Business Article
How Evolved Is Your Business?
(The Seven Stages of a Business)
By Pam Butterfield
Stage One: Envisioning the Dream
This stage is all about dreams. Two types of people start a business:
the “excited entrepreneur” who has a passion for getting
into business or the “reticent entrepreneur” who is establishing
a business for defensive reasons (tired of current job, getting downsized,
etc.). In both cases, each entrepreneur might have a special skill or
passion, but probably don’t have much, if any, experience running
a business.
Founder’s mindset: The new entrepreneur has
a surplus of excitement and creative energy. But this energy usually
can’t be maintained for long. Consequently, the potential for
personal burnout is high. And employees are also at risk, since owners
at this stage tend to place high demands on their people.
Management practices: The founder of the business
usually handles all management functions. In family-run businesses,
they might be split among various family members. This can become a
potential source of conflict, tension, and stress.
Planning mechanisms: Usually, starts ups do little,
if any, formal planning, unless they are seeking a business loan. And
then, planning is limited to the minimum needed to produce a business
plan.
Financial considerations: The owner will typically
start the business using personal sources of cash (home mortgage, personal
loan) or loans from private investors. This latter strategy increases
demands placed on the owners. Plus, banks are not always receptive to
business loan applications from start-up companies.
Products and services: Products and services are typically
launched on the basis of informal market research (“My Mom loves
it!”) This leads to over-optimism in the product’s actual
chances. Plus, failure to reach out to people outside the immediate
circle of friends and family can cut the company off from helpful sources
of information and advice.
Key challenges at the boundary: To move into the next
Stage, business owners must develop a business plan—defining its
products, markets, distribution channels, etc. and a learning plan:
what the business owner must know in order to run the business. The
owner must also develop sufficient sources of funding to cover costs
until sales begin to grow.
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