In his video, Mr. Paritosh Sharma, a Professor at Bada Business, talks about an issue that concerns almost all entrepreneurs: why do many businesses fail? According to Mr. Sharma, a significant contributor to the failure of businesses is the lack of agility to changes in the market like technology, customer needs, and buying behavior.

Well-known brands like Kingfisher Airlines and Kodak have vanished in the past decade, raising questions for many on how to survive or at least not share in the same fate. In this article, we will present the 4S of Business, which is a guide to help entrepreneurs understand the four phases of a business and the mistakes that need to be avoided.

4S of Business: A New Approach to Business Strategy

The four S’s of business as the name suggests are four stages that every entrepreneur requires to go through to achieve growth, success and sustainability in a business. There are: Survival, Struggle, Stable, and Scale.

Stage 1: Survival

In the Survival stage, an entrepreneur functions diligently as an employee, dealing with recruitment, accounting, marketing, and administrational duties as well. This is a stage where the entrepreneur slogs their way day and night to ensure the business does not collapse.

Why it Didn’t Work Out: The Survival phase can lead to overwhelming business failure. Entrepreneurs in this phase might start to believe that they are the only key resource of the company as they are single-handedly executing all tasks. This attitude can limit growth and development.

How to Avoid Failure: To resolve this problem, entrepreneurs must understand how to let go of certain activities and recruit the right people. Shifting focus towards growth and success allows for removing activities that consume time but add little value which is important to help move to the next stage.

Stage 2: Struggle

In the Struggle stage, things begin to move. Entrepreneurs notice shifts in customer feedback toward their products or services and the business slowly starts to make profit. It’s important to note that while the revenue growth appears promising, it comes with various challenges that arise from the pressure to grow the business further.

Why it Didn’t Work Out: The entrepreneur at this stage seem to be too preoccupied with external capital funding, hiring as many staff and acquiring market share as possible to the exclusion of customer relations. While it is important to seek new clients, nurturing and pleasing current ones is much more important.

How To Prevent Failure: At this point, it is imperative that entrepreneurs adjust their business model to ensure that customers acquired at this stage are retained and loyal. The foundation of the business will be cemented by marketing through word-of-mouth and a thorough understanding of what the customer requires.

Stage 3: Stable

This stage of the business cycle is known to be the most important phase of a business’s life cycle. The business is, at this point, making profits at a consistent figure, and, at the same time, the entrepreneur has a base of devoted customers. But that profit, have end use spending, can appear misleading.

Reason for Failure at This Stage: Entrepreneurs could be prone to remaining idle at the Stable Stage under the assumption that their business is secure and will not need drastic changes. The moment they stop innovating and become too engrossed in the day-to-day activities, is the moment they are certain to fail in achieving any growth.

How to Prevent Failure: Innovation is the primary weapon they can enable to evade this stagnant position. Instead of loosening their grip over their core competencies and straying away from providing new services or introducing new products, acquiring novel customers, and investigating undiscovered areas for expansion is essential. At this point, fundraising and establishing key positions should be the standard strategy adopted. Without innovation, there is no possibility of achieving growth.

Stage 4: Scale

During scale stages is where bulk profits and growth is obtained. This is simple due to external funding becoming available. Investors always want to put their money in a productive company, with hopes of venture growth.

Why it is Difficult to Achieve Success During this Phase: The risk at this stage is that the individual entrepreneurs or business leaders could become too confident with the growth received in external capital. In addition, they may perform unnecessary actions or make rash expenditure decisions with the precise belief that they have sufficient funding that can be used. This is the kind of thinking that can cause failure and should be controlled.

Steps Towards Avoiding Failure: Entrepreneurs should focus on a specific proven growth model for the Scale stage, rather than do too many new experiments. A fundamental example of this is A/B testing: the process of checking different versions of a product/service to determine which one is more appealing to the customers. To succeed at this stage, a company needs to be focused on customer-driven steps, and feedback.

Paytm is undoubtedly a great example of a company that made the best use of the 4S framework. A case study worth discussing is the journey of Paytm with its founder, Mr. Vijay Shekhar Sharma, who played a key role in establishing it and leading India’s largest and most successful digital payment company, Paytm, through each of the four stages.

Stage One: Survival:

To tell the truth, Paytm initiated its operations as One97 Communications, a provider of mobile value added services.

Stage Two: Struggle:

One97 Communications launched Paytm as a small digital wallet after identifying changes in consumer behavior.

Stage 3: Stable

During the period of demonetization, Paytm registered huge levels of popularity amongst the population as they slowly started adapting to digital payments. However, their work monetization did not just stop there, as seen in the introduction of Paytm Mall, Paytm Bank, and Paytm Credit Cards, thus innovating the company further.

Stage 4: Scale:

Paytm achieved the Scale stage by broadening their services and product offerings continuously, which to some extent were even based on customer feedback. These innovations were key for Paytm’s state as they managed to attract a lot of investment and expand their service coverage further.

Key Parameters to Track in Your Business

While venturing through the stages of your business, focusing on these parameters can ensure that your business runs smoothly at every possible level:

Sales:

Track your sales figures, including your past performance, present sales, and future expected sales. These figures will allow you to understand the status of your business.

Marketing/Leads:

Store the number of leads generated during the last three quarters and try to assess how effective your marketing strategies were and if the goals for customer acquisition were met.

People:

Keep track of the number of employees and their corresponding salary costs. Ensure that as you scale, you have the right team in place to cohere with the growth.

Action Plan 4S Business Assessment

To successfully navigate through the complex stages of business and grow your company, you need to do these 4 steps:

Evaluate the existing level: Determine which level your business is currently at and highlight the challenges that are present.

Plan in order to increase the level: Consult with your key employees or engage consultants to develop a strategic plan on how to deal with your current challenges and progress to the next level.

Pay attention to customer signals: Make it an obligation to hear your customers, whether they are critiquing your products or providing necessary input for your next offering.

If all the steps are incorporated and a sustainable innovation is made, moving through the 4S of Business becomes easier and lays the framework for a successful venture.

Categories: Busyness To Business