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What's your end game?

Module 6: Knowledge framework for growth

Not many founders think about the ‘end game’ when they start a company. But as Dr Stephen Covey (The 7 Habits of Highly Effective People) says, “Begin with the end in mind”.

Determining your end game early on is important because it will have implications for the kinds of people you hire, your options to finance the company, and your exit strategy. Be honest about why you’re in business – these reasons will significantly impact and influence the way in which you grow your company.

Are you in business because you want to do what you love?

Some people start a business to have fun or to practice their craft. They intend to stay in business as long as they’re enjoying it, and can afford to do so. The business itself could be a hobby – or the individual could be a professional (e.g. architect, accountant, lawyer) with the intention of winding down when it’s no longer fun, costs too much money to maintain, or they’re ready to retire. In most cases, these business owners are not interested in growing the company. As long as they can lead a quality life, doing what they enjoy, they are happy.

What to consider:

Given that these types of businesses usually comprise one person, funding needs to come from the owner. Angels and venture capitalists are not interested in financing sole proprietor companies – they prefer to invest in growth companies with a clear exit strategy (i.e. multi-skilled teams that can execute a clear plan and do what they say they’re going to do).

Determining your end game early on is important 

Are you in business because you desire a particular lifestyle?

Some CEOs use their business to fund the lifestyle of their choice. They may value high-performance cars, private school education and luxury holidays – or they may value work-life balance, in which they can enjoy lots of free time doing things they love. In effect, the business becomes their cash cow.

What to consider:

It can be difficult to grow this kind of business because the CEO usually makes decisions based on the near-term impact on their lifestyle, rather than the impact on the long-term value of the company. In addition, it can be challenging to attract up-and-coming professionals looking to advance their careers, as there aren’t enough opportunities to grow into new positions. Finance-wise, these types of companies typically fund themselves, potentially with help from a bank loan – however, the lender will need to see that the individual can pay back the loan and interest before providing a revolving line of credit.

Some CEOs use their business to fund the lifestyle of their choice

Vendors, suppliers and partners

Vendors, suppliers and partners are an important resource because you count on them to provide the raw materials and/or the components that you use to create – and then sell – your unique product. Building good relationships with them is critically important. A delay of a month or two in receiving supplies could result in your company being late to market and missing sales targets. If you don’t supply vendors with products and appropriate marketing material, they could substitute another company’s product for yours and sell it, making you redundant from their perspective. You need to figure out how to manage relationships, bind suppliers to you and make your product top-of-mind if you want your company to grow.

Angels and venture capitalists typically don’t fund legacy companies

Are you in business because you’ve inherited the reins from others?

There are many CEOs that have inherited a business from their father or mother. Unfortunately, they can be more concerned about preserving the legacy (i.e. the land, the farm, the brand) than scaling the business to its full potential. They also may intend on passing the business down to their children, and consequently focus more on preservation than growth. The flipside of this, however, is that the more generations the business goes through, the more stakeholders expect a share. So growing the size of the legacy actually becomes more important.

What to consider:

Banks might only fund legacy companies with collateral if the family is making good business decisions, or has brought in professional managers who are running the business. Angels and venture capitalists typically don’t fund legacy companies because there’s no way for them to exit from the investment, unless there’s a trade sale.

Are you in business to build an asset and sell for profit?

Some CEOs say they want to build a company that will be an asset they can sell. As one CEO said, “I used to think of the company as my baby. Now I think about what I can do to make it an increasingly valuable asset.”

What to consider:

This type of business is the most attractive to investors. However, attracting the right talent requires a convincing mission statement and purpose.

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