, and the external stakeholder influences need to be managed and targets met.

Not every company will go through all the stages, but the transition points require new skills and focus from management. They will need to overcome the challenges of becoming leaders, acting autonomously, dealing with third parties, navigating red tape and the learning curve of hiring and firing.