How do you decide which are the most rewarding challenges for your business? When is the right moment to turn them into opportunities?

Acknowledging one’s own phase in life is imperative for evolution. This holds true for businesses as well. This article addresses the challenges that companies face during each stage of their business journey.  You will also discover how some companies and business owners addressed the challenges that pushed them towards expansion once they acknowledged their condition.

The reality of many established companies resembles an unfair 3 – sided coin (heads, tails, and the edge with low chances of occurrence). The three perspectives refer to the same facts, although their implications are different or even opposing each other. Let us imagine the following scene with well-known actors such as “the company (business owners)”, “the major client” and “the ambitious competitor”. Three different offices.

Company (business owners): “We find ourselves in the situation where we try to solve everything as we used to, but it is not enough anymore. Although we have a great product, an amazing team and an inspiring vision, our business is stalling, and the outlook seems uncertain. We have grown the company to the point where there is a lot of pressure to ensure stability for employees, to maintain the trust of investors and partners and to keep the reputation and service quality for our clients. We still see growth opportunities, however there is no clear path of how to seize them. Nevertheless, our clients appreciate us, and their loyalty can ensure some stability in the future.”

Major client: “I’ve used their services for years and it was great at the beginning, the level of service, how prompt they were, I was impressed by the level of professionalism although the company itself was barely starting. Unfortunately, in the last period we noticed a decrease in quality, some delays, and a reduced level of customer support. Unfortunately, this affected our operations as we relied on their services. Although I’ve known them from the beginning, I have received some offers from new players that seem to be closer to what we need at this point. As we have our own performance targets to meet, I feel compelled to reconsider our collaboration.”

New ambitious competitor: “They introduced pioneering services when they started out and inspired a lot of other companies. Too bad that they could not adapt the product and services to the existing needs, they seem to be too slow in staying competitive. In contrast, we manage to address a problem that no one is addressing right now, faster and with better prices. Our current challenges are to meet the growing demand and develop close client relationships. Also, they focused locally, whereas we wanted from the beginning to address the international markets which give us other opportunities.”

The three monologues happen at the same time and represent the sides of the same coin. Unfortunately, the chances for a positive outcome for the Company are the lowest if it is unable to find the right direction to move forward to.

Every business has its own life cycle. If the company can recognize and accept its own situation, then it can better prepare for the next stage in a more confident manner

There are different terms used for the stages of the business life cycle. I will use the approach with seven stages as I personally think that they represent more realistically a company’s journey. It is not necessary that the stages presented here will occur in the same order. Below you will find an overview of the 7 stages together with relevant information for each: description, challenges, focus, financing options, and milestones.

The Stages and their implications

1. Seed

This stage is the beginning of the business life cycle. This is when business is just a thought or an idea and requires several rounds of research and testing in its initial stage.

• Challenge: Most seed-stage companies will have to overcome the challenge of market acceptance and decide on the niche they want to pursue. Are they convinced that their offering is desirable? Did they obtain enough evidence to justify advancing to the next stage?
• Focus: At this stage of the business, the focus is on matching the business opportunity with one’s skills, experience, and passions
• Finances: Own capital, time and support from friends and partners, seed investors
• Milestones: A well-researched and defined business model and plan to be tested in the Start – Up stage

2. Start – Up

The idea was turned into actions, the business was legally incorporate and has a customer (or users). You might have a partner (or two) to help you get going, and you’ve got some money together to get off the ground.

• Challenge: The business owner(s) must invest energy and time to market the product. The business owner(s) need to evaluate the needs of the customers and verify whether the business is going in the right direction or not
• Focus: The focus at this stage is to establish a relationship with the customers and to understand their needs to improve the product. Moreover, it is also important to establish the business in the market along with maintaining and checking the flow of cash. The business owner(s) must develop strategies to deal with competitors
• Finances: Owner, friends, family, suppliers, customers, or grants
• Milestones: Product / Service Market Fit is reached, and the Business Model is generating increasing revenues

3. Growth

At this stage the business owner (s) may realize that business revenues and customers are growing. This is the time to experiment with new and exciting products and services. The growth has generated new opportunities while adding different issues. Profits are increasing along with increased competition.

• Challenge: The business faces issues related to financing the growth. Managing the business in an effective manner is required, as well as revising the business plan
• Focus: The focus of the business owner(s) is to run the business efficiently to increase the sales and the number of customers. The business owner(s) must maintain a good relationship with all the people involved with the business whether internal or external. The business owner(s) must learn the art of training and delegating to pass this stage. Hiring of some experienced professionals will be required to save time and money
• Finances: Banks, profits, partnerships, grants, and leasing options, outside investors
• Milestones: Well-articulated growth and marketing plan, all key competences are covered, the budget can sustain the new business plan, revised operational plan

4. Established company

You have loyal customers, your growth is not explosive (and it may even slightly decrease). Revenue numbers are manageable, and the business is following the routine process. Competitors will take this time to attack you, and try to weaken your position, but you will be able to withstand this, because you are now a household name.

There is little to no innovation happening here. You will find that the people who rise here are Sales and Marketing types, and the Product types who served you in the Startup and Growth Stages will become bored and distant. Companies will often find that this is when they lose their earliest employees, and massive turnover in key positions (especially the C-Suite) to more established corporate hires.

• Challenge: It is far too easy to stay in your comfort zone during this life stage; the marketplace is relentless and competitive. Issues like the economy, competitors, or changing customer tastes can quickly end all the hard work
• Focus: The business owner(s) needs to improve the product or services and enhance productivity. To be able to compete in the business, the business owner will investigate inclusion of best business practices, use automation, and look for outsourcing of the business to enhance productivity
• Finances: Profits, banks, investors, and government
• Milestones: The owners and management will look for expanding in new areas. The business must evaluate the changing needs and improvement areas to cater to the demands of its customers. New products and services may replace the old ones

5. Expansion

This life cycle stage is characterized by a new period of growth into new markets and distribution channels. This stage is often the choice of the owners to gain a larger market share and find new revenue and profit channels.

• Challenge: Moving into new markets requires planning, research and detailed analysis. Your focus should be on businesses that complement your existing experience and capabilities. Moving into unrelated areas could be disastrous and might require unjustified large investments. Projects outside core activity areas can be regarded as Seed or Start Up initiatives, thus addressing the relevant challenges and opportunities as such (see above)
• Focus: Add new products or services to existing markets or expand the existing business into new markets and customer types
• Finances: Joint ventures, banks, licensing, new investors, and partners
• Milestones: The marketing plan is revised and the customers are to be served with improved products and services as per their needs

6. Mature

This is another “plateau” period, where companies tend to get complacent — like the “Established Company Stage”, there is little to no innovation, and everything is procedural. Each year you remain in this stage, your sales and revenues will be stable — there will be little desire to change anything, as everything is working.

• Challenge: This is where you are at your most vulnerable, however, the competition that started to pop up when you became established is now even more fierce. Eventually, your sales will start to fall, your revenues will take a downturn. The biggest issue is how long the business can support negative cashflows
• Focus: You will need to decide whether to reinitiate the Expansion Stage, to sell the business or to close it down due to losses incurred
• Finances: Suppliers, customers, owners, reserves
• Milestones: Revised business model and growth plan, revised finances, new transformation strategy, exit strategy

7. Exit

It is a big opportunity for your business to cash out on all the effort and years of hard work. Or it can mean shutting down the business

• Challenge: Selling a business requires a realistic valuation. It may have been years of hard work to build the company but think about the real value in the current marketplace. If you decide to close your business, the challenge is to deal with the financial and psychological aspects of a business loss
• Focus: Get a proper valuation of your company. Look at your competences, business operations, management, and competitive barriers to make the company worth more to the buyer. Setup legal buy-sell agreements along with a business transition plan.
• Finances: The owner may look for a partner who can value the business or he can take advice from his advisors on the best option and strategy to sell or close the business
• Milestones: The important aspects of the business are accepted by the buyer and agrees to a realistic value of the company

In my experience, although each company has its particularities, these stages are relevant irrespective of the industry. As an example, I will highlight below two companies from apparently opposite industries that acknowledged their stage and decided to act accordingly. One is active in Agriculture and the other in IT. These are some cases of established companies, that, with the help of Enovise Present, have tackled their own challenges and initiated actions in the right direction.

Example 1: Bayer Crop Science

Bayer’s Crop Science division is one of the world leaders in the field of agricultural inputs. The activity of the Crop Science Division in Romania includes the development and marketing of innovative high-performance products for agricultural crops: fungicides, herbicides, insecticides, seed treatment products, DEKALB hybrid for corn and rape seeds.

Challenge

The client collaborated with one exclusive distributor in Romania. Bayer Crop Science was facing planning challenges (sales volume, inventory, cash flow) and needed accurate information from its distributor. The distributor is a Romanian entrepreneurial company with over 20 years of experience in the field of agricultural distribution.

Objective

As part of a global growth strategy in Central and Eastern Europe, the client wanted to develop its business in Romania, helping the distributor to optimize its business. This approach addressed the following objectives for the distributor: i) To be able to cope with higher demands and volumes in the future, ii) To become competitive in a market where profitability margins have decreased significantly, iii) To better manage the financial situation (profitability, inventories, cash flow). Moreover, another common goal was to increase transparency and stabilize financial data with the aim of improving planning quality.

Solutions provided by Enovise Present

• 360 organizational analysis
• Carried out a financial analysis for Management to increasing transparency regarding financial performance
• Conducted a financial benchmarking between the supplier from Romania and other suppliers from Bulgaria and Russia
• Proposed a plan with measures for process optimization (planning, sales, operations, IT) thus reducing both financial and operational risks

Deliverables

• Report with the results of the organizational analysis (structures, processes, roles, IT systems, customers, competitors)
• Report with the results of the financial analysis (profitability, liquidity, efficiency, solvency) and benchmarking between distributors (Romania, Bulgaria, Russia)
• Organizational optimization plan

Example 2: Onseo

ONSEO is a B2B software services company, with international presence on three continents boasting a wide stack of technologies in the iGaming industry. It provides services to some of the largest iGaming and Sports companies in the world, supporting them in their efforts to innovate and attain market leading positions. It also operates a technology R&D arm working across several sectors: Automotive, Healthcare, Agriculture, Oil & Gas.

Challenge

The company grew organically, with a strong focus on the iGaming space and found itself on a plateau characterized by diminishing profit margins.

Objective

While the software development market is becoming increasingly competitive, and the client reached a certain level of business maturity, the company was looking for strategic options to increase its competitiveness and consequently its value, primarily in the iGaming space.

Solutions provided by Enovise Present: 

• 360 Organizational capability analysis
• Industry and Market Research
• Strategic Option Design
• Financial Evaluation of the Strategic Options

Deliverables

• Internal Capability Assessment Report
• Documentation of Strategic Options
• Improvement measure plan for each Strategic Option
• Investor Presentation Deck

If the situations described in this article speak to you and you are looking to turn your most rewarding challenges into opportunities,
I invite you to a discussion to go more in depth on the topics of interest. We would be excited to help you along this journey! You can contact us directly on Linkedin or at the following email address ionutzaharia@enovisepresent.com.

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