The four stages of growth Model

1. PRE START-UP STAGE - The period during which entrepreneur plan the venture
and do the preliminary work of obtaining resources and getting organized prior
start- up. There are four activities common to all new ventures.

BUSINESS CONCEPT IDENTIFIED - Entrepreneur must conceptualize their business.

This conceptualization occurs as natural extension of the creativity process in which
new ideas are shaped into vision. In this, Entrepreneur defined his goal of new venture
and what does the he want to achieve with this business. For example, Steve Kirsh was
MIT student working in the electronic lab .There are many damage mouse in the lab. He
think about to sell designing a reliable electronic mouse to a company. When he was
turned down, he offered to license his product. Turned down again, he thought of
manufacturing but realizing that he knew little about production, he decided to focus on
designing and marketing mouse accessories.

PRODUCT-MARKET RESEARCH - When the entrepreneur has determined that

product or services are feasible and he might be capable, then next set of activities
involves practical research.

Product search - Should include patent searches to uncover the existing products. If
the search reveals a similar product in production, the proposed new venture ends
there. If the product never worked in first place, the flaw might be
discovered, encouraging the entrepreneur to design a successful one.

Market search - Market research is any organized effort to gather information about
markets or customers. Market search is process of answering such questions as these:
Who will buy product and services? What they willing to pay? How can I attract to my
business? Is this venture is a big success? Entrepreneur occasionally seek professional
help from market researchers, university centers and experienced mentors.
Unfortunately the Entrepreneur does not ask enough people enough questions.
Successful entrepreneur will try to reach as many people as possible in symmetric
manner before start investment. Market research is done by Secondary and Primary
data collection.

Example: Kisha Nichots want to start new venture shoe store. She decided to perform
some Secondary data research and visited the local chamber of commerce web site.
The site provides her with demographic on population for her city and country and
industry forecasts for communities in her area. She also found information the book on
the average income of retail shoe store owners in her state newspaper articles gave
kasha psychographic data on people’s life in her state

FINANCIAL PLANNING - The third set of pre-start up activities relates to money. Early
cash flow is usually acquired through combination of short term loan and family
investment. As the venture evolves further, more cash is needed, and Entrepreneur has
to attract capital through sophisticated loans and knowledgeable investors. Investor and
lender want to see financial projections based on reasonable initial search and they
require accurate documentation. They also require financial statement that show how
the venture will perform during its first few year of business.

PRE START UP IMPLEMENTATION

Pre start-up implementation is period that comes first from any attempt to generate
sales. Entrepreneur must establish vendor relation with suppliers, establish business
location, hire essential personal and arrange for initial promotion and set
up administration system.

Example: Any mobile company (Telenor, Mobilink, Zong) before launching his services,
first they set location for their franchises and hire the personal for franchises e.g. some
are technical, some are management side. They advertise for the initial promotion their
services in that location.

2. START UP STAGE
The start-up stage is initial period of business. For companies with the product or
services to sell, it is first foray into revenue. The startup has no definite time frame.
There are two benchmark considerations.

1. Entrepreneur wants to meet operating objective such as satisfy revenue and cost
targets.

2. They want to position the venture for long term growth.

MARKETING OPERATING OBJECTIVE - The risk is often ignored because most

people automatically assume that a higher sale volume means higher profit
.Unfortunately the only time this assumption is true is when an entrepreneur sell
everything for cash and has unlimited supply of inventory. Meeting operating objective
does not mean necessarily means making a profit. To the contrary most new venture
operate at a loss for several years. (Creating marketing operational objectives is the key step in
the preparation of a small business marketing plan. Operational objectives are the breakdown of
daily, weekly or monthly project goals into workable tasks to help management and staffs achieve
the overall promotional strategic plan. Setting the right objectives is crucial to build awareness,
attract leads and turn leads into customers. As with strategic objectives, marketing operational
objectives should be quantifiable and specific, but with a narrower focus.)

Example: A retail bicycle shop may have been planned to generate 60% of gross
revenue from bicycle sales. 30% from accessories and 10% from repairs. It may turn
out that 60 % of total revenue from accessories and 30 % from bicycle and 10 % from
repair. In this situation the shop owner will have idle inventory in bikes while accessory
inventory depleted. Moreover unless the
cost price differential is exactly the same for bicycle and accessories income projection
will be seriously distorted.

POSITIONING OF ENTERPRISE - Every successful business starts with a fixed

business idea. Two considerations are important. (1)The business must survive in the
short term and (2) The business must be positioned to achieve long term objective. The
Entrepreneur must take quick adjustment to survive. These may include simple decision
such as adjusting inventory to eliminate slow moving items or complex decision such as
restricting the company debt when cash flow becomes thin. From the long term
perspective, the business concept must coincide with the realistic prospect for growth.
This means that the enterprise must be positioned to take advantage of growth markets

Example: Michal dell positioned PC limited to sell the small business and as stands
alone system through a factory direct marketing process. He could have positioned his
product for home use, education, scientific, work or office network each with different
distribution system. Sun microsystem for example sells mainly to organization with
engineering application

3. EARLY GROWTH STAGE - Once the venture is positioned, successful

entrepreneur will experience a stage of early growth. This is a period of intense
monitoring and growth can occur at different rates along continuum.
At the low end of continuum, Entrepreneur finds that they compete in slow growth
market. As a result they can achieve immediate success by attracting clients.
Between these extreme a majority entrepreneur finds a ‘comfort’ zone of expansion.
Their venture may have growth potential but founder restrains expansion to coincide
with personal objective
Example: Jim strange founder of spokes Etc...Quickly succeeded in his first bicycle
store and within year he opened another store. Both are successful with the annual
growth 20% in 1989 strange was urged to open a chain of franchise but he refused,
preferring instead to own and control his own shops.
4. LATER GROWTH STAGE - If the enterprise proves successful in early growth
stage. It can find itself in competition with the larger companies .This is the later
growth stage when the rate of growth may be slower and industry has attracted
competitors. Companies reaching this stage often ‘go public’ with the stock
exchange.
Example: Jim Jaegar founder of Cincinnati microwave Inc. the company that makes the
guide radar detector reached a sales plateau in 1984. The market was still strong for
radar detector but competition required infusion of new product. He developed a
complementary product called the passport and sales surged. Jaegar found himself
heading $77 million with hundreds of employees. This growth required a transformation
in the company to restructure its equity capital and to establish a professional
management team.