5. Maturity (Going Public)

At some point in the steady growth stage, your company will have arrived at the place where it can no longer move forward and achieve its potential without either merging with another company, being acquired, or going public. Now you know the harvest is near. The dream you had years ago of taking a company public is finally within your reach.
 
It’s time to put the finishing touches on all your systems and begin to operate like a company that is fully prepared to go public.   

As we have discussed, before the most glamorous of companies, and thus the dream of many entrepreneurs, is for the company to go public. Companies considering this should concentrate on preparing for that move. The Trendsetter Barometer found that many growth companies planning to go public over the next three to five years are not taking vital preliminary steps required to do so. From the very beginning you want to think through all the necessary steps of starting and growing the business so that it can go public some day.

What started out as a dream has become a reality.

                                                  An example

Have you heard the amazing story of NetFlix? It was founded by Reed Hastings in 1997 after he had just sold his previous company, Atria Software, for $750,000,000. Does that strike you as strange? Most of you are probably thinking that after selling out for that amount of money you would just sit back and relax, right? Well, Reed Hastings had different ideas. He also had vision.

Hastings is as an avid movie-watcher, but, as you’ve might expect, he is also a very busy man. He became dissatisfied and fed-up a few years ago when he kept going to video rental stores and they often didn’t have the movies available that he wanted to rent, especially new releases. Further, because he traveled so much he often returned movies late. In 1996, he rented the movie Apollo 13.  When he returned it late, it cost him $40 in late fees. He could have gone to the cinema several times for that price!

It was at this point that Hastings decided to open NetFlix. From the beginning it had far-reaching goals. A staple of American culture at that point, and a very fast growing business indeed, was to rent movies from video stores. Hastings noticed that DVD’s were gradually coming into use. Even though they cost about $300 he thought they might eventually out number VCR’s. Thus, he started the first DVD subscription business.

This was a risk from the beginning. It required nothing short of a change in consumer behavior. As you can imagine, it takes time for word of mouth and customer habits to evolve, even in this information age. Thus, the company was projected to be unprofitable for several years. And guess what? These projections turned out to be accurate!

Hastings also was obsessed with something very old-fashioned. He was driven to achieve consumer satisfaction and focused on the overall consumer experience. His model was Starbucks. “Starbucks is a great experience. How Howard Schultz talks about building the brand one cup at a time.” Hastings adds, “As Starbucks is for coffee, NetFlix is for movies.”  Various plans were available to allow anywhere from three movies, to even an unlimited number of movies, out to customers at various times. His business plan even showed that the company would lose money on customers who rented more than five movies per month because the cost of delivering them through the U.S. Postal Service was greater than their monthly subscription fees. But such avid movie-watchers were part of his original business plan to change the way people watch movies at home.

So there you have it. Reed Hastings was a man obsessed with changing consumer habits and improving consumer experience, and his financial plan from the beginning allowed time and resources to achieve this. Consumers soon realized that this was a superior home-viewing experience. Further, Hastings had an innovative way of conducting market research. Millions of bits of data are available on an on-line site are available for consumers to scan to see what other customers were viewing in what areas. 70% of rentals are recommended on this site.

After a few years NetFlix became one of the fastest growing subscription services on the internet.  Hastings makes the provocative remark that “Blockbusters is the Dunkin’ Donuts of the movies.” The company is now racking up impressive profits and went public on the NASDAQ(NFLX) in 2002. Its stock price is soaring. However,  Hastings is not resting on his laurels.

The trend in home movie rentals may be towards digital. Consumers would be able to download movies from their home. True to form, Hastings is preparing for this day, which may be anywhere from two to fifteen years down the road. He is buying distribution rights to individual films. “The dream twenty years from now,” Hastings says, “is to have a global entertainment distribution company that provides a unique channel for film producers and studios.” How ironic that these are the same people that were horrified by and fought the idea of home movies when the idea first arose in the 1970’s.

You can read up to 60 sample business plans www.bplans.com/sp/businessplans.cfm
The reality is that business planning never stops.

As your business grows, you will revise this plan many times, because it is your roadmap. It should be a living, breathing document that grows and changes to meet the needs of your business.

Activity 17: Results of Market Research

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