Stages of a Start-up
A start-up usually takes off with the idea of one person, or a group of persons, and is funded through personal sources such as savings, and help from family and close friends.
We live in an entrepreneurial age. Technological advancements have made information so readily available to all, and today’s youth are right in the middle of this era.
With so much information available, and with such great potential to reach beyond the confines of one’s immediate geographical location, starting a business has never been easier.
A start-up, simply put, is a newly established business. A start-up usually takes off with the idea of one person, or a group of persons, and is funded through personal sources such as savings, and help from family and close friends.
A company, in its start-up stages, usually goes through different stages through which it establishes itself. Many have identified these different stages. Some classify it into three stages, some into four, and others into five or even six stages. However, all of these classifications are right in their own ways.
In this article, we shall look into five (5) stages of a start-up, from the point it was first conceived as an idea up until it becomes and established business and no longer a start-up.
Ideation and Research
Ideas rule the world, they say. There is no start-up without an idea, whether new or improved, that is perceived to offer a needed product or service. At the ideation stage, the start-up is still a thought in the mind of the entrepreneur. An idea alone, however, is just not sufficient. An entrepreneur with his million-dollar idea also needs to determine if his idea is viable enough. Research needs to be made on how big the customer base for the idea really is, whether it is appropriate enough for the economic climate within which it is to be established, how long it would take for the new product or service to be accepted and gain traction. The first stage is a very essential stage. The success or otherwise of a start-up relies heavily on taking the right actions and getting the right information in the first stage.
Establishment and Traction
At this stage, the company, the start-up, now exists in legal terms. This is the take-off period for a new company. Creating a prototype and business model, securing funding, etc fall into this stage of a start-up. Apart from all the legal paperwork that needs to be completed, at this stage, an entrepreneur also needs to begin to get the word out regarding his/her product or service which is now officially on the market. The aim of an entrepreneur is to grow a customer base and begin to earn revenue at this stage of his start-up.
This is the stage where an entrepreneur goes back to the drawing board to improve the business idea based on feedback, solicited and otherwise, from the early adopters of the product or service. Refinement is an essential stage of a start-up, considering how things change rapidly. It is important for an entrepreneur to look once again at the start-up, where it is at, what has been achieved and what can be improved. Customer feedback can prove to be immensely beneficial in this stage of a start-up. The main purpose of refinement is to ensure that the product or service is still viable for the market.
If the refinement stage was properly executed, then it will be easy for a start-up to proceed to the growth stage. The growth stage is characterised by expansion into new markets, increase in distribution channels, increase in customer base and increase in revenue. Oftentimes, it may also include an expansion in the product/service or the addition of a new product/service. Growth is sometimes mistaken for traction, however, both stages are totally different. Indeed, the traction stage experiences rapid growth in terms of customers and revenue, but it is only a growth spurt which is characteristic of new business. True growth is steady and does not run the risk of a mass exit of customers, as is likely in the traction stage. It is also important to note that not all start-ups experience the growth stage. Those who do not will experience what is called the decline stage. Here instead of increase and expansion, there will be decrease and decline until the only option left will be to close down the business.
Start-ups with a successful growth stage can either choose to continue the cycle, thus going back to refinement stage, or choose to go into the exit stage. The exit stage refers to the buying of small companies by bigger ones. The exit stage is an opportunity for the entrepreneur to cash out on all the years of hard work that it took to bring the small company to its current position.
Knowing what stage a start-up is in can help an entrepreneur make correct decisions in order to facilitate the success of the company.