An entrepreneur’s journey is one full of varying experiences both happy and sad ones. However the greatest experience that each entrepreneur yearns to go through is to see their business move from being a small start-up in their backyards to a fully-fledged regional business conglomerate. The experience is both fulfilling and exciting, but one that requires patient and a lot of focus at each level as you grow your enterprise from a sole proprietorship into a limited liability empire.
As your business grows from one stage to the other, the demands that it has are different and its systems keep maturing over time. In addition, the finances needed to keep the business running and growing also keep increasing over time as your business moves from one growth stage to another. Sources of funding for your business will therefore evolve over time as you grow too.
1. Seed Stage
At this stage, as an entrepreneur you will be focused more on testing your business idea to see its viability. You will also be involved in a lot of market research to try and validate existence of a market gap that you want to fill using your new product or service.
In addition, you will be focused on planning how the business operations will look like as well as determining the ownership of the business.
Finances needed at this stage will most likely be your own savings, grants from donors or borrowing from family and friends.
Related: 10 Tips for Finding Seed Funding
2. Start-up Stage
Once you are done with testing your idea and validating the existence of a market gap that you want to fill, you will move to the start-up stage where you shall be focused on establishing your own customer base. With your product ready, your focus now shifts to looking for potential buyers and early adopters.
At this stage you will also be more concerned about customer feedback about your product so that you go back to make changes as necessary and return a polished product to the market.
With a ready product to give to the market, your suppliers can now start offering you credit financing; while you can also capitalise on pre-orders from you customers in order to generate a positive cash flow for your start-up. Other sources of funding at this stage would be crowd funding, sweat capital, incubators, accelerators and angel investors.
3. Growth Stage
After tweaking your product to fit the market demand, you will start experiencing high demand for your product or service. This is a clear sign that you have moved up to the growth stage of your business where you will now face rapid growth.
As the entrepreneur leading the business, you now have to start thinking about how to deal with market competition as competitors invade your territory. With high demand and increased production, you will also need to focus on improving your business systems and hiring more employees in order to serve your customers satisfactorily.
At this level venture capitalists will start looking for you if you are on high growth path. In addition you will find it easy to access financing from banks including getting the best business credit cards there is in the market.
Related: Doing Your Finance On The Fly
The growth stage is followed by an expansion stage whereby your business now moves to different geographical locations. This is considered to be partly as a result of moving to capture new territories that have not been ventured into; but also a strategy to move away from completion in saturated markets.
With stiff competition in the market and little room to expand, your business will eventually reach maturity and the only option on the table will be product diversification. You will also be more focused on cost cutting and trying to get maximise your thin profit margins.
At early stages of this level you will find private equity firms interested in buying a stake in your company.
As you grow more mature you will be more focused on both vertical and horizontal mergers and acquisitions as a strategy to be more competitive and have control along the value chain in your industry.
Finally, once the business is well established in the value chain, you will want to exit the market and retire from actively owing and running it. At this stage you will most likely spend much of your time on road shows looking for external investors to acquire your business or you might need to consider an Initial Public Offering (IPO) and completely exit the company.
You Too Can Grow A Successful Subscription Company. Here’s How
Dog toys? Baby stuff? Puzzles? Makeup? How can you think ‘outside the box’?
Subscription companies have a unique opportunity to connect with their customers. By offering a recurring product, they get multiple chances to interact. Products range from razors like those sold by Dollar Shave Club to wristwatches like the ones we offer at my company, Watch Gang. Then there’s BarkBox, which treats your dog to a monthly shipment of toys and treats. These companies are vastly different but share a common goal: Curating a high-value experience for members.
Thousands of businesses have adopted the subscription model. We’re seeing new companies launching all the time, in every niche, from Sock Work, which sends monthly socks and donates some of its revenues to veterans, to iFind Seekers, sending monthly puzzles.
What may be surprising to some is that businesses offering a recurring product have been around since the dawn of commerce: The Romans sold and delivered food and newspapers on a repeating schedule 2,000 years ago. In this country, weekly milk deliveries were common even before the Constitution was written.
Interested in establishing a subscription business for your product? In my experience, I’ve come to recognise what I call the “five pillars” for the foundation of a successful and sustainable subscription business. Those pillars – community, value, discovery, service and integrity – are exactly what you should focus on:
Pillar 1: A thriving community
Having a community of enthusiasts speaks volumes about your company. It’s a sign of trust and brand affinity, and proof that people are genuinely interested in what you have to offer. They are willing to share their experience with others.
Your community is a trusted group of peers who are more than ready to authenticate a product, provide feedback on the service and help create a sense of belonging for like-minded members.
Your community drives your business forward, motivates you to improve and helps you craft service improvements. You have to be dedicated to growing and nurturing your community, because ultimately it is the backbone of your business.
Pillar 2: The delivery of value
Consider this: Why would customers want to “set it and forget it” when they can just order when it’s convenient for them? Why would they agree to a recurring payment every month for your service? The answer is value.
People have to get a product far more valuable than what they are paying for, which means you as the company founder have to go above and beyond to deliver added value.
Watch Gang, for instance, has price levels to fit all budgets, from $29 to $999 a month, and the watches members receive have a value that’s higher than their membership fee. At Barkbox, a $20 box is valued at over $40. Bluum, which offers a box containing the best-reviewed baby, toddler and mom products, has a monthly subscription fee of $34 with the box’s guaranteed retail value at $45. These are tangible savings, and for customers they provide convenience.
Apparently, customers agree. A Gang member recently sent a testimonial that stated, “My Watch Gang subscription is the only bill I actually look forward to paying every month.” A bill that’s welcome? This tells me that we have honored our commitment to delivering value.
Pillar 3: Opportunities for discovery
Subscription companies need to serve as a point of discovery. One of the reasons why subscription businesses continue to be so successful is because of the element of surprise — people love to open a box without knowing what’s inside. Subscription boxes give members the opportunity to discover new brands and styles.
Companies today are engaging members beyond just the monthly shipment. Birchbox offers loyalty points and money back for purchasing the full-size version of samples. At Watch Gang, we launched the “Wheel of Watches,” where members can spin a virtual wheel full of watches they may be interested in.
They earn points to apply to the wheel every month they remain a member. This has become one of the biggest draws at Watch Gang, because it provides an entirely new kind of discovery experience – and it’s fun.
Pillar 4: Amazing customer service
While not a subscription box, Zappos has repeatedly been recognised as a shining example of how to treat customers. The often forgotten, but arguably crucial, benefit you can provide to a member of a subscription company (or any company) is world-class customer service.
Of course it’s easier and cheaper to outsource customer service or offer email-only support to cut costs. But you have to remember that every call, every customer and every situation is unique. Your customers deserve exceptional service from real people whom you’ve empowered to solve their problems.
Some of the most important changes your company can make may revolve around your customer service department. A single phone call can have immense impact. Having a well-trained customer service team gives your company the opportunity to learn from valuable feedback.
It’s crucial to give your team members a voice in your business and encourage them to share what customers are saying, both positive and negative. These team members are on the front lines with your customers every day, so they need to be adequately supported and compensated.
Pillar 5: A high standard of integrity
Without a sincere commitment to the above four pillars, your subscription business may never be profitable or sustainable. That’s why maintaining a high standard of integrity means you put people over profit. You need to take a stand to help your customers and deliver on your promises – even when that might cost you.
Every time a customer reaches out for support, you have an opportunity to demonstrate your integrity. It’s not an opportunity to make more money from the customer or even to deter him or her from canceling. It’s an opportunity for you to shine, as a beacon of good morals.
Set an example for all your employees and team members from the top, and it will trickle down to all day-to-day dealings within your company – with your customers, with your shareholders and with the public at large.
Today, anyone can launch a subscription business and start selling memberships; however, the businesses that will stand the test of time and truly become successful are those built with a solid foundation using these five pillars.
Investing time and resources into these five areas will help you not only grow quickly but also stand out as a company committed to taking care of its customers and employees.
This article was originally posted here on Entrepreneur.com.
Are You Prepared To Listen To Your Board Of Directors?
If you want to drive growth in your organisation, you need to listen to your board at critical junctions.
In speaking with shareholder-managers about creating a board of directors, at some point the most critical question of all raises its head. “At the end of the day, will you actually listen to them?” Having a board of directors is a great driver of profitability and performance as we have traversed in previous articles. However, if you are not prepared to listen to them you will not receive the value from having them there.
Listening at critical moments
It can be very easy to respond to this challenging question by saying, “Of course I would listen to them.” In practice, it can be a much harder reality.
More specifically, it can be one thing listening to your board when you like what they have to say, and another thing entirely when you disagree or do not like what you are having to hear. When your board is challenging you, making you feel uncomfortable or suggesting you are going down the wrong path, this is the time to sit up and take notice.
Being the shareholder-manager and the entrepreneur means having to take a step back and take account of what others are saying. It can be an interesting change. I am sure that on your entrepreneurial journey you, as have I, have occupied that comfort zone of “what I say goes.” In the boardroom though, the last thing you want your non-executive directors to do is to turn-off because of the way you respond.
Do not avoid the tough discussions
As a non-executive director, I am not one who avoids the tough discussions. In a board meeting I once chaired, the board felt that whatever we asked or said about a particular issue we were told we did not know the context or management explained how much work had already been done. It was as though the entrepreneur had decided what was happening and did not want the board to get in the way.
The project in question was at an early stage and while it was a good idea it was going to require guidance and critique to support its success. The discussion got to the point where I turned to the shareholder-manager and asked, “What questions are we actually allowed to ask?” It was in a slightly heated tone, I will admit.
There were a few moments of silence while the room took stock. The point was made and management relaxed a bit. We then worked through the issues as a team. The entrepreneur still refers to that discussion and the fact that if he is not prepared to hear the board, then what is the point of having a board.
It takes two to tango
If you are not getting this sort of level of challenge and debate, it may not only be your fault as the entrepreneur. It may not be because you have shut down conversations or stopped lines of questioning you have not liked. It could be because you do not have directors who are naturally challenging enough. If you have a board of directors, including independent non-executive directors, my question for you is, “When was your last tough discussion?” If this is a difficult question to answer then you should ask yourself, “Has my board turned off the tough discussions because of how
I respond?” or “Do I need to find non-executives who are really willing and able to challenge me?”
Building a high-performance board is a journey, not a destination. It is critical that you have the right people around the table to tango with you.
7 Ways To Leapfrog Your Business From 0 To 1
Here are some of the ways I have leapfrogged my business, Mann Made, alongside relevant examples.
Entrepreneurs should always be asking themselves, “How can I use technology to scale my business faster?” There are a number of ways to do this to move ahead of your competition and leapfrog your business into the future, as detailed in Peter Thiel’s book Zero to One and Salim Ismail’s Exponential Organisations, which I recommend every entrepreneur read.
Here are some of the ways I have leapfrogged my business, Mann Made, alongside relevant examples.
1. Utilise already available Tech Stacks
You can scale your business in an exponential way by using various internal and external tech stacks that are free or available at a low cost. Just think of the iPhone. When it first launched, it did not use a single piece of new technology. It was manufactured using pre-existing technologies. It was more a case of how Apple packaged these technologies together that created the iPhone’s unique user experience and ecosystem. It illustrates that you don’t always have to reinvent the wheel, you can use pre-existing technologies to help your business get ahead. In this way, you’ll have more time to focus on other more important elements of the business, which will allow you to scale faster.
Use project management software tools and digital dashboards to help you assess the financial health of your business in real time by means of a digital timeline. They can comprehensively outline your expenses and sales drivers, provide an overview of your previous, current and projected sales, and illustrate further ways in which you can streamline various business processes. These should be implemented across your business, alongside time-tracking software, such as Toggl, and project management software, such as Asana, both of which we use at Mann Made. Choose whichever tech stacks suit the structure of your business and will help you scale and automate quicker.
Also think of shortcuts. Mandrill by MailChimp is an email marketing platform that provides in-depth analytics and tracking options. Using plugins on your website or inbox means you don’t have to create your own email software. By combining multiple programming languages, software services and online products, you can rely on external servers and databases to make your own tech stack.
2. Leverage assets, products and services you don’t own
Uber and Taxify don’t own any cars, Airbnb and AfriStay don’t own any properties, social media platforms don’t create any content. Each of these businesses leverage assets they don’t own. And you can do the same.
In the digital realm, you need to be able to scale up your systems, servers and output really quickly to ensure your website doesn’t crash during peak periods. Make sure you use the big guys – those with a reliable reputation, proven track record and 24/7 support – for domain and website hosting as well as cloud storage.
3. Crowdsourcing through the gig economy
Similarly, leverage freelancers and contractors through the gig economy. This is one of the ways in which the future of work will be defined in the coming years. “No matter who you are, most of the smartest people work for someone else,” according to Bill Joy, co-founder of Sun Microsystems. By using the power of the crowd and the collective, you can source solutions beyond your employed work force. Look to OfferZen, Flexy, Fiverr, Supplier swop for on-demand work forces, as well as The Resource and I Know a Guy Facebook groups.
The gig economy allows you to call up trusted and proven freelancers and contractors as and when you need them. It doesn’t leave you with the financial burden of keeping them onboard when you don’t have projects for them to do. Have systems in place so that the training required for on-demand staff is minimal or has been briefed ahead of time using training materials, so once the project is briefed they can hit the road running.
NetFlorist is the perfect South African example, they scale up really quickly during their peak periods and don’t have to bear the costs during the quiet times when it’s business as usual.
4. Create an ownership mindset
You won’t have to micro manage your staff if you hire the right people. Make performance-based individuals – those who are self-motivated to grow without the need for external input – part of your core team. Give your employees more autonomy and decision-making power. Allow them to have creative ownership of the projects they’re working on. This will help them to thrive in the work environment and will ensure optimal results. That’s exactly what we try to do at Mann Made and have found that people rise to the occasion and take accountability for their projects with exceptional pride.
5. Expand your network and community
In 2011 software engineer Marc Andreessen said that software is eating the world. And it’s true that in the coming years, all businesses, not just internet companies, will become digitised and will run on software.
In 2018, networks are eating the world. By leveraging the network effect, you can create a strong system and support base of likeminded entrepreneurs in the same or similar industries, as well as future business opportunities.
The best way to do this is to attend industry related-events, conferences, indabas and award ceremonies – find those by browsing B2B websites and industry calendar listing, such as BizCommunity. Attend relevant alumni events hosted by your university, a local business school, or sign up for webinars hosted by international business schools. Expand your network by joining local community pages and groups, try LinkedIn, meetup.com, Facebook, as well as open-source communities to share ideas and collaborate on projects. The SingularityU South Africa Summit has a number of chapter events about exponential technologies happening throughout the year in Cape Town and Johannesburg.
More importantly – offer advice and personal learnings on these various platforms, be engaged and answer questions freely, so that you are seen as an industry leader. Accept invitations to exclusive and invite-only industry related events and conferences. Also be sure to share information and key learnings with your audience on social media. And remember to be relevant.
6. Learn from the future
In the past, we were taught in quite rigid ways; these days there are multiple teachers and numerous credible sources of information. Subscribe to newsletters from quality websites and blogs that are linked to your line of business, join online courses, participate in MOOCs (Massive Open Online Courses) that are offered through various universities. Have a look at the free introductory course to understanding exponential technologies offered by Singularity University. You can’t evolve to the next level – as a human and an entrepreneur – if you’re not updating your knowledge base and keeping up with industry trends. Watch pertinent lectures on YouTube and presentations on TEDTalks, increase your emotional intelligence by watching The School of Life – each of these will help you become a more agile leader and understand your work force better.
My goal for 2018 is to do at least three online courses – in electronics, programming and in Blockchain. Never stop learning!
7. Experiment with iteration
Jeff Bizos rates the success of Amazon not based on earnings, but on the amount of research and development they are undertaking. Of course, it’s much easier for multi-billion-dollar companies to pump billions of dollars into R&D, but much harder if you’re still starting out or at the stage of trying to grow your business.
Supercell, the mobile gaming company that developed Clash of the Clans, has an entire department that develops, trials and kills games. Progress is all about experimentation. While it’s important to develop new products and services, it’s equally important to trial them, get constructive feedback from your target audience, redevelop, trial for a second and third time and, at times, learn how to bury unsuccessful projects. This process will help you to minimise the risks involved in R&D.
At Mann Made we’re always willing to try new things – and fail. We established a music record label that folded, tried our hand at advert gaming in the early days of internet adoption in South Africa, and created a content-sharing platform in 2005, the same year that YouTube was launched.
Through these trial and error projects we learned the importance of asking – our internal or external project managers – to create a minimum viable product that was not as expensive as the final product, but could be used to test and receive sufficient feedback from our target audience. This process would give us an indication of whether it was worth investing further.
I encourage you to fail in your business from time to time as ‘fail’ merely stands for F- first, A- attempt, I – in, L – learning, and that’s the only way you’ll get your business to thrive.
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