Why do so many businesses “drop out”? One always easy answer is that they fail to “change.” But there’s a lot more to it than that.Three things inspired this column: A recent sampling of our readers, America’s high school dropout crisis, and my daughter.

First, in a recent sample, a number of our readers told us they want to hear more about how smaller, entrepreneurial companies can grow more efficiently—and keep growing into larger entrepreneurial companies. Second, a just-released book about reducing the high school dropout rate shows that freshman year is overwhelmingly an essential, but almost always overlooked, transition in growth that can predict future growth in life.

Finally, in the spirit of full disclosure, the book was written by my daughter Emily Krone Phillips. It’s called The Make-or-Break Year: Solving the Dropout Crisis One Ninth Grader at a Time. While the book is about transition in school, the idea of transition also applies to business growth, especially when contrasted with the longtime buzzword, change. We’ve found that change, while the ultimate goal, can imply abrupt, significant alteration in behaviors and processes. Unfortunately, as we all know from making New Year’s resolutions, that kind of change is usually unrealistic.

So, why do small businesses fail, disappear, or morph into something else? Why do they, in effect, “drop out”? My experience in growing my business over 25 years, and assisting in the growth of many others, shows that companies move through five crucial transitions. Yes, change occurs during those transitions, but it’s usually not abrupt, largely because changing behavior takes time.

Transition #1: Great Idea! Now what?

Moving from an idea to actually forming a business, raising capital, and generating revenue may be the hardest transition, in part because “the idea” itself is often a moving target. My first idea for this business, Productive Strategies, was to write a column like this one and sell it as a subscription. My key advisor at the time, my wife, convinced me that serving as a consultant and using a column and other writing to help market the practice would be more effective.

Even so, we were still in transition from great idea to viable business. Our goal, based on my experience as a former manufacturing company owner, was to carve out a niche to help companies find new trading partners in global markets, usually distribution and sales organizations. We began by helping companies develop specifications for off-shore partners and then searched databases to produce candidates. Two companies benefited from our work and found trading partners in South America and China.

But we soon realized that such sales would be truly difficult. The people we wanted to meet with were usually abroad seven out of eight weeks. When they returned, they were either too busy to meet with us, or felt we might be encroaching on the services they provided.

Gradually, as the market started coming to us for advice on Business Development in the US, we transitioned into a marketing and management consulting firm—which is what, with specialization in topline growth, we are today. The lesson is to listen to what the market is telling you about what it’s looking for from you.

Finally, raising capital is key in turning an idea into a viable product or service. Investors are looking for evidence of a strong sales process. I have seen investors turn down or invest in start-ups based on the strength of the sales process. If they don’t see a process capable of persuading prospects to buy, they will not be persuaded to invest. Our FOCIS consultative sales training course can create customized sales processes to persuade investors and customers.

Transition #2: Who Am I, Now?

The beginning of this transition occurs when the founder realizes that being the chief business development officer, the chief provider of services, and the chief manager of the company is no longer possible. Usually, the founder decides that business development is the most crucial element and looks to hire at least a salesperson or even a sales manager. But most founders fail to recognize the large role they themselves play in bringing in new business.

Consequently, they also fail to recognize that any new salesperson rarely—in fact, in my experience, never—has the passion, the industry contacts, or the technical knowledge the founder does. Such a new business developer just can’t rely on personal charisma, over-the-top enthusiasm for a product or service, or industry “friends” to make sales.

As an owner, the two best things you can do when hiring salespeople is to:

A. Use assessment tools to ensure that your hires are hard wired to be salespeople. The truth is that too many salespeople today shouldn’t be selling at all. They simply don’t have the professional DNA. The good news is that can be determined with effective assessment tools and interpretation.

B. Create a customized sales process that leverages (remember, it can never be duplicated) your intellectual and behavioral capital to get new hires up to speed as quickly as possible. Our FOCIS consultative sales training and process development do help that transition occur smoothly.

Transition #3: It’s New, It’s Good, But It’s Not Selling.

Expanding from a single successful product or service to one or more is often critical to growth. But from a business development perspective alone, expansion is often problematic. When asked to help with a new product or service that fails to meet projections, we find that the sales process is often the culprit. Assuming quality and market need are on target, we understand the sales issues and can resolve them. Give us a call and we can talk about the specifics of your challenge during this transition.

Transition #4: Word of Mouth Rules.

This business development transition occurs around the ten-year mark and—to be completely honest—it’s great. Recognition and reputation in the marketplace are strong and, especially in service-oriented businesses, referrals alone can fuel growth that meets corporate objectives. Enough people and relationships are in place that business development often gets easier. Some businesses can live in this environment for a long time. But eventually a business dependent largely on referrals can face a gradual and potentially fatal fifth transition.

Transition #5: Where Have All Our Friends Gone?

The fifth and sometimes final transition occurs when peers and customers of the founder begin selling their businesses, referral sources begin retiring, and strong marketing and business development activities haven’t kept pace to compensate. Based on the maturity of a business, yet another transition of accelerating marketing investment may be—and most likely is—different from the “go-go” years when everything clicked. One important service we provide is helping successful companies implement new, innovative ways to go to market. A big change today, for example, is that even business-to-business companies must cultivate selected social media channels. That specific channel is a challenging transition in itself.

If you want to talk with us about business growth transitions, please contact me at 847-446-0008 or [email protected]. If you want to improve education in this country (read: the capability of your future workforce), think about reading Emily’s book: The Make-or-Break Year. And, no, you don’t even have to buy it. Just check with your local library.

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