Startup is the process of setting an idea in motion. A good startup always knows what problem and why they are solving. It is successful when they have solved the problem. Usually begins with an idea, which doesn’t have any guarantee of success. Startup might be an idea discussed over cup of coffee but it is an effort put by the team keeps it thriving through difficulties. Startup is different from traditional startup because they are designed to grow fast.
The Initial stage of startup life cycle is when startup is just a thought or an idea. This is the very conception or birth of a new startup.
- Challenge : At this stage of the startup the focus is on matching the business opportunity with skills, experience and passions. Deciding on a startup ownership structure, finding professional advisors, and startup planning.
- Focus : Most initial stage companies will have to overcome the challenge of market acceptance and pursue one niche opportunity. Do not spread money, time and resources too thin.
- Money Sources : Early in the startup life cycle with no proven market or customers the startup will rely on cash from owners, friends, family, suppliers, customers, government grants and banks.
Startup is born and now exists legally. Services or products are in production.
- Challenge : If startup is in the start-up life cycle stage, it is likely you have overestimated money needs and the time to market. The main challenge is not to burn through little cash.
- Focus : Startup requires establishing a customer base and market presence along with tracking and conserving cash flow.
- Money Sources : Owner, family, friends, suppliers, banks, customers and grants.
Startup has made it through the toddler years and is now a child. Customers and revenues are increasing with many new opportunities and issues.
- Challenge : The biggest challenge growth startup face is dealing with the constant range of issues bidding for more time and money. Effective management and a new business plan are required.
- Focus : Growth life cycle startup is focused on running the business in a more formal fashion to deal with the increased sales and customers. Better accounting and management systems will have to be setup. New employees will have to be hired to deal with the influx of startup.
- Money Sources : Banks, grants, leasing options, profits and partnerships.
Startup has now matured into a thriving company with a place in the market and loyal customers. Sales growth is not explosive but manageable. Startup life has become more routine.
- Challenge : Startup has worked hard and has earned a rest but the marketplace is relentless and competitive. Stay focused on the bigger picture. Issues like the economy, competitors or changing customer tastes can quickly end all you have work for.
- Focus : An established life cycle company will be focused on improvement and productivity. To compete in an established market, you will require better business practices along with automation and outsourcing to improve productivity.
- Money Sources : Profits, investors, banks and government.
This life cycle is characterized by a new period of growth into new markets and distribution channels. This stage is often the choice of the startup owner to gain a larger market share and find new revenue and profit channels.
- Challenge : Moving into new markets requires the planning and research of an initial or start-up stage startup. Focus should be on businesses that complement your existing experience and capabilities.
- Focus : Add new products or services to existing markets or expand existing startup into new markets and customer types.
- Money Sources : Joint ventures, banks, licensing, new investors and partners, profits, banks, investors and government.
Year over year sales and profits tend to be stable, however competition remains fierce. Eventually sales start to fall off and a decision is needed whether to expand or exit the company.
- Challenge : Startup in the mature stage of the life cycle will be challenged with dropping sales, profits, and negative cash flow. The biggest issue is how long the startup can support a negative cash flow.
- Focus : Search for new opportunities and startup ventures. Cutting costs and finding ways to sustain cash flow are vital for the mature stage.
- Money Sources : Suppliers, customers, owners, and banks. Profits, banks, investors and government.
This is the big opportunity for your startup to cash out on all the effort and years of hard work. Or it can mean shutting down the startup.
- Challenge : Selling a startup requires your realistic valuation. It may have been years of hard work to build the organization, but what is its real value in the current market place. If you decide to close startup, the challenge is to deal with the financial and psychological aspects of a startup loss.
- Focus : Get a proper valuation on your organization. Look at organization operations, management and competitive barriers to make the startup worth more to the buyer. Set-up legal buy-sell agreements along with a business transition plan.
- Money Sources : Find a business valuation partner.