When do Startups Graduate being a Startup
The 4 Tell-Tale Signs Of Startup Graduation
A startup is not the same as a small business. The biggest difference between a startup and a small business is that startups are the companies that are trying to build a new business model, in which they introduce something new to the market.
In addition to that, startups have a high potential for exponential growth and success. Startups require not only more risk-taking than small businesses but also more financial resources.
A startup is defined as an emerging company or enterprise, moving from the idea of innovation to the first successful product. A startup founder’s main goal should be to get their product known among people and get customers.
Once you have achieved this goal, you can consider yourself a successful founder, and it’s time to start thinking about “graduation” from your startup stage.
How do you know when your startup (or your personal project) will graduate when it is time for your startup? Well, many different signs can help you understand if you’re already doing well or still taking baby steps with your project. And we will review them all below:
1. You have a minimum viable product:
When we talk about startups, we mostly refer to the projects that are still in their initial phase. And for a startup to be successful, it must have a minimum viable product (MVP). So what is an MVP? An MVP is the first version of the product that you want to make.
It’s usually not the final product, and it doesn’t necessarily have all the features you want to implement in your project. But it has enough features for customers to try out your product and give you feedback.
In other words, an MVP is a prototype of your future finished product that you can use to test your assumptions. It helps you gain insights into how people react to your project once they see and interact with it. And if you already have a working prototype of your MVP, then it means that you are already at the next stage of your startup: ready for growth.
2. Your project has reached $1 million in annual revenue:
Reaching $1 million per year in revenue can mean many different things for startups. For example, some startups can reach this goal by selling their products or services on a small scale within their local community, while others may need to sell thousands of products or services on a global scale throughout the entire year. So how do you know if your startup is already reaching revenue of at least $1 million per year?
To know this, you must first understand what kind of business model you are using. If you are selling physical products or services, then it will be easier to calculate your revenue. For example, if you have 100 customers and each customer spends $100 per year on your product, your annual revenue would be $100.000.
If you are selling digital products such as e-books or digital courses, then calculating your sales would not be simple. The reason for this is that a single customer can buy multiple copies of your product and may also buy other marketing materials that will help him/her spread the word about your product to other people.
So how do you know whether or not you’re making enough money to reach annual revenue of at least $1 million? The best way to do so is by calculating the amount of money that each customer spends on your projects in their entirety (including potential purchases from other people), rather than just calculating the amount they spend on one purchase. This will give you a better reflection of how much money is generated by one customer in its entirety.
3. You have hired c-suite executives:
Once you have reached $1 million in annual revenue and have an MVP, you can start thinking about hiring executives to help you manage your project. A c-suite executive is a person who is in charge of a company’s core business function, such as marketing, sales, finance, or HR.
For example, if your startup sells physical products through a shop or online marketplaces, you may need to hire a Chief Executive Officer (CEO) and a Chief Marketing Officer (CMO). Or, if your startup is an e-commerce website that sells digital products to its customers online, then you may need to hire a Chief Executive Officer (CEO), a Chief Financial Officer (CFO), and a Chief Operations Officer (COO).
These executives are usually hired by startups when they reach more than $1 million in annual revenue. Having them on board helps reduce the founder or CEO’s workload because they can take care of all the important matters for the company while he/she focuses on making more sales. So what should you do once you have reached $1 million in annual revenue and hired c-suite executives? The first thing that we recommend is diversifying your team with new members. While you’re at it, you can also start thinking about how to attract new investors.
4. You have a profitable business model:
The term “profitable business model” is usually used to describe an online business that continues to generate a profit without having to spend money on advertising. In other words, when you don’t need to pay for additional marketing services, then your business model is said to be profitable. And if your business model is already profitable, then it means that you have reached the next stage of startup growth: scaling. So how do you know whether or not your startup is profitable?
To determine whether your startup has a profitable business model, you must first analyze whether or not the company spends more money on marketing than it generates from its customer base. If this happens and the company needs to spend more money on marketing to attract new customers, it means that the company isn’t yet making any profits from its current customer base. If this happens and the company does not need any additional marketing expenses to attract customers, then the company is already making profits from its customers and can now invest them back into the company to help it grow and expand.
These are just four of the many different ways you can use to determine whether your startup is ready to graduate from being a startup. If you have already reached all of these milestones, then it is time for you to stop thinking about your project as a startup and start thinking about it as a small business. In other words, it is time to start thinking about how you will help your business grow into something bigger than it currently is.
But if your startup still hasn’t reached any of these milestones, then you can always try new methods to help your project grow. And if nothing seems to be working, then you might want to reconsider whether or not the project that you’re working on is worth pursuing at all.
A startup is an innovative idea for a company that has just begun operating, to develop new products or services and sell them in the market through a smaller company. The main goal of an entrepreneur should be getting their product known among people and get customers. Once they have achieved this goal, they can consider themselves successful founders, and it’s time to start thinking about “graduating” from their startup stage.
About the Author
I am the Founder of Cudy Technologies (www.cudy.co), a full-stack EdTech startup helping teachers and students learn better. I am also a mentor and angel investor in other Startups of my other interests (Proptech, Fintech, HRtech, Ride-hailing, C2C marketplaces, and SaaS). You can also find me on Cudy for early-stage Startup Founder mentorship and advice.
You can connect with me on Linkedin (https://www.linkedin.com/in/alexanderlhk) and let me know that you are a reader of my Medium posts in your invitation message.