Is Your Business Ready to Graduate?

It’s graduation season and as the father of twins who are graduating from high school this year, I know the next few weeks are going to hectic and kind of crazy.

In the grand scheme of things, graduations don’t really mean all that much. They aren’t a guarantee for future success and at least for high school, it’s more of a checklist item than anything else (something that’s expected).  However, they do reflect a significant accomplishment and maybe even more importantly, graduation signifies a new stage of life for the graduates – either moving on to the next level of academia or onto the ‘real world’. It’s a great way to mark progress.

What if your business could graduate?

Wouldn’t it be nice to have some similar milestones in the business world?  One of the challenges that a lot of entrepreneurs face is that they don’t have a great way to measure progress and maturity.  If you have a viable business model, you’ve got growth and eventually, you’ll have profits to measure, but there are no clear-cut points to let you know you’ve succeeded and moved on to the next stage of business.

What would that look like?

Start-up Graduation…?

Every business has to start somewhere and most are born from a combination of a good idea, a desire for independence and an opportunity in the marketplace. The start-up phase is all about figuring out the business model, pricing, target market and how to deliver your product or service. As the owner, you’re going to be doing all the work (at least for a while) and there will be a lot of scrambling and missed steps along the way.

But… if you figure some things out and you had a good opportunity to start with there will come a point where you will move out of the start-up phase and into the growth phase.

Requirements to graduate from the start-up phase…?

  • A clear and proven market for your product or service (you know who your best buyers are and what they’re willing to pay).
  • Relatively predictable income (and expenses) and a clear path to growth.
  • You are able to pay yourself a regular salary (maybe not full market rates, but meaningful).
  • You need to or already have hired some kind of help (employees or outsourced).

The exception to this model would be someone who’s entering the workforce as a freelancer of some sort. You can build a highly successful career as an independent freelancer and make a lot of money, but that doesn’t always translate into building a business (and it doesn’t need to).

Growth Phase Graduation…?

The next stage of your business is the growth phase. You’ve got a clear spot in the marketplace and opportunities to scale – now you’ve just got to figure out how to make that happen.  This is where you really have to start relying on other people. There is a limit to how much you can scale before you need other leaders on the team.  During this phase, money will be tight and a big part of your ability to survive this phase will depend on how well you understand and manage your profitability.

Candidly, this phase is where most businesses fail. There are a lot of challenges and your relatively young business doesn’t have a lot of leeway for errors. A couple of bad months could put you on a path to closing down.  However, if you hire the right people, if you get out of the way (as the owner) and if you continue to figure out how to make enough profits you will find ways to grow.

Requirements to graduate from the growth phase?

  • Strong profitability relative to your industry and you’re paying yourself well.
  • You can take a real vacation (at least a week) without worrying about the business falling apart while you’re gone.
  • You have hired at least a couple of key employees who take ‘ownership’ of parts of the business.
  • The business has a good track record of predictable revenue, expenses, and growth.

If you’re able to ‘graduate’ from the growth phase, you are acting more as a leader than a ‘technician’ in your business and you’re spending more time on strategy than day-to-day work.


Leadership Phase Graduation…?

The third phase of business maturity is all about leadership and creating a strong team that ultimately can run the business without you. As the owner, your focus is on strategy and finding ways to enhance the business (run more profitably or find new streams of income).  Overall the business is healthy, explosive growth is harder to come by but you have a solid recipe for incremental growth. You have a great group of employees that love what they’re doing and are actively finding ways to help make their business better.

Requirements to graduate from the leadership phase…?

  • The business could (or is) effectively running without you.
  • You, as the owner, are being well rewarded for your past efforts and your business is throwing off cash. You’re paying a lot in taxes…!
  • Your company has a strong culture that the marketplace respects and drives employees and recruiting.
  • You’re starting to look into ‘what’s next’ – an acquisition, a sale, succession to the next generation or even starting up a charity.

Most businesses aren’t going to graduate to this visionary stage – but the few that do become icons in their industry and drive a huge amount of value to the owners, employees, and communities that they’re located in.

Where is your business today?  Do these graduation requirements make sense to you?  What are we missing?  Let us know in the comments below.

If you’d like to take an assessment that will help you figure out where your business is today – check out our Business Maturity Evaluation – it won’t cost you more than a couple of minutes to answer a few questions and might help you figure out what’s next for you.  You can find the assessment here: Business Aspirations Model

Shawn Kinkade   Kansas City Business Coach