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Understanding Second-Stage Entrepreneurship

General Business News

June 2016

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Understanding Second-Stage Entrepreneurship

For the 10 percent of startups that survive, according to Forbes, there is what’s called second-stage entrepreneurship. But what, exactly, defines second-stage entrepreneurship and how do businesses know when they’ve reached it?

Recognizable Signs

When it comes to identifying a second-stage entrepreneur, there are some general guidelines that experts cite to define this stage of business. The first sign is when a business plan is replaced by long-term calculated marketing plans. Another sign is when a real estate decision goes from finding an initial location to adding on to a building or moving into a larger factory or office space. Other signs can include moving into another, complementary product or service line or expanding across the country or an international border. Generally, in more measurable terms, it’s recognized as a business employing 10 to approximately 100 workers and making anywhere between $750,000 and $50 million in annual income.

A Shifting Focus

Moving beyond these recognizable signs, a second-stage entrepreneur’s strategy moves from a narrow focus to the bigger picture. New challenges to survival in this stage of entrepreneurship include soliciting financing from either venture capital or angel investors. While this can provide a financial jumpstart to accelerated growth, business owners should consider the potential sacrifice of the direction of the company’s path when it comes to existing or new products or services. More established companies will be less concerned with survival and beating out competition and more concerned with moving into a creative path that can help distinguish itself from competitors.    

As a company grows and expands, it takes a careful eye for it to make it through this stage. One key to success is having a management team committed to coaching its sales staff to help them tweak their sales process and strive for increasing goals.

Another cornerstone of a second-stage business is when it dedicates specialized staff to curate relationships with customers to deliver personalized experiences, not just rote customer service practices. This external commitment to customer service can also translate to a supportive culture for all team members, helping them feel valued and promote a desire to continually want to contribute to the organization’s mission.

Considerations Moving Forward

One reason why some startups and second-stage business have an edge in succeeding is first identifying and then attempting to replicate the behavior of a star salesperson that helped to accelerate its growth. There are two approaches that can be taken after an exemplary employee is identified. The first is observing and replicating the behavior, as best as possible, by training new candidates in the same role based on what was observed from the high performing employee. Another consideration is balancing the candidate’s desire for a promotion with keeping them in the same role, letting them focus on the task they excel at.

For entrepreneurs at the second stage of an organization’s development, many of the same principles still apply as during the start-up phase. However, there are many more considerations to take into account when modifying one’s business plan as it morphs into a longer term business strategy and development plan for the future.

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These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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