After your first year, re-read the business plan you started with. One reason to review it now is to update and, if necessary, revise your goals or schedules. Re-reading your business plan also re-acquaints you with the goals you had in the beginning but may have lost touch with during the hectic startup days. Fix these goals in mind as you enter years two through five.
Now is the time to begin formalizing the processes and procedures you've developed during your first year. The basic goal is to get information out of people's heads and onto paper. Writing down operations procedures in a manual also helps you think through the elements of critical tasks in the company. Having a system that's rational and repeatable is invaluable as you plan for your first sustained growth phase.
As you enter this first growth phase, you may hire your first employees or begin bringing on new people in greater numbers than before. Foolproof this process by writing job descriptions for all positions new and old. Well thought-out job descriptions help you hire the right people for the right jobs. They'll also guide you in developing training that provides additional skills to people already hired.
Sales and marketing processes also cry out for standardization. Carefully consider the face you want to present to customers. Codify the messages, images and other marketing materials used to present it. Look at everything--from the way service reps answer your phones to the color of your company trucks. A standardized marketing message is vital for differentiating yourself from your competitors and establishing brand identity .
At some point, your company is likely to grow too large to manage in the hands-on way you may have used successfully in the beginning. It's time to hire a management team, which may mean anyone from a supervisor who will oversee the night shift to a COO responsible for a wide array of day-to-day decisions. Either way, you'll have to let go and delegate some authority, and that's often difficult for entrepreneurs used to signing every check and approving every expense . Make it easier by asking yourself what kind of person you can work with and creating highly specific job descriptions for managers you can truly have faith in.
Personal savings, friends-and-family money and bootstrapping suffice to start many a new enterprise, but as your company grows, its needs for capital are likely to outstrip those initial funding sources. The good news is that now you have a track record, you'll be much more attractive to banks, angel investors and other financing sources.
And while you may have been able to borrow from a family member with nothing more than a handshake, it's important to know that institutional financial sources require more documentation. Prepare for near-future financing needs by moving as soon as possible to institute solid bookkeeping procedures. Generate regular and accurate accounting reports including income statements, cash flow projections and balance sheets.
Bear in mind that banks are most concerned with feeling certain their loan will be repaid, while venture investors are willing to gamble with a higher risk of failure in return for the chance to earn annual rates of return of 35 percent or more through a sale or merger within three to five years. Angel investors , another source of capital for firms at this stage, may be motivated by any combination of those two, along with the simple desire to help an entrepreneur like you to succeed.