When transitioning from being a startup to an established business, how do you recognise it, and when do you prepare? What should you consider to best grow revenue and the team?
What separates a startup from a mature business?
There are many answers for this question, some won’t be applicable to every business.
A startup tends to be one that has a negative cashflow – They consume more resources than they produce, whether because they are ‘fighting uphill’ to establish a foothold against established players, or they are polishing and evolving their core product.
As you start to break even, over a period of 4-6 months or longer, you’re reaching a potential tip-over point. Some practices that make sense to your business initially may not make sense when you have more resources, or once you’re an established player. Revolutionaries often have trouble adapting once they achieve power because they can’t adapt to the change.
Don’t mistake more resources for a license to print money
A startup has to be ruthless about prioritising the use of its resources, because they are limited. As the business becomes more mature and successful, the greater resources can cause issues, as it’s tempting to use them because they are there. When you can start thinking about saving cash or resources because they don’t need to be used immediately, it’s a sign you’re approaching a good place – but don’t be hasty, it is good to have some saved in case of an unexpected problem, or as insurance. Don’t trip over an untied shoelace while looking to the horizon!
Don’t be afraid to use it to pay back debts or obligations you built up initially – If it’s costing more to service the debt than to clear it, then settle. It’s also possible that you might want to regain more control of the business, or simplify your decisions by removing a voice from the table that isn’t contributing, or has a different priority for the business.
Make sure that you look after your team as it grows
Many startups thrive on the drive and commitment of their team to go ‘above and beyond’.
People work longer hours during the week, work at home, come in at the weekend, etc, etc. This can be damaging to the team over extended periods (It’s known as cruch in the game development industry) and can cause valued members of the team to burn out and leave, or even accept offers for jobs elsewhere which promise less stress.
The enthusiasm can be intoxicating at first – us against the world – but there should be some moderation over time, it shouldn’t be the standard. As more resources become available, or problems are cleared, look at adding new team members to lighten the load, strengthen the team and spread demand.
If there is an opportunity, and the space, encourage team members (including yourself) to rest and relax, recharge their batteries and to approach work refreshed. This will mean the work the team puts into the product(s) and the company is more consistent and this will reassure customers and investors. It also allows the team to reconnect with friends and family, eat better, and makes them more likely to stay and help the business grow and develop.
It’s good to grow, but don’t forget to pick the right location and use it well
Many startups begin at home (sometimes one home,sometimes everybody’s), and the start of the growth to a mature company begins when it can afford separate offices, and allows the team to FEEL successful as they can separate home and work.
The first offices will often be in shared workspaces, sublets in the back of shops, etc. As the quality of the premises improves, and the amount of space, it can be tempting to go mad in indulging the staff and to be ‘cool’ – Arcade machines, coffee bars, sleep pods, etc.
This is the teenage phase – “Wouldn’t it be cool if we?” This is impulsive, but the point of maturity comes when you start thinking about the office as a workplace, and that playing and team building should be balanced with productivity, and that you don’t want everybody becoming tired of each other. Your facilities will become better, and will reflect you and the team to make it feel more comfortable, but you will start thinking about improving the company and the team members’ prospects at the office and outside of it, once you’re comfortable enough to think further ahead, and to be less focused on the immediate work problems.
Find a balance between generalists and specialists
As everyone who has been involved in a startup is aware, the job you thought you were hired for rarely remains exactly the job you end up doing, and in most cases you’re doing several jobs at once. Sometimes you may feel unprepared or unqualified, but it’s rare that a startup can afford everyone it needs in all areas. The trick is always figuring out what is essential, and what you can get by with.
Generalists are a great asset, and the good ones are amazing. The main issue you will find as you grow is that a generalist will never have as much time as a specialist to master their craft. The advantage is often a wider perspective when they’re evaluating an issue or implementing a fix (or talking someone down from a ledge!).
In key areas, you will find there are times when you reach a threshold – You’ll see that it is important to fill those roles with someone who is not just skilled in that area, but that brings experience to save everyone’s time and short circuit your progress to move forward faster. Giving someone the time to dedicate themselves to that function of the business fully will give returns far greater than it seems when mated with experience bought and paid for before they come to you.
Tip: Does this mean you should get rid of generalists? We’ve seen too many businesses go to the extreme of replacing or developing their whole team with specialists – when something happens, leaves the business in a difficult position without the crossover of experience to avoid a silly mistake or save time in finding a solution. A great generalist is worth their weight in gold, but will benefit from the right support for dealing with details and execution, while also seeing a wider picture and being able to warn the Emperor when he’s buying a suit of nothing!
And don’t be afraid to work with an experienced member of the team when they want to develop. It keeps the experience you’ve paid for, and lets them focus their professional development in a direction that benefits the business. And they will still have that awareness of previous experience to help you avoid past mistakes, or identify strengths and weaknesses over time.
Leverage Standard Operating Procedures to codify good practice as you grow & train new hires
Let’s face it, we’ve all been there. We know (or one of our team knows) exactly where that thing is, how to do that one workaround or exactly the right time to action that task. But as the business gets bigger and people come and go, training can be such an expensive element where you can waste more resources than needed for a given outcome. It’s hard for things to scale up effectively.
S.O.P. stands for standard operating procedure, and it is essentially a document explaining how to perform a task or set of tasks based on experience.
By starting to build your S.O.P.s early, you are easing the teething issues of business growth massively. If someone is ill, or busy doing something else, you can’t always pause your business until they are free.
If that’s you, you can’t focus on the growth of the business, and so you’re selling yourself and the rest of your team short by holding them back. And someone else might have experience or insight that could improve on what you have been doing if they can become part of the team fully.
Some of your team might prefer the ‘job security’ or control behind being the only one who knows, but the business is more than one person. In addition, that person will never be able to grow and mature, developing within the business, if they lock themselves into one role ‘just because’. A person may actually become actively harmful to the business by impeding their colleagues.
Tip: If you find people waiting to continue because they are reliant on you, or someone else, then take the time to document the process they are waiting on, including any credentials. Make sure at least 2 people know how to do anything, and that where possible (within reason) they can’t both be impacted by the same problem or issue.
Tip: Run regular audits on your processes, work with the team involved, improve the processes where possible and get the team to update the S.O.P.s regularly. Nothing is sacred if it can be done better. Don’t get attached to a solution just “because we have always done it that way”, find the best solution for now and the future. Small gains multiply, whether time, money or both.
The hardest thing when you move from a startup to the next stage of maturity and growth is to avoid leaving the top off the ‘lightning in a bottle’ and letting it escape. You’re still juggling plates, you just find that you have more helpers and options – this is both good and bad.
Don’t be afraid to write down and keep what worked well, as long as it’s not hurting you, and don’t feel that because you’ve gone from negative to positive cashflow that you’re Scrooge Mcduck with a money bin to swim in. You’re just gonna be able to say yes a little more often (within reason!) – And you need to bear this in mind as you look at offices and hiring more people. You’re not out of the woods yet.
At the end of the day, preserve what was good, don’t be afraid of growth, but listen to your trusted friends and team-mates if they are worried you’re going too far, or that you’re holding back and hurting the business. There’s nothing worse than being surrounded by yes men!!
It’s a great time, as the business moves from cash burn to being a ‘proper’ business that pays its own bills. But there are likely to be many more challenges to come. Be mindful of the times and the battles to come, but let your hair down a little as you remember why you started in the first place!