The term “second-stage business” is rarely recognized by entrepreneurs, yet your company might be one. If so, it’s likely time to invest in brand strategy, adjusting your positioning in the marketplace so that you can continue to grow and scale.
When you think about the lifecycle of your business, you probably break it into 1) those treacherous start-up years and then, assuming you survive, 2) everything after. But this perspective ignores a critical stage of your business’s development that is chock-full of risk — and reward — particularly if you don’t know that you’re in it. I’m talking about second stage.
The Edward Lowe Foundation defines second-stage businesses as privately owned, growth-oriented companies between $1M and $50M in annual revenue and 10-99 employees. The challenges companies of this size face are staggeringly predictable, as is the path toward becoming a scaled enterprise.
So why haven’t you ever heard of a second-stage business before?
Well, because of one of the common symptoms. Second-stage owners are typically working so hard in the business, they can’t pick their heads up long enough to see these patterns. The challenges all feel unique, new, and frustratingly personal. To be perfectly blunt (from my own experience), second stage can feel a lot like failure.
Before we get into five critical signs that you are in second stage, let’s take age off the table: there is no hard-and-fast timeline for second stage. I’ve met companies who are at second stage within a few years of starting up. Many didn’t reach this milestone until 10-15 years in business. A surprising amount of companies that hit second-stage at 50+ years when they experienced a change in the market, or a renewed appetite for growth at the C-level.
At Six-Point Creative, we specialize in brand development and brand strategy, so we look at the signs and symptoms of second stage — and the solutions for second-stage businesses — through that lens.
Here are five signs that your business is probably in second stage:
- #1: What you used to do to get big sales lifts doesn’t work anymore. We hear it all the time: “I’ve never had to spend much on marketing.” Exactly. Start-up (or first-stage) companies rely on their networks, word-of-mouth, and a very core customer base. And it’s true — if you have a strong value proposition, you can get pretty far with that approach; BUT, it can give the business owner a false sense that a build-it-and-they-will-come approach will last indefinitely. It won’t. You’ll eventually reach the end of your network, and with it, the end of your effortless lead gen and sales. Luckily, there is a solution (even though you don’t want to hear it). Start spending on marketing and investing in your brand. This shift doesn’t mean you’re doing anything wrong. It isn’t a sign of failure. In fact, it’s a sign of success.
- #2: You’ve been debating whether to hire a CMO. Many second-stage companies have been spending money on marketing, and might have a marketing coordinator position or similar, but they aren’t running integrated marketing campaigns with strategy and confidence. They’re getting more and more strategic and sophisticated in other areas of their business. They probably have a CFO and have invested a lot of time and attention in their operations through consultants and internal staffing. Then they will be ready to tackle marketing. Of course, with strategy comes the need to execute, so the timing becomes difficult: It feels like we need a CMO to optimize our marketing. But if we hire a high-priced CMO, how will we have the budget to hire individual contributors to execute the strategy? Maybe we should keep things as is until we get a little bigger. But how will we grow until we get more strategic in our marketing? It becomes a frustrating cycle.
- #3: Your elevator pitch no longer describes what you do. Yes, at one point you totally had it down, and so did everyone in your company. The concept of an elevator pitch isn’t new to you. But now it comes with hesitation, or caveats, and varies widely based on who you’re talking to (or who is doing the talking). This can be damaging externally, but it’s also probably causing friction internally. Key employees are frustrated because it’s unclear about whether or not the company is committed to the vision in your strategic plan. Your elevator pitch has one foot in the past and one foot in the future, and it feels like the company is hedging its bets.
- #4: You are considering (or already have) shortened a once meaningful name to an acronym. The company was founded with a clear vision and in response to a market opportunity. That has shifted over time. No one was willing or able to speak up at the exact moment when the tide turned, but at some point a shared sense emerged that the old name isn’t as relevant anymore, so you should probably just use the acronym. “It’s easier than a real name change, and our customers call us that anyway.” I know, I know … it works for IBM and UPS, so why shouldn’t it work for you? Here’s the hard medicine on acronyms: they only work if you’re truly able and willing to invest big dollars in the brand development and marketing to make them meaningful. And this just isn’t a possibility for most privately held, second-stage companies. (See #1 & #2 above.)
- #5: You feel imposter syndrome when it comes to staking a claim to your ultimate vision for the company. You have a 10-year BHAG in notes from a planning session somewhere, but you aren’t willing to look and act like that now. You feel like there is a lot more groundwork to do before you could ever be that bold. But did you ever stop to think that if you openly claimed that vision in your current brand, you could make that 10-year vision come true even faster? That you could attract the team that you need to make it a reality, motivate your existing team to truly get it, and allow your ideal future customer to identify you now?
If any of this feels like you’re looking in a mirror, you might want to check out the Edward Lowe Foundation’s “Second Stage Road Map.” Usually, we recommend that companies tackle core marketing and branding issues when they are in the second or third phase of second stage. That timing allows your marketing dollars to impact (and be impacted by) your scaling strategy. But, it’s not so early that you create more issues for yourself because you don’t have the right infrastructure in place to accommodate growth.
Second stagers often feel that their situations are more unique than they are.
But, as a second-stager myself and an observer of many other business owners in this life stage of business, I can typically spot the patterns of symptoms — and solutions — a mile away. And there are solutions. In fact, the good news is that though your business may be special, your problems aren’t unique — and becoming familiar with the challenges of second stage is nearly half the battle.
In fact, knowing where you’re at is why I made this article less than 1,200 words long. Glad you made it to the end; now go put out that fire.