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building business foundation

a strong business foundation avoids self-destruction

A common trap that early stage businesses fall into is failing to build a solid business foundation to grow on from.

Entrepreneurs are often wooed by the satisfaction and gratification that comes with rapid growth within their businesses at an early stage and often leads to the state of their personal lives taking preference above building stability and sustainability in their businesses. Without a strong business foundation, you could set yourself up for self-destruction.

With early stage, I mean the first 5 years. There are many different quick roads to success, but the road to sustainable success is much longer and requires an entirely different mindset and a rare kind of durable patience. It is my view that this is where entrepreneurs can get it wrong. It is easy to get comfortable during the short-term success and lose sight of the long-term strategy, resulting in a top-heavy business that can topple over at any given time.

Let me explain my thoughts.

Contrary to the common belief, 5 years into business is still a very early stage. In fact, companies like SpaceX and Tesla is still considered start-ups yet they are heading for the twenty-year mark. They are both run with a start-up mentality, which is why they are able to innovate the way they do. They turn billions, but they also burning billions and very much still laying the business foundation for their future.

If 5 years seems like a long time to you, a paradigm shift in the way you think about business is highly recommended. Generally, the first 5 years is for laying the business foundation, the next five tests the strength and durability of that foundation, and after that, 10 to 15 years, that is when the real growth takes place. The accelerated and sustainable growth phase, built on a solid foundation.

Almost every one of the fortune 500 tech companies only found their sustainable growth after ten years or more. If short-sighted entrepreneurs drain their companies for personal gain they will never reach long-term sustainability. They might experience rapid growth, no doubts there, but with a weak business foundation that business becomes top heavy and is destined for self-destruction.

Putting it into practice.

The graph I created below sort of illustrates what I am trying to say. In the case of tech companies, funding is often raised in order to build their foundations. In these cases, they burn money at the beginning, but it’s the way funds are utilised that determines the foundation. With no business foundation, you cannot support your growth and you will hardly make it past year 5.building business foundation

I guess the primary point I am trying to make here, is entrepreneurs should give their ventures enough time to be a startup. Manage it like a startup, and protect it like a startup for as long as possible. Prepare and build a solid foundation that will in return protect you during your exponential growth.

In my opinion, you either spend the first 5 years building your foundation, or you are delaying the inevitable self-destruction.



Carl Wallace