Years 0 to 2
Most businesses start the same way, that is, there is an idea, the business plan is formulated and developed, facilities are established, employees are hired, money is raised, and products and services are delivered.
Once these stages are completed, the variation begins. The issues related to hiring, refining, evolving, systemizing, planning, and dissolving the business come up at various times of the business life. The simple solution is to predict and understand the challenges and set them on the business timeline.
Many entrepreneurs in the past have faced such barriers and thus have some established ground-rules and solutions for these impediments. The basic proven solutions are divided among three timelines. The next two stages of timeline continue.
Years 2 to 5
After the first year, the entrepreneur must review the business plan and re-structure it if needed. The plan must be updated and all goals must be revised. The idea is to work on these goals in year’s two to five. In these cases, utilizing a business planning software product such as Business Plan Pro is helpful.
Entrepreneurs must formalize the procedures that were developed during the initial stage by getting things down, formally on paper from people’s minds. He or she must get the rules, procedures, goals, and operations down on paper in the form of a business manual.
Hire the first set of employees or hire some new employees if the business is growing. Write well-thought job descriptions for all old and new jobs to make sure the right people are hired. This would also help to develop the training schedules. It is also important to delegate the responsibilities and authority by hiring a management team, which can oversee the daily work and make day-to-day decisions. It is extremely important to have faith in the managers to make it easy for the work to be done efficiently.
It is also important to standardize the sales and marketing wing of the business by carefully presenting the right picture to customers. A consistent marketing message is crucial for differentiating the business from other established competitors and brands.
Initial business financing can be done with personal savings, bootstrapping, borrowing from friends and relatives, or even borrowing from a pre-existing 401K. However, as the business grows, the capital needs to increase, and new ways of funding are needed. By this time, the business becomes more attractive to banks, angel investors, and other financing sources. These institutional financial sources require many documents and thus it is important to follow strict bookkeeping procedures that include up-to-the-mark accounting reports that include cash flow projections, income statements, and balance sheets.
While choosing the right financer for the business, it is advisable to look at the various terms and conditions of the different types of financing. For example, banks like security whereas venture investors like to gamble and take risks to earn annual rates of over 35 per cent through sales or mergers.
Years 5 to 10
After about five to ten years in the business, it is common to find business slackening and sales and demand slowing. The existing range of products and services begin to lose its existence and potential. The best thing to do at this time is abandon these products and services and search for new products, services, and markets. It is a good idea to expand and extend the range, develop slight variations in the existing range, change the packaging, etc. This would ensure new sales being made to new customers in old markets as well as continuing sales to existing customers.
Many times, businesses change their locations to follow suppliers and customers. At other times, businesses relocate because they need a bigger space in terms of employee space, inventory, etc. or need a better infrastructure for things like transportation and communication.
The key during these times is to focus on reducing costs and not specifically increasing sales. It is a great idea to improve productivity in a technical or scientific manner. Do so on paper and create systematic instructions and diagrams to understand where the blockages are and how the unnecessary processes are eliminated.
Once you have understood the business processes, use technology as a productivity enhancer. Add computers, softwares and other technology to the already existing technology. Ensure complete training is provided to all employees for efficient usage of these systems.
Years 10 to Retirement
Once ten years down, the business may be old, known, and stable. However, as the business becomes stable, the markets,
competitors, and technologies begin to transform. Thus, the key to maintain stability and productivity is to innovate.
This can be extremely difficult in some cases as all processes and systems need to get re-evaluated. However, with new blood coming in and the founding entrepreneur planning to retire, it may become easier for the business to get a grip on new ways of doing things.
Most businesses tend to appoint a successor who is just like the founding entrepreneur. However, this is the wrong approach. The correct approach would be to find the type of person that the business needs and not the type of person similar to the founder.
Training and grooming the successor is also significantly important and the most difficult step. This is the trickiest action and many times it is needed for the successor to gradually set in. A good way to do this is by taking long vacations and allowing the successor to take over everything.
Handing Over the Business
If the current business is being carried out to the next generation, it is a great idea to start grooming the successor early, as it can take years to fully train the successor. It is also important to plan for the process by which the business would be transferred.
The first thing to do is to set a date when the entrepreneur plans to retire and hand over the business. Once the business is handed over and related formalities are completed, it is best to never look back. However, from time to time, consulting with the original owner to make important decisions can be advantageous for the business.
Many entrepreneurs like to sell their well-established and profitable businesses to potential buyers. These buyers pay for the future cash flows that the business would generate and the purchase price would be equivalent with the cash flow.
Many times when entrepreneurs do not find the right successor or the right price, they might consider closing the business. This process can be simple: sell business assets, repay business liabilities, lay off employees, update customers and suppliers, pay all outstanding bills and loans, and move on with life. This strategy requires very little planning and groundwork. If this route is chosen, it is very important to give proper notice when closing the business.