Understanding Business Life Cycles: Part VII

Understanding Business Life Cycles - Part VII

LIFE CYCLES, Part VII

As a company enters into the “We” phase, it runs headfirst into the complexities that accompany operating a larger business and the necessity for a structure that can support it. As you might imagine, this causes many business owners to chafe within the confines of the added structure. Let’s see how this plays out in the Business Dynamic of the Violand growth model.

Financial viability. For most small businesses, being profitable and having strong cash flow is not only fundamental to its growth but also for its ability to sell for a meaningful multiple when the owner wants to sell.

By the “We” phase, companies need to be viable enterprises financially if they want to sustain profitable growth. This doesn’t mean they must be wildly profitable all the time or that their profit margins must be consistently increasing. It does mean they should at least be meeting the established standards for profitability, cash flow, and equity of companies similar in size and age in the industry the company operates.

Not producing or understanding accurate and timely financial reports for companies in the “We” phase is simply not an option. It’s downright dangerous, as money moves too fast and financial decisions are too big to shoot from the hip.

Operations. Every industry has a set of established KPIs (Key Performance Indicators) that are crucial for a company’s ability to sustain profitable growth. Knowing those KPIs and understanding how to consistently achieve them is crucial.

This is also when many of the processes and systems that were first articulated in the “Me” phase are documented, refined, and formalized. Most importantly, they’re being used to produce predictable results in the work being done and to minimize the company’s risks.

Human Resources. At this stage not only does the company need the skills of people with more advanced business acumen but to help drive the company forward the owner needs the talents and insights of more-skilled workers.

While the company is not yet large enough to support a full-time HR professional, the HR function plays an increasingly important role in the company’s growth; one that is usually beyond the owner’s ability and desire to manage.

Successful companies in the “We” phase have a demonstrated ability to attract and keep qualified people. Org charts, job descriptions, compensation schedules, and policies are in place and are being followed.

Sales and marketing. It is essential for the company to have a well-organized sales and marketing plan that is tied to the overall business plan. This helps reduce the risk of being overly reliant on any one customer or superstar salesperson, dumb luck, or just hoping for continued sales growth. “We” phase companies can no longer rely on low-hanging-fruit sales that are common with younger and smaller companies. There simply isn’t enough of the low-hanging fruit to support it.

Having clearly defined, unambiguous sales goals supported by solid strategies that are executed and tracked are hallmarks of successful companies in the “We” phase.

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