Preparing for the Survival phase
Welcome to the next episode in our series of Eddie Senatore Talking Business, based on our monthly two-page newsletter. In this second installment, we look at how a business passes through the startup phase, and moves successfully to the next phase, survival.
Eddie goes over a number of common issues businesses will experience in this awkward stage, where they have more traction than a startup, but less stability than a company that can really double-down on growth. Survival is where things get interesting, as you’ve got more sales and the opportunity to really differentiate yourself in the marketplace early on.
After survival, you’ll be looking forward to another three phases, namely, growth, expansion, and maturity.
The four critical issues facing a business in the Survival phase
- Straightaway, you’re looking at cost control. Let’s say you run a house-building company. You need help to deal with the additional work you’ve taken on, so you’ll be taking on new staff. Then you might be running into unplanned expenses, such as needing new supplies for more complex projects. Make sure, as you grow, that you avoid cost overruns, which could mire your company in debt. If you can avoid them, you’ll be in great shape for future growth.
- Next, you need to look into building an internal information system. Now that you have more information about how your business’s operation, you need a systematic way to deal with all that data. Whether it’s a digital approach through spreadsheets or accounting software, keeping track of it manually, or through hiring a third-party accountant, you can’t make forward-looking decisions about your business without real metrics about its operations.
- Speaking of looking forward, this is a good time to think about market differentiation. After going through the startup phase, you now have a sense of what your competitors do. This leads to great ideas for strategic planning. Can the company compete on price, or on value?
- Last but not least, watch out for overtrading. While it’s great that your company has more work than it did in the early days, you may wind up taking on debt and burning out if you’re not careful. Doing too much at the same time means a need for greater cash flow (such as paying suppliers before getting paid by a client if a project takes longer than expected). This means debt and interest costs. Make sure you keep your business’s timeframes in consideration to avoid time and cost overruns.
Surviving so you can grow
Although these issues can sound a bit spooky, every business faces struggles at different phases. Success relies on anticipating problems before they start, so you reduce the number of fires you have to put out!
Now that you’ve survived, join us on our third episode, where talk about the next phase, growth.
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