Innovation, flexibility and speed are just some of the characteristics that we typically associate with start-ups. Modern technology and innovative business models give start-ups the potential to grow (or ‘scale up’) faster than tradition...
Innovation, flexibility and speed are just some of the characteristics that we typically associate with start-ups. Modern technology and innovative business models give start-ups the potential to grow (or ‘scale up’) faster than traditional companies. Above-average innovation is definitely an advantage when starting up: the search for ‘the next big thing’ is what drives many young companies.
The typical start-up phases
From the start-up idea to an established company: a start-up life cycle is made up of various phases which differ in terms of objectives, tasks and challenges. The stages and time scales are not the same for every start-up. However, we can generally distinguish between the following six phases, with often fluid transitions between them.
#1: Pre-seed (orientation phase)
The focus in the early months is on finding ideas and their feasibility. The right target group can be verified by testing ideas with smaller numbers of people. Early feedback stimulates innovation, and the rough creative concept needed to establish a start-up is crystallized.
#2: Seed (planning phase)
The next start-up phase is shaped by the business plan, proof of concept, initial prototypes and market analysis, which are used to determine the market potential and feasibility of the idea. Funding and budgets must be planned in order to avoid financial difficulties right from the outset. Networking should also be a key element of this phase.
#3: Start-up (set-up phase)
After around a year of orientation and planning, the stage is set for the establishment of the company. It is essential to perfect the start-up business plan and engage in intensive organizational development. Production planning and preparation and the (possible) creation of a distribution network are prerequisites to a successful product-market fit. It is important not to overlook legal requirements (insurance, articles of association, certificate of incorporation, etc.). Furthermore, ability to pay must always be kept in mind in order to avoid failing at this stage due to going into the red.
#4: 1st stage (development phase)
It also takes at least a year before production or service processing can start. The company begins operating in this start-up phase. The first sales are generated, and consolidating the young company’s position in the market is the priority. Professional structures and processes used to constantly monitor market and consumer behavior can help to ensure a flying start. If the workload gets too heavy, it is worth adding reinforcements to the team to cover any gaps in expertise.
#5: 2nd stage (growth phase)
An aggressive expansion strategy is pursued in years four to six, with the goal of achieving profitability. This is also accompanied by an internal restructuring. Aggressive growth or a change in strategic direction may lead to founding members turning their focus elsewhere or even leaving the company. Professional staff management is of utmost importance in times of reorganization and restructuring.
#6: 3rd or later stage (maturity phase)
From aggressive to sustainable growth – now it’s important to align with markets of the future. Stabilization by means of acquisitions or mergers improve a start-up’s sustainability – a good starting point for considering further start-up ideas, new technologies, product ranges or start-up funding.
The customer at the heart of a successful start-up company
Many start-ups focus resolutely on customer centricity. This means always considering what customers need and consistently gearing all actions toward this. The product or service is brought to market quickly in order to test and analyze the response of customers. By surveying customers, they are actively involved in the development of products and services and the offering is continuously optimized.
Small teams, big output: the start-up mentality
In contrast to traditional large companies, young start-ups usually work in small teams that are assigned a certain amount of responsibility and are involved in shaping the company. Employees are encouraged to develop new skills and long-term employee retention is promoted. This agile approach not only differs from conventional working methods, but also creates a new hierarchy concept. Support and encouragement from management instead of guidance and control are the order of the day. This results in a flat hierarchy, which constitutes the modern approach to collaboration at start-ups. The opportunity to play an active role in what is going on at the company and to grow at both a professional and personal level are what make the start-up concept so appealing to young people.
Start-up flexibility as an efficient means to success
By constantly monitoring customer feedback and needs, a start-up is able to revise or even completely overhaul old concepts very quickly. Trial and error as well as agile working can lead to companies radically modifying their initial business model within a very short time. Thanks to efficient structures, start-ups are also in a position to quickly tap into new business areas and position themselves profitably.
Start-ups as a versatile role model
Start-ups are known for taking new paths and acting courageously. That is why they also make interesting partners and role models for conventional companies. The creation of an innovation culture, changes in perspective and constant engagement with customers are prerequisites to corporate change and are approaches that can also be used by established companies to set standards in tomorrow’s markets.
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