When to Do What: How to Navigate the Four Stages of a Successful Startup
October 19, 2016 by Brasco ///
Written by our Guest Blogger, Bobby Martin.
I’ve been where you might be.
I once was just a guy with an idea, and a founder with an offer from someone wanting to buy my company. Each scenario might clearly be different, but what you decide in either of those matters.
In my experiences growing a startup from concept to profitable business, I’ve taken note of a common thread among many successful innovative businesses. I’ve also interviewed successful founders across many different types of businesses wanting to learn the principles that guided them. As I gathered this data, I noticed a remarkable trend in their stories that I recognized as being true in my own experience as well.
I realized that startups consistently go through four stages of growth in their development.
It’s the navigation of these four stages that can make the difference between a revered business success story or a depressing cautionary tale.
These stages of revenue growth, which I go into detail about below, can all be plotted on a chart resembling the curve of a hockey stick. In studying this curve, I began to formulate a series of principles that served as a beacon to guide startups through these complex stages. Here are the four stages:
Stage 1: The Tinkering Stage
The word, ‘tinkering’, makes us think of an older gentlemen mulling around his workshop working without direction on a project, trying to figure out what it is he wants to create. This word is the perfect descriptor for all of us who have ever toyed with an idea. It’s the act of letting our brain mold something nudging us into a viable action point.
So, whether you’re batting around an idea for a tangible product or working to create the latest and greatest app, this is the phase you enter when your brain recognizes that you want to do something and the phase you exit when you decide it’s, “go time.” This is the stage where the danger lies in never seeing an idea to fruition. It’s comfortable in the Tinkering Stage. There’s no risk. Your ideas have not been subject to critical feedback. You still have your day job.
Stage 2: The Blade Years
This is where the work really starts. By entering the blade years, you have made a commitment. This is where the founders have decided to move forward and the risk picks up big time. In many cases, founders have quit their jobs and details have to be hashed out. I estimate that this phase lasts 3-4 years and it can be quite bumpy.
Often jobs have been quick to increase focus and provide time to devote, which can cause a significant dip in personal finances adding more stress to the equation. This is the stage where people often get overwhelmed and lose heart, their resolve can begin to crack. It’s understandable as this is the phase with the highest amount of scrutiny to the original idea and the least amount of money. So how do you navigate through it? It’s tempting to put out the fires by over focusing on gaining funding or by spending on marketing but if you know it’s coming, the blade years can be pushed passed without too much fall out and you can move on to the next exciting phase in your startup journey.
Stage 3: The Growth Inflection Point
It’s time to put your seat belt on because this journey is about to take a turn for the wild. This is where the revenue begins to arrive at a faster pace. It’s a welcome sight. It can be like rain during a drought. The hardships of the blade years may have added stress, but there’s no doubt that through the process you experienced personal and professional growth. The business model has been honed and in some cases, the investors have come calling. You’re beginning to see the financial fruits of your labor as you break the bondage of the blade years and enjoy some profit.
It’s easy to get carried away in the phase and let your guard down or to make hasty decisions in the flurry of fast growth that won’t support sustainability. You can’t get too caught up in this upward climb because there are still important decisions to be made. Where will you put your time, attention and money? If long term success is what you seek, and I think that’s the goal of startups, then the decisions you make here will determine this for you and your partners.
Stage 4: Surging Growth
Depending on how you managed your startup through the growth inflection point, you will ideally find yourself in the surging growth phase. This is where the simplicity of your garage idea takes on new complexity. Your market may be exploding but so is your company and it requires excellent management to run effectively and profitably. This is where restructuring may happen, offers to purchase the company may pop up and you —no longer the scrappy youngster daydreaming of creating your own company — need to learn how to transition to a more focused CEO.
It can be daunting and you might be filled with mixed emotions, but if you dedicate yourself to consistently adjusting your sales in the direction you would like to go, you can have a thriving business.
With that said…
The hockey stick curve is a common trajectory for innovative startups across many different kinds of businesses. Each of the four stages along the curve contains its own set of challenges depending on the type of business and the specific scenario of the founder. If you go into these stages with 1.) the knowledge that they even exist, and 2.) the tools to manage through them, you should be able to manage the unique challenges of each growth stage and push ahead to full realization of that once small idea that was tinkering around in your head.
Meet the Author
“Bobby Martin is author of The Hockey Stick Principles about four stages of entrepreneurial success. He believes that too many startup founders pivot too early, quit too early, and expect rapid takeoff. Through his experience of starting and selling First Research (a leader in sales intelligence) for $26 Million to Fortune 500 firm, Dun & Bradstreet, he’s learned first hand the challenges and solutions at each stage of entrepreneurial growth. Bobby’s current adventure is as chairman and co-founder of Vertical IQ, a leading provider of sales research insight for banks. Bobby is an active angel investor and is a national speaker. He graduated with a degree in economics and banking from Appalachian State University. Bobby is married, has two children, and is an avid tennis player.”