When we started Stage 2 Planning Partners the idea of having a graphic with 3 stages was more than a clever idea about how to name a business. It was and still is how we think about the natural progression of a successful business.
I believe that successful businesses are tactically and strategically excellent. They keep themselves ready for sale whether they’re interested or not. When a business is “sale ready” it has more options for the owner. Sale ready businesses also tend to be more successful than those that aren’t. The owners of these types of businesses work on their business much more than they work in their businesses.
Start with Stage 1
Stage 1 is all about tactical excellence. It’s where you move your company from a good idea to one that creates regular cash flow. You understand what creating enough profit for growth is and you make plans for your business to deliver on that need.
You learn about putting systems in place and understand why your employees really want to know what to do. They don’t want to have to figure out how to deal with your customers every time a new problem appears. You’ve helped your people think through these issues and have developed systems to support them in providing an excellent and consistent experience for your customers.
If you’re a successful stage one business owner you think strategically but just don’t have much time to spend time putting strategic plans together. You’re too busy setting systems in place and making sure your customers are treated the way you want them to be treated.
Moving to Stage 2
As your systems become more solid you’ll find that you have time to not only think strategically, but you’re also going to have some time to start acting and working on strategic initiatives. This is where enterprise value is built. You’ve moved through Stage 1 and have made yourself operationally irrelevant in your day-to-day operations.
Strategic activities might be installing a lean manufacturing system, working on a well-defined niche, developing a repeatable sales process, or putting together a strategic marketing system. Your strategic activities will always include an innovation process that is repeatable and can be taught to those you work with.
While working on your strategic activities you will make sure your company not only covers its cost of capital, but also creates enough additional cash flow where others will be interested in owning what you’ve built. This doesn’t mean you’re going to sell your business today. It means that your business will be sale ready at all times. This creates more flexibility in what you’re going to do as you move into Stage 3, the transitional stage.
Stage 3, you’ve built it now what?
Stage 3 is the transitional stage. You might decide to make yourself into a passive owner. You might decide to start moving management to a new generation. Or, you might decide there are other things you would rather do and its time to move on.
A successful stage 2 business allows you to move into stage 3 with many options. The more successful you are in developing a sustainable business the more options you have. Once you enter Stage 3, there is no rush in leaving. You can take your time finding what works best for you.
It’s important to not let others tell you what you should be doing. This is about you. Stage 3 might be the most important part of your life to ask the question why and make sure you get a defining core answer. If you do this, you’ll likely make a decision that fits in well with your life and business needs.
I’ve seen businesses go through all 3 stages and do it well. I’ve seen businesses get stuck in both stage 1 and stage 2. Most sadly, I’ve seen too many businesses never make it through stage 1 and fail because the owner never learned the basic rules of running a business. Which fate waits for you is in your control. I hope you decide to be one of those who look back at their business career with pride.
I’ve written a special report on the five financial stages of a business owner. To get this special report and find out what stage your at, click on the button below.