Jan 7, 2022

Companies in early, seed-stage funding and operations have dramatically different realities and needs than those in mid-stage or later-stage growth. In this article we’ll explore these stages more in-depth, discussing how to excel in each stage while keeping an eye on the stage ahead. We’ll also uncover why it’s important for founders to know when and how to expand on their skillsets with experts around them who can help them make the climb.

Early Stage Companies: Obstacles and Realities

The financing and management team of an early-stage company can face three major challenges:

  1. Difficulty in raising capital, which is the most common challenge
  2. Difficulty in attracting and retaining top-tier employees
  3. Difficulty with managing cash flow and expenses.

Early-stage companies need to find a balance between investments and growth. They need to focus on hiring the right workforce for their business, while also managing their cash flow. To address these challenges, founders need to find advisors who can help them with their unique needs.

The early stage company’s workforce is typically comprised of the founding team and a few keys hires. Early stage companies are generally looking for finance in order to grow and satisfy their customer demand. They typically have a high amount of growth, but they might also see high turnover rates and high levels of stress that come from the hard work and hustle inherently required in the early stage. In order to remain competitive, early-stage companies need financing and advisors to address cash flow and “lengthening the runway” of available funds. In addition, support for finding and retaining the right employees and board members while developing a broad professional network is essential.

Making Your Way to Mid-Stage

A company is considered to be in the middle stage of its life cycle when it has already solved its survival problem but hasn’t yet reached the point where it could reap the benefits of economies of scale.

Mid-stage companies are caught between raising capital and managing their growth. They are not looking to grow too big too soon, but they also need to manage their scope of work. They can’t afford to be inefficient.

Mid-stage companies face challenges that include:

  • Financing – they need capital for growing the business or funding their growth (e.g., acquiring another company)
  • Advisors – they need expert advice on how to manage growth and company strategy
  • Management teams – they want a management team that is equipped with experience and skills for handling the challenges of mid-stage companies
  • Workforce – they want talented employees who can support them in this stage while doubling down on human resources

Mid-stage companies may still in the process of rapid expansion and growth, but that growth is probably starting to slow. They usually require more management teams and employees with different or specialized skill sets. A company in this stage must have a strong management team with the skills to scale up and grow with the company. They will also need to figure out how to grow their workforce while sticking to their values and vision. This means founders need a clear vision, and the company must adopt values that employees are energized to be a part of.

Approaching the Peak: Late-Stage Success

A late-stage company is a company that has raised a lot of funding and maybe in the process of either IPO (Initial Public Offering) or acquisition. It can be challenging for late-stage companies to manage their business, financial and human resources effectively.

Late-stage companies need to make sure that they have enough cash flow. It is crucial that they keep up with the growth of their workforce and do not add too many employees or add too few employees who are not qualified for the job. Like in every other stage, they need to make sure that they have the right management team and advisors with experience for late-stage success.

Some late stage companies are at a point where they may want to protect their long-term success by scaling back on finance, management teams, workforce, and employees due to competition from other companies in the market space. As companies enter their late stage, they could need to make changes to their workforce from hiring from the outside to structuring for an IPO or sale.

The challenges late stage companies face are more complex and sophisticated than what they faced in earlier stages:

  • Financing: finding new ways to fund the growth of the company, especially if they don’t want to borrow money
  • Advisors: finding people who can help them with financial planning, marketing, or business development
  • Growth: identifying new markets and product lines that will help the company grow
  • Management teams: assessing whether they need an influx of fresh knowledge or skillsets in order to manage the next phase of the company’s life cycle

A key strategy for preparing for and managing growth seems simple and obvious: Have a plan from the start. If you are starting your own company, it is important to have an exit strategy in mind. This will help you decide what kind of financing you should seek out, who your advisors should be, what kind of management team and workforce you need, and whether or not this is a sustainable business for the long term.

Don’t Make The Climb On Your Own!

Trusted experts and guidance at each stage are essential, and a part-time or fractional CFO could be part of your path to success. At ProCFO Partners, our network of experts means there’s no growth stage we aren’t deeply and widely experienced in, across nearly any industry or vertical. In any case, seek advice not just for the stage you’re in, but for the stage you’re heading into. This will help you be proactive and ready for growth.

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