You have a great passion for business! You have taken a significant
first step towards becoming a Visionary company.
You must have launched your business with passion, high hopes, and a strong belief
in your product or service. With our experience in working with a lot of small and medium
businesses, we surely know that things have not unfolded quite as you had expected.
All our dreams can come true, if we have the courage to pursue them
Few important facts about Small businesses (defined as less than 500 employees)
“50% of small businesses fail and close within one year.”
“80% of small businesses fail and close within five years.”
Welcome to the world of the entrepreneur! Your first task is to develop a business model
that has wings to fly. It is a time for moving past trial and error experimentation.
What does a Stage 1 company look like?
A Stage 1 company has 1-10 employees, and at this stage of growth, it’s all about survival.
A Stage 1 company is CEO-centric — meaning the CEO is likely the ‘specialist’ who has created a product or service and is now getting his/her idea to take shape. It’s the energy, passion, and vision of the CEO that is the driving force behind the company’s success today. The CEO also makes all the decisions and brings in all the sales. Therefore, 50% of the CEO’s time should be spent as the technician, or the Specialist, while only 10% of his/her time should be spent as a manager. The other 40% of the leader’s time should be in creating and fine-tuning the vision of the company.
A Stage 1 company is designed to innovate very quickly; it is not designed to be locked into any one specific focus at the beginning.
It is meant to quickly discover, explore, experiment, and find the right product or service that the leader intends to bring out into the world.
A Stage 1 leader shouldn’t worry about hitting the precise target, just close enough to continue to move forward. The leader has to figure out how to generate income because cash flow generally is the number one challenge. At this stage of growth, trial and error should be expected. The risk is high because of so many unknowns.
As a company navigates through Stage 1, its primary goal is to develop a business model that is profitable and sustainable. A CEO should evaluate how the company will grow and think about the following:
Customers / Channel
Product / Service Features / Benefits
Marketing and Sales Process
In Stage 1, team selection is all about how a staff member ‘fits’ the culture and the ability to do whatever it takes to get the job done (specialized skills and experience are secondary.) The CEO’s staff needs to help facilitate how work gets done and how quickly it gets done.
The staff also needs to be flexible and willing to embrace change because there are so many unknowns, and things can change quickly as the leader frequently makes adjustments to find what works best. Of the three Gates of Focus, The People Gate, The Process Gate, and The Profit/Revenue Gate, the latter is the main gate of focus for Stage 1. It’s all about proving the business concept and getting traction by generating revenue.
The second gate of focus is The People Gate because the company has experienced adding new people, bringing with them a whole new set of challenges for the leader.
Profit / Revenue
Required Leadership Skill Base:
The ability to identify one or more market opportunities
The ability to construct a skeletal business plan
The ability to raise sufficient capital
The ability to provide a product or service
The ability to see what needs to be done and then do it
Creating and maintaining focus is exceedingly tricky in Stage 1. The high degree of uncertainty affects the CEO’s ability to stay focused. Unless the business has outside funding, poor cash flow, and limited capital can force leaders to stray from the original core business by chasing projects that might bring in money prematurely. A Stage 1 company needs to stay focused on the principal goals and objectives.
The Top Five Challenges in Stage 1
Destabilized by Chaos
Slow Product Development and Getting to Market
Limited Capital to Grow
Without a robust business model (big picture strategy and plan), the leader’s efforts to bring in capital, find markets for products /services, and add new staff needed to help deliver the products/services can destabilize the work environment. The leader’s influence in the business must be dominant. Without a dominant influence (direct or indirect), the business will not move forward.
The staff will look to the leader for direction, and even though the leader expects people to be capable of pulling their weight, it doesn’t mean expectations or performance plans aren’t important in this early stage of growth.
( 50% of the time)
( 40% of the time)
( 10% of the time )
The CEO should primarily wear the hat of Visionary (50% of the time) and Specialist (40% of the time). As the Visionary, it is the CEO’s passion, energy, and vision that will keep the business moving forward.
As the Specialist, it is the leader’s expertise that creates and improves the new or better products/services and their delivery to the market. With a self-motivated team that is able to get things done, managing should not be a time-consuming task, taking up only 10% of the CEO’s time.
Builder / Protector Ratio
The Builder/Protector Ratio (BPR) is a measurement of “confidence vs. caution.” It is critical tool to gauge the business’ ability to accept change, respond with confidence to change, and successfully navigate the change.
Thrive on risk
Are always looking for new opportunities
Don’t back down from the everyday challenges
Thrive on caution
Prefer to apply the brakes (and should be encouraged to do so when appropriate)
During Stage 1, the optimal Builder/Protector Ratio should be 4:1 four builders to one protector.
The CEO must not only be a builder, and he / she must develop a team that, for the most part, is like minded to persevere through the challenges of a start-up. But, a bit of the protector mindset is helpful to counter the builders’ tendency to be eternal optimists with tunnel vision.
Foundation Building Blocks for Stage 1
Experiment until the company discovers its unique value proposition that resonates with target customers/clients. Develop a simple sales system that works and can be replicated and used by all salespeople.
Identify and document critical
processes. Train staff, so they
understand the processes.
Financial systems should include:
A simple financial model for understanding what affects the bottom line
Cash flow forecasting and tracking
A simple managerial accounting system
Refine a simple business model laying out the company’s
Target Customer / Channel
Product / Service Features and Pricing
Marketing and Sales Strategy
The Non-Negotiable Leadership Rules
Generate, track, and preserve cash
Focus 80% of the company’s resources on selling the two to three offerings with the best margins
Hire first for how the person fits in with the team and second for competence
Waste no time trying to stabilize the company – embrace chaos. Command the team and inspire the employees
Establish a company-wide performance mindset, feedback loop, and employee development with regular one-on-one meetings
VRT Management Group LLC created a custom program called Entrepreneur Growth Operating System™ (EGOS™) – Business Growth Alliance (BGA) to help companies just like yours navigate the challenges that are typical for a Stage 1 organization. We have designed programs, services, and tools that are directly tied to the issues faced by Stage1 leaders and their businesses.
We always welcome an opportunity to have a 45-minute conversation with CEOs, Entrepreneurs, and Business owners to understand their current challenges and share a couple of best practices to help them navigate through their challenges.
We strongly encourage you to avail of this complimentary opportunity. Over 151 of your peers have received tremendous value through these Zoom sessions.