The Stabilization Phase

Key characteristics of businesses in the start-up phase

• Businesses in the stabilization phase know what they are good at and who they do it for. In this phase, they need to get better and better at doing more of it. Here, focusing on consistency and efficiency means developing measurements and reporting and using the “numbers” to manage the expanding team and business. 
• This increased focus on efficiency and reporting often drives a need for better, more integrated systems. At this point, those highly manual, dispirit, best-of-breed systems get consolidated into larger, more integrated systems that provide better visibility and greater accuracy in the numbers being reported. 
• The primary challenge that the stabilization stage business needs to overcome is developing a functioning middle management team. To enable growth, the business owner needs to spend more time leading and less time doing. This means letting go of day-to-day control in big areas of your business and working through your management team to accomplish the changes that you see need to happen. 

How to “graduate” from the stabilization phase

There are two primary developmental tasks that you must achieve to “graduate” from the stabilization phase:

First, the business must have a revenue model that is predictable and scalable. In the growth phase, you prepared to scale; in the stabilization phase, you see that growth move ahead. By demonstrating the predictability of your growth and profits, you build the case you need to attract capital in the expansion phase. 

Second, the business must be able to demonstrate how additional investment can create additional growth, both in sales and cash flow. To do that, they need to understand the key performance indicators of every department in the business. They must tie their sales pipeline to their utilization and project profitability. To do that, more sophisticated and integrated information systems are needed.

In the stabilization phase, the business owner’s primary role is to build and lead the management team. The management team leads each of the departments, and any changes or improvements that the CEO sees are executed through the management team.