In a market of cut-throat competition, a unique idea is useless if you don’t hone it.
Even if you’ve come up with a fantastic idea, you still need to cultivate it patiently (because successful businesses start small and grow slowly, so there’s perhaps no more remarkable skill in business than patience).
Therefore, miracles (just like success) don’t happen overnight.
Every single business needs to go through five essential stages as it strives to become the next unicorn.
I know what you’re thinking. “Identifying start-up growth patterns is a hopeless task. Every business requires different approaches, management styles, and levels of effort”.
I agree with you. Nevertheless, if you look at the big picture, you’ll notice quantifiable stages that every start-up goes through.
Thus, businesses are like seedlings – even though they grow differently, there are common patterns in the life cycle of each one.
Table of contents:
1. What Are The 5 Development Stages Of A Start-up?
Knowing precisely the stage of your start-up lifecycle is critical for your entrepreneurial journey.
Skipping stages or assuming that any of the five start-up development phases does not apply to your business is risky as your start-up growth can quickly stall without a strategy based on the business lifecycle stages and challenges.
As every start-up stage requires different skills and knowledge, it is essential to identify the phase of your start-up life cycle in order to set realistic goals and define the direction of your operations.
For this reason, we will take a closer look at the five stages of a start-up, what you can expect from each one, and how to make a smooth transition from one stage to another.
1.1. Filling A Gap
Filling a gap is the first step to building a successful business.
Market gaps are business opportunities. In other words, a gap in the market gives you the chance to make and sell something that is not available yet, but people would like to have it.
A business idea does not need to be 100% unique as people typically pay for convenience.
Let’s assume that you plan on starting a car wash. You may say: “I’m not looking to try out an unoriginal idea!”.
What if I told you that people are looking to save the time and hassle of going to a carwash? Maybe there are thousands of car washes out there, but how many of them can actually help you save time?
For example, many consumers would pay slightly more just to have their car cleaned when parking within walking distance from the place they need to visit (they would expect to have it thoroughly cleaned before their return). In other words, consumers are willing to pay more for convenience.
Now, let’s assume that there is no parking lot offering car wash services in the area you live in, and consumers are willing to save the time of going to a car wash and waiting for their car to get cleaned.
So, you decide to start a car wash and offer your services in a parking lot. Essentially, you are filling a market gap.
Below you will find the three ways you can fill a market gap:
- With an upgrade or improvement (as described in the example above – this is the easiest way to find opportunities within saturated markets)
- With an original product that doesn’t exist in the market
- With a product that already exists, but no one has tried to sell it in a new market
No matter how you choose to fill the gap, you need to make sure that your solution is solving a real-life problem. If you’re not able to fix anything with your business idea, it means you’re about to start the wrong business.
I suggest that you conduct as many surveys as possible to identify consumers’ feelings and thoughts concerning your specific solution and determine whether your business idea can fill a market gap or not.
1.2. Building An MVP
After finding a business idea that fills a market gap, it’s time to build an MVP (Minimum Viable Product).
According to Medium, the term “Minimum Viable Product” comes from the lean startup methodology.
The lean startup is the scientific approach to launching a business based on experimenting and testing while developing products.
Lean startup author Eric Ries describes the Minimum Viable Product as “a version of a new product which allows a team to collect the maximum amount of validated learnings about customers with the least effort.”
In other words, the Minimum Viable Product is the first form of product you can release to consumers.
Below you will find a few examples of Minimum Viable Products that you can use (according to the industry you are in and the type of product you plan on launching):
- Software prototype (an incomplete version of a software program)
- Product design (a sketch that demonstrates how your product will work)
- A landing page to announce your new product and engage your target audience
- Concierge (a Minimum Viable Product that requires you to perform every function of a product or service manually, such as an automatic couponing program)
- Wizard of Oz (creating an illusion of a fully functional product and giving a faithful representation of what the product or service would act like)
- Piecemeal (using existing tools and solutions to deliver a product or service, such as a third-party e-commerce platform)
- A demo video explaining what the product will do
Here are the most important benefits of building a Minimum Viable Product:
- Evaluating the product’s performance in the real market
- Determining the features of the product according to the consumers’ needs
- Avoiding failures
- Getting user feedback and improvement ideas
- Saving time and money by detecting risks
- Evaluating the product’s functionalities
After building a successful Minimum Viable Product, it’s time to enter the market and attract as many customers as possible.
1.3. Entering The Market
Once all of the previous steps have been completed, you can start preparing your successful launch strategy.
At this stage, you need to take important steps that will impact the success of your product launch:
- Reconfiguring and optimising your product to make sure you’re meeting consumers’ needs
- Building anticipation (you can promote your product prior to launch by creating a landing page and email campaign and reach out to bloggers and industry influencers)
- Establishing a solid supply chain to ensure you will be able to meet demand
- Creating guidelines for your brand’s voice (for more details on building and defining a powerful brand, you can read this post)
- Polishing your brand image (the most affordable and cost-effective way start-ups can build a professional business image is using a virtual office. First-class virtual offices provide businesses with all the necessary tools to stand out from competitors – if you’re not familiar with the virtual office concept, please read this blog post).
If planned correctly and consistently, your product launch will garner success.
However, after launching your product, I suggest that you keep the following KPIs (Key Performance Indicators) in mind:
- Launch campaign metrics (e.g., leads generated, website traffic, email open rate, PR coverage, etc.)
- Market impact metrics (e.g., revenue, market share, competitive win rate, etc.)
- Feedback (feedback from customers is essential, but you also need to collect feedback from your team, marketers, and product managers)
- Product adoption metrics (e.g., product trials, user retention, customer intent, etc.)
1.4. Scaling The Business
Scaling up a business means reaching the stage that supports growth by increasing revenue faster than taking on new costs.
As you enter the market, you should already be thinking about a scaling strategy (rather than a growing strategy).
Therefore, there is a difference between scaling and growing. Scaling means increasing revenue without a substantial increase in resources while growing means increasing revenue by adding more resources (that require additional costs).
For this reason, you need to focus on a scale-up strategy that enables you to maximise profits and cost-efficiency.
Please note that premature scaling (expanding faster than a business is ready for it) is one of the leading causes of small business failures. For example, hiring too many employees too soon is the most common sign of premature scaling.
Thus, you need to ensure that you choose the right moment to scale up (when your business is ready to go through a new development stage).
Typically, three signs indicate that your business is ready to reach a new stage (without accumulating a high amount of overhead – which is the secret to successful scaling):
- Your business has a steady cash flow and a solid pipeline
- Your business operations and processes are running smoothly (e.g., supply chain, customer service experience, skilled employees, etc.)
- You’ve set objective and created a clear growth goals roadmap
As I shared in the previous section of this post, a virtual office is the most effective workspace solution for start-ups and small businesses. A virtual office enables companies to access office facilities and build a professional image even when running on shoestring budgets.
I just want to add that virtual offices offer great support for scaling. They allow businesses to access additional outstanding services (e.g., meeting rooms, local landline plans, virtual receptionists, etc.) without requiring high additional costs.
1.5. Reaching Maturity
Have you reached this stage? Congratulations – your company has become an established enterprise.
Now, you should start having a stable stream of revenue (while you keep focusing on customer retention and refining your marketing strategies).
When you enter the maturity phase, you become less directly involved with the day-to-day operations (meaning that you can finally improve your work-life balance and free up your busy schedule!).
The beauty of this stage is that you have endless possibilities and multiple options for moving forward.
For example, you can consider expanding the business, keeping it as it is, bringing a new CEO on board, or selling it. The choice is up to you, and it totally depends on the lifestyle you want.
Therefore, the journey doesn’t really end after reaching the maturity stage.
The challenge that perhaps you need to face after achieving this stage is avoiding a decline that typically happens for reasons such as:
- Changes in consumer demand
- Increased competition
- Not keeping up with industry trends (e.g., technology updated, innovations, advances, etc.)
No matter what choice you make once you reach this stage, remember to keep your customers at the centre of everything you do as they have the power to make every company prosper or fall.
Every start-up development stage comes with different challenges.
Below you will find the most common challenges you need to face according to the start-up development stage you’re in:
Filling a gap:
- Business idea profitability
- Market acceptance
- Establishing a business structure
Building an MVP:
- Identifying the needs of your audience
- Finding a skilled team
- Choosing the proper project management methodology
Entering the market:
- Scaling the MVP
- Aligning the product and market demand
- Implementing customer feedback
Scaling the business:
- Dealing with increasing revenue
- Dealing with increasing customers
- Expanding the business
- Increasing market competition
- Tapping into new markets
- Accounting management
Whichever stage of business development you’re in, knowing where you are can help you understand the challenges you need to overcome, set SMART goals, and build your strategic planning.
No matter what development stage your start-up goes through, a smart and flexible office would add value to your business. For this reason, B2B HQ would be happy to provide you with a fully equipped, cost-effective virtual office or any other services (such as a virtual receptionist) that can help you make a smooth transition from a development stage to another. Do not hesitate to contact us and let us know if you require any further information!