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hi I'm Jerri fuller executive director of the associated colleges of Illinois in the final segment of our business basics series we're going to talk about the life cycle of an organization the startup growth diversification and exit phases every organization no matter how large or small is at some point on this continuum thanks again for being part of a CIS business basics course you throughout your career you'll encounter variations on the business functions you've studied but you won't find an organization that doesn't do some kind of accounting marketing sales operations human resources and basic management function one other certainty all organizations have a lifecycle with a beginning middle and an end in Japan a family business called Kongo Gumi actually built temples in the country for fourteen hundred years before selling out to another firm there's something of an exception most companies don't last that long and the majority go out of business within a few years but while they're alive they provide some amazing statistics ing to the US Small Business Administration 23 million businesses account for more than half of all US sales nearly three-quarters are owned and operated by a single person and small businesses create 13 times more patents than larger more mature firms in this last segment we're mainly going to talk about the life cycle of companies but all organizations profits and nonprofits mirror what we're about to discuss and because everyone starts small we'll begin with startups in a start-up you usually have one or more people and an idea a company may start in a garage or a spare bedroom or these days in a coffee house somewhere and it really won't be much of a company at this stage it's mainly an idea you won't see a marketing or finance department as a beginning those functions evolved into freestanding support features as the business grows who starts a business anyone these days but once you do you can call yourself an entrepreneur someone who organizes manages and assumes the risk of a new business or Enterprise if you dream of starting your own company spend your work experience learning how your employer got started how it grew and what some of the biggest growing pains were if you can learn from someone else's mistakes you'll hopefully avoid a few of your own the idea stage is about talking and research all entrepreneurs should research a business concept thoroughly that involves everything from picking the brains of smart people who know your industry to ours alone researching your marketplace some people talk for years about their ideas before doing anything your industry will determine the best resources of information where you can learn more it's all about finding out whether all the talk and research makes it worth taking the idea further setting up a nonprofit organization is actually a similar process like-minded individuals also have an idea but instead of creating a product they're likely focusing on a solution to a problem they'll start by volunteering and testing that solutions so they can make sure they have the best way to deliver it to those in need then they'll determine a leadership framework and funding system to make their nonprofit a reality as we've said for-profit companies benefit shareholders with monetary compensation nonprofit organizations benefit those they serve with a financial structure to support that mission but both begin as startups next we go to proof-of-concept which is another way of saying does your idea actually work it's not enough to believe your product or service is going to work you've got to test it proof of concept is really the first operational stage of a company or organization prototypes are built and tested systems to deliver products and services are invented for the first time if audiences respond favorably that's information that can be used to justify growing the company and taking this concept to investors it's also about assembling the organization's team no entrepreneur or company is an island new organizations may need a number of staff members to make the operation run solo entrepreneurs may find outside partners or contractors who complement their own strengths an entrepreneur with a strong marketing background might partner with someone who really knows operations or finance trial-and-error will be a constant as the new company discovers what works you'll hear the term scalable process it means a process that grows as the business grows their goal is to have systems in place that can work efficiently with few changes as the company evolves because when companies grow entrepreneurs should be focusing on customers and clients not systems customers never see proof of concept also determines whether an idea will turn into a money-making machine at a non-profit the founder and her team will figure out if there is need for what they want to provide if the idea has been properly tested and if early results are good investors and donors will surface to turn the idea into a real organization and now the startup is launched call this the end of the beginning now let's see if this organization can grow startup companies get the reputation of being fast-paced energetic places to work when they move into their growth phase everything is new new offices new furniture and equipment and new people not all companies actually get to this phase many companies fail to create a concept for a product or service that anyone actually wants or they may create something people want but they can't cover the cost of delivering the product or service with the revenue they generate if companies are to sustain themselves they have to grow and grow efficiently if they're successful this is a time that a formal departmental organization begins to develop accounting is one of the first areas where formal structure and process is needed like large companies startups have to pay for equipment office supplies people and taxes so they'll probably start with software to assure accurate financial reporting eventually though they'll probably need internal staff and outside advisers to maintain the process next processes need to become more formalized and efficient as the company reaches out to a wider group of customers quality control becomes a big issue as filling orders becomes more active and those mistakes are made that's how the organization learns and grows technology firms have taught all industries a lesson about innovation and operations very few companies can wait until a product or service is perfect before they launch most new companies don't have the financial infrastructure to delay so most new products and services have a few rough edges as their operations functions get up to speed and because cash resources for new companies are generally tight finance becomes an important role as founders find themselves in direct negotiations with lenders and investors to exchange ownership for the cash that will keep the company growing no cash no growth eventually a chief financial officer who can specialize in that function will come on board as most startup CEOs want to focus on product and customers by now the company is starting to look like a wheel in motion with all these interconnected parts firing at once and as long as they're all firing without any significant stops or delays that's how the company grows customers like the product and want to buy more the company ramps up production to serve them finance record sales pays expenses and taxes and talks with investors and bankers about future investments in the company's growth and on top of it all senior management and their board keep an eye on each other and the operation to make sure the company keeps right on growing sounds easy when we say it like that doesn't it in reality it's not even close even companies with a wildly successful first product can stumble and sometimes they don't get up successful companies learn to spot mistakes and quickly correct course so they can keep growing that takes skill concentration and a willingness to learn as you learn about business in school and on-the-job keep one thing in mind mistakes teach there's a parallel process in nonprofits nonprofits grow when they can demonstrate they're meeting their mission if beneficiaries are served as promised and the nonprofit is transparent and efficient in handling their operations that's precisely what donors want to see and they're likely to continue their support one more thing to know as companies and nonprofits grow lenders and investors want closer oversight of their financial involvement that's why you'll see these people being named to boards of directors so growth sometimes means giving up a bit of control and that's where many companies come to a fork in the road it's time to make new decisions about where to take the organization we'll talk about that in our next segment