5 Stages of Business Development
What Stage of Business Development Are You In?
So, you are an entrepreneur. You are developing your business, and of course refining your product/service, talking to customers and ready to start seeking funding. Or you don’t need funding and all you need is some (or more) customers. Are you a start-up business? Are you a developing business? Are you an on-going business? What are the stages of your business development? Exactly what stage of business development are you really in? What determines what stage you are in? Why should you care?
I am willing to bet that, unless you are already generating on-going revenue, you think you are further along the development scale then you really are, or that you hit a wall and don’t see a path towards progressing further. There is a whole lot more to your business but understanding the development stages is extremely important as a basis for long term success. One must plan to get through each stage and to the growth stage. You can’t do that unless you understand those stages as they are, by definition, your journey.
Simply stated the generally accepted definitions for the stages of a businesses development include some form of: Concept, Early Development, On-going Development, In Revenue, In Profit and Growth. While most businesses start in concept and flow through at least the In-Revenue stage, even companies in growth can find themselves moving backwards to prior stages when circumstances change or they try to re-invent/re-in vigor their business. So, what defines each of these stages?
The most important factor defining what stage your business is in is the number of key business attributes that you are making assumptions about. The difference between executing based on assumptions and executing based on validated hypothesis is the key to long term success. The number of validated attributes that exist and the amount of assumption testing being done defines what stage you are really in. The key to knowing which stage you are in at any point in time is documentation. Everything undocumented is an assumption.
To Advance From Stage to Stage You Must Validate Your Assumptions
In the Concept Stage you are doing nothing but documenting and discussing your assumptions about things like the Problem you are trying to solve, the Solution you believe you have to that Problem and the overall Market Opportunity. You may be doing other things, but if you have not documented your assumptions and hypothesis regarding the key attributes of these three components of your business, you are considered a Concept business. Concept businesses typically don’t get funding outside of friends and family and sometimes small grants from organizations they are associated with.
In the Early Development Stage, you have begun developing and documenting necessary tests required to validate your hypothesis for the assumptions you defined in the Concept stage. You are beginning to execute those tests (which could be simple research on the internet) and gathering the necessary data to make a determination about whether or not your assumptions and hypotheses are valid. If you determine they are not valid, you need to rethink/document your assumptions accordingly.
In addition, during the Early Development Stage you are now documenting your assumptions for all of the other important business attributes including things like your Competitive Advantage, your Business Model (how do you make money), your Culture/People/Structure, and your overall Business Planning. This can be a lengthy stage but ultimately the goal is the beginning to the development of a complete business plan for at least the next 3-5 years. During this stage small amounts of funding can often be found, but most support will still come from grants and friends/family.
The On-going Development Stage is where a business starts getting serious. All of their assumptions about the various attributes of their business are either actively being tested or have been validated to the point that solid plans can be documented and ultimately executed. During this stage it is important to completely validate all attributes associated with the Problem being Solved and the Opportunity/Market being addressed. At this phase of development, a complete business plan should be developed. This is the stage where early rounds of funding can start to be requested. Serious funding typically does not come until a business is In-Revenue.
The In-Revenue Stage is simple to understand…you are generating revenue on a regular on-going basis. One-time sales and purchase orders for future sales do not count. From a development perspective however, it is important that at this point you have validated all assumptions except for some key attributes surrounding your Business Model and Culture/People/Structure. To seek funding a complete Business Plan is required.
The difference between In-Revenue and In-Profit is also pretty straight forward. Just because a company is generating revenue does not mean they are making a profit on a regular on-going basis. From a development perspective though, the thing that typically tips the balance to In-Profit is the validation of everything but the Culture and People. Those are things that are constantly being tested and evaluated by companies until they really get to the Growth Stage. In the Growth Stage you have validated all original assumptions and are regularly retesting every assumption that had previously been validated to make sure your plan does not require adjusting.
So, which stage of development is your business in? The real answer is in the detail, which will be the subject of future blogs. Your challenge this week is to be honest with yourself and your team.
Mitchell Bolnick – The Excel Consulting Group
