The companies they play a fundamental role in the country’s economy, since they generate employment, promote innovation and bring dynamism to the market; However, the first three years after they are founded are crucial in determining their success or failure, which becomes a true litmus test.
Some challenges they face in their initial stage are financial management, adjustments to their business model, sales strategy, as well as the structure and functions of the collaborators.
According to the study of Financial management of companies in Mexicopublished by ASEM, 4 out of 10 companies do not carry out financial planning.
How to survive the first 3 years of life of companies?
Daniela Blank, Member of the Board of Directors of the Association of Entrepreneurs of Mexico (ASEM) and CEO and founding partner of GROW, an organizational culture agency, believes that, in order to overcome these adversities, every company must take into account three factors to maintain sustainable growth. :
1. Constantly evaluate the problem to be solved
To align the business model with the needs of clients, the ASEM member suggests that entrepreneurs analyze the problem they seek to solve in detail, under the premise that it constantly changes as time goes by.
“You have to understand and define what product you are going to position; I believe that one should not fall in love with the solution but with the problem that we want to solve, that is, find a formula where we respond to what the client is looking for and the way in which their needs evolve”, explains Blank.
He argues that, in order to adapt and overcome adversities, companies must take into account factors such as:
- Flexibilitywhich implies having enough openness to adapt the product or service according to the needs of the market.
- metricskeep track of progress and goals achieved in order to grow in an orderly manner.
- Marketingfocused on the specific needs of the business model.
- Balancewhich leads to maintaining a proper harmony between investments, expenses and profit margins.
“In our case, to overcome adversities we adjusted the product until we found the right solution. One sees many things in social networks and marketing strategies to replicate. The truth is that very specific things work for each company, which are met with a little patience and then must be replicated over and over again until generating sustained growth”, Blank points out.
2. More products does not equal more sales
Data from the latest edition of the Radiography of Entrepreneurship in Mexico of the ASEM indicate that, during the first three years of life, the main source of financing of 90% of the companies are the own resources of the founders or partners, for which reason sales are key to the survival of the company, from the validation of the product or service, the competition, until the construction of a customer base.
“Even the approach given to the project marks success or failure. Sometimes, some early-stage companies launch many products trying to position themselves in the market and achieve more sales, when the ideal is to focus on having a business model aligned to a single product, through a single channel, aimed at a specific type as a client”, explains Jorge Sánchez, managing partner at Apolo 25, a consultancy specialized in public relations and design for SMEs and startups.
He argues that, in these cases, the scaling up methodology can be of great help to companies, since it provides them with a structured and proven approach to achieve sustainable and successful growth.
Some ways that Scaling Up can help companies
- Strategic approach: provides tools to analyze the market, define goals, and set key performance indicators to measure progress.
- Optimization in execution: help to establish clear goals and objectives, as well as identify and overcome obstacles that may arise along the way.
- Growth Management: It offers tools to manage growth effectively, such as team structuring, aligning all employees with the vision and values of the company, as well as talent development.
- Cash flow management: The methodology offers elements to improve profitability and ensure that the company has sufficient capital to support growth.
3. Proper structure of the work team
The structure and functions of the collaborators are another challenge during the first three years of existence of the SMEs, because in small teams each collaborator assumes multiple roles and responsibilities to cover the needs of the business.
“However, as the project grows, it becomes essential to define the functions and the specialization of the positions, that is, who should be responsible for a process and what it should have. The Scaling Up model makes it clear that a leader must learn to delegate, making decisions based on values so that, when the company grows, it does not suffer in key functions”, Sánchez points out.
By taking these three factors into account, companies can improve their strategic focus, optimize execution and strengthen their work team, which will allow them to better face adversities and grow sustainably during their first years of life, conclude both specialists. .