Challenges

As emerging private companies and new businesses within young public corporations grow, they typically move through four stages, each defined by an overriding business objective and each with its own set of critical growth challenges.

During formation, the primary objective is to define the basic business and product or service concept, and to establish the organizational requirements necessary to operate the business.

In the development stage, the principal goal is to build the business' first product or service, test it with a few initial customers, and adjust the business objectives and model based on what is learned during this stage.

The revenue stage's overriding objective is to generate significant sales of the business' product or service to demonstrate that the offering has value in the market place and that the business has a way to capture some of that value.

Finally, in the profitability stage, the goal is to operate the business in a way that repeatedly generates revenue which exceeds all the costs of running the business, and at a level that public markets or a potential acquirer finds attractive and are willing to provide liquidity to the business' owners.

During the initial three stages, emerging companies are typically burning through cash, only to turn the corner to positive cash flow during the profitability stage. The timing of progress through these stages is important, to ensure that cash doesn't run out before the primary objective of each stage is accomplished. As each stage nears completion and a business shows progress through the completion of stage-specific milestones, additional rounds of funding provide capital needed for the next stage.

Moving through and between each growth stage, critical challenges arise that, if not properly dealt with, can derail the business' growth and potentially shut it down. It is these stage-specific growth challenges that leaders of emerging businesses must focus their attention on. Meeting these challenges, or getting beat by them, ultimately determines the value of the business.