A few weeks ago, we ran an “Startup advice: When do you stop calling yourself a startup ?” In the section, tech-startup founder and innovator, J.M. Daniel highlights a key distinction between startups and small-business. Here we follow up on the theme of startup as small businesses.
5 Key Actions For Surviving The Business Storm Cycle
Every business goes through cycles.
They get started. They expand – sometimes rapidly. They decline. They consolidate.
But if they’re not careful navigating the storms that the market and fate throw at them, they could cycle right out of existence, says Dave Hopson.
In fact, about half of all new businesses don’t make it to their fifth birthday, according to the Small Business Administration. Essentially, those startups stalled out.
Maybe the reason was too little capital. Maybe it was a faulty marketing plan. Sometimes the reason may be that the technology crucial to any business’ success simply couldn’t meet the always-evolving challenges the business faced.
“Transitioning from startup to successful enterprise is always going to be a difficult undertaking,” Hopson says. “But that’s going to be even more so if your company hits an exciting growth phase and your back office fails to keep up.”
As they try to make sure their businesses survive, Hopson says it’s critical that company leaders keep these key points in mind:
- Professionalize the back office and IT. That will keep your systems predictable and your IT ready to expand and adapt to the next phase the business faces. “And I don’t care what business you’re in,” Hopson says. “Information technology is your company’s backbone.”
- Technology alone isn’t the answer, though. Successful ongoing transformation of a business depends on not just technology, but people and processes as well. Each must be fully integrated with the other two. When you leave out one, Hopson says, your business’s functions are no longer healthy, effective, and productive—and you may not be able to survive the transition points on the business cycle. He developed an “IT survival quiz” to help business leaders assess how well they’re doing on this score.
- Keep employees informed and engaged. It’s part of a leader’s role to let people know where the company is in the business cycle, and to educate, encourage, and inspire them to use each phase as productively as possible, from startup, to rapid growth, to deceleration and back again.
- Don’t stand still. The “business storm cycle” will drive you to constantly reinvent yourself as a company. If you fail to recognize that the status quo won’t last forever, the market will leave you behind.
- Be prepared for a “tornado.” Periods of high growth – which Hopson calls “tornados” – are caused by a new product, a new market, a new merger, or a technology breakthrough. “Companies that understand the characteristics of all the phases a business will go through are less likely to be caught unawares by these hyper-growth phases,” he says. “They know how to make one of these growth phases last as long as possible so they can get all the profits they can out of it.”
Although it can sound like he’s sounding a dire warning, Hopson says with the right planning businesses can survive those “tornados” and thrive.
When you do, take a deep breath and relax, he says – but not for too long.
“Eventually, a new tornado will come along,” Hopson says, “and you will go through the entire cycle all over again.”
About the author: Dave Hopson author of Surviving the Business Storm Cycle: How to Weather Your Business’s Ups and Downs (www.davehopson.com), is the managing partner at Triumphus, which offers IT consulting services to companies from startup through exponential growth to IPO. He has a bachelor’s degree in political science from Sam Houston University and a master’s in international relations from Claremont Graduate School. He also has a doctorate in international relations and econometrics from the Peter F. Drucker and Masatoshi Ito Graduate School of Management and School of Social Science, Policy & Evaluation at the Claremont Graduate School. Hopson also served in the Marine Corps.