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I run a global business accelerator and from 2010–2018, our team interviewed over 6,000 entrepreneurs and leaders in the UK, USA, Australia and Singapore. We discovered a common journey that businesses go through time and time again. When we looked at the data, it was clear that this was happening across the economy.
Out of 5.7Million businesses in the UK, Over 4.3Million of them have no employees. Despite making up 76% of businesses, these early-stage businesses account for just 7% of business revenue. Conversely, there are just 40,000 companies in the UK with over 50 employees and these businesses account for over 60% of business revenue.
The beginning of the journey is hard and unrewarding and we need to plot a course for becoming the type of business that delivers results. I’ve observed that there are two outcomes to aim for on the entrepreneur journey – a lifestyle boutique (3-12 employees) or a performance business (40-150 employees).
Here are the stages in the Entrepreneur Journey:
1. Startup. Every business began as a concept in someone’s mind, with excitement and nervousness in anticipation of launch. Working with ideas, plans, prototypes and skill sets, someone created a vision, expecting rewards of money, more meaningful work and increased freedom. It was brilliant in their mind and so they began.
2. Wilderness (1–2 founders). After launching, most businesses end up in survival mode with the founders working alone. There’s no team to help with making sales, delivering the service or day-to-day operations. The owner is left with little spare time, money or freedom. They swing between stress and boredom, often feeling lost and unable to see a way to break the cycle. In the UK, USA and Australia, 75% of all businesses do not reach a point where they can employ anyone.
3. Struggling boutique (3–12 people with low revenue-per-person). A small team begins to form and the roles become more focused. The struggling boutique is able to pay basic wages but it’s not very profitable. It defines itself by geography (e.g. Brighton Pizza Shop, Tampa Bay Printing) and fails to develop many assets mostly trading time for money.
4. Lifestyle boutique (3–12 people with high revenue per person). A small, dynamic team with relatively low overheads but a high-energy culture forms. The team self-organises, has fun developing digital assets that reach people globally and the business looks much bigger than it is. The owner receives better income than they could get at a corporate job with more freedom, greater impact and less stress. This type of business often centres on a ‘Key Person of Influence’ who’s known, liked and trusted in their industry.
5. The desert (13–40 people). During this scaling phase, the business is too big to be a small boutique and too small to be a big business. The overheads increase with additional staff and investment into growth. The business requires leaders, managers and technicians but can’t afford these roles. Although the fundamental business is sound, it becomes unprofitable, and investing in long-term projects kills cash flow. Culture is damaged as it is pulled in two directions – the flat structure of the past vs the professional culture of the future. It needs to either grow or shrink fast before it runs out of cash.
6. The factory (40+ people with low revenue per person). Adding a high headcount without improving revenue per person creates a stressful business known as a factory. The business is always on the edge of a financial cliff as payroll ticks over month by month. There’s no money to reward the high-performers and they leave, and there’s no money for research and development so things stagnate. The business begins a cycle of cutting back overheads and eroding the few assets it once had.
7. Performance (40–150 people with high revenue per person). This is a dynamic team of professionals working with high-quality business assets. The business is almost unrecognisable from the lifestyle boutique it once was. The culture, brand, systems and products have all shifted up a gear and the business now serves more markets and territories. There’s healthy profit from well-developed strategic assets (mostly digital or intangible). The business owners can either hold on and enjoy the profit or exit for a life-changing amount of money.
8. Unicorn (250+ people with ultra-high revenue per person). This is a performance team that was in the right place at the right time with the right opportunity and access to lots of funding – like Facebook, Uber, Tesla and LinkedIn. They receive a lot of attention and achieve soaring valuations in a short timeframe. These businesses are almost impossible to replicate, although thousands of copycats try.
9. The corporation (250+ employees and established in the market). This big, established, bureaucratic beast has lots of assets and many people working to sweat or improve them. Corporations used to enjoy a gilded position because not much could dethrone a business with global scale and strength. More recently, every corporation has needed to think like an entrepreneurial team or risk being disrupted by a fast growth performer or unexpected unicorn. The money flowing around corporations is now fair game for ambitious entrepreneurial teams.
Knowing these predictable phases can guide you towards the business you want. If you are an entrepreneur with a level head, your real choice is to focus on either a lifestyle or a performance business. Unicorns require so much in the way of luck and deep pockets that it’s impossible to plan them and no one want’s to be alone in the wilderness or sweating it out in the desert.
March 4, 2019 at 09:52AM
Forbes – Entrepreneurs