You don’t learn to walk by following rules. You learn by doing and falling over.” – Richard Branson, Founder, Virgin Group
Startups aren’t easy. The lives of entrepreneurs are tough. In a world with no absolutes and no certainty of business success, experts rely on valuations and profitability to judge financial health. In the case of startups, entrepreneurs never really look at the valuation argument, and in the very early stages, they don’t even look at the profitability. Here, it becomes difficult to determine if it is a healthy company or not.
Here are some vital signs which you can use to ascertain the health of the organisation:
It is very easy for startups to lose the vision they started with. Many times, to become profitable soon, the founders take unpleasant decisions which cause short-term gain but long-term pain. If your startup has the ability to choose among projects and the courage to say no to proposals that not match your vision, you score brownie points.
Again, if the top management is clear of their strategy for the next two years, if not five, it’s a cherry on the cake. A plan in place is the journey half covered. All other business functions can be aligned similarly to reach the planned spot on the growth curve.
If you won the heart of your audience, you’ve got it right. A strong base of patrons is needed for the bright future of your startup. They not only become returning customers but also become endorsers of your company’s product or service through word-of-mouth publicity.
PESTLEL stands for Political, Economic, Social, Technological and Environmental. Anyone who has studied economics will know what PESTLE is and how it can make or break organizations. The ability of a startup to cope with the ever changing macro-economic environment shows the strength of the founders and the company.
Crisp and transparent internal and external communication can prove to be the harbinger of tremendous growth for the firm. Internal communication is essential to keep the team motivated to achieve objectives. On the other hand, excellent external communication is indispensable in creating the necessary brand image.
It’s a sign of a healthy firm to be able to mature over time in terms of experiments also. Rather than shooting in the dark, startups should aim to take risks and challenges. They should continuously experiment with an objective to learn and measure impact simultaneously.
Last, but not the least, financial health also needs to be checked. Sales should be planned bottom up and initiatives should be taken to achieve them. Another thing to check is where the investor-money is being burned. If the company is going on a cash conservative mode, it’s a good sign.
It’s the early stages and early years of a business which the lay the foundation for a good company. In light of this, it is safe to keep the above things in mind when building a company.