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It's a great temptation just to get started, there's lots for an entrepreneur to do, after all: places to go, people to see, things to do. Building value needs more focus than this because each stage builds on what went before. You wouldn't have roof tiles delivered before the bricks for the wall, and neither are needed until the foundations have been finished. So how should the entrepreneur organise and focus all that stuff between startup and exit?

Monty Python did a great sketch in their 'How to do it' skit of early children's programmes, called 'How to rid the world of all known diseases'. http://www.youtube.com/watch?v=tNfGyIW7aHM Just three steps were needed, they said: become a world leading scientist; invent something that would cure people of any disease they had; then give it to everyone. Wonderfully simplistic, obviously, but it does have a lesson for the entrepreneur.

There are three generic stages that build value, and it pays to know which you're doing because it can be very easy to get confused, get ahead of yourself, and stumble as a result. Being very clear with yourself, your team, and your investors, about which step you're attacking is very valuable. It will give you clearer objectives, tighter outcomes to manage, and a better flow to your action plan.

Prove the proposition

Exactly what is it you're going to be asking customer to buy, and will they agree willingly? Who are these customers, and what would persuade them to part with their cash? Can you deliver what you've promised them, and do they like it enough to buy again or recommend? Will they be prepared to pay the kind of money you anticipate, and will they buy in the way you expect? How will you reach your customers, and how does that all work? What does the whole cycle look like? Only once you know the answers to these questions, with some degree of certainty, does it make sense to begin to scale up. Many companies start too early, before they have proven their proposition, and have to reinvent themselves. That's hugely expensive in time and effort and equity. The entrepreneur will be more cunning than that, and will maximise his chances by being careful to prove what he's going to scale up before he presses the accelerator in earnest. So the first infection point of value comes when you have proven the proposition, its value, and your ability to get it to customers and get paid.

Prove the market

Unless your proposition has a really tight, niche market, the second big up-lift in value comes from demonstrating the market size it can reach. The entrepreneur will arrive here having proven one market while proving the proposition, and have a stable platform on which to build. Better to have concentrated on that one foundation market and consolidated there, than have scattered precious effort across several, and have no point of stability.

This second phase is all about proving what other market can be reached with the proposition. The dimensions are fairly straightforward, and usually include different sectors an different geographies, but should include different routes to market as well. It may be that there are different business models, to prove as well: white label, subscription/SaaS, OEM, etc.

This is the first major inflection point. Skills are scaled up as expertise in sales and marketing extends the capability out into the market. Processes need to be ugraded, as product focused people start to respond to the agendas set by customers. Management must upgrade too, as the organisation becomes more diverse and dispersed.

The key watch-points for the entrepreneur are to figure the dimensions out before the effort begins, and to understand how each leverages into value and what the priorities should be. After all, this approach means that your sales people must understand that: "Not all revenues are equal". Yet another customer in a sector already proven is not as valuable as a customer that proves a new sector. So the value is built by extending out on as many axes as possible.

Go and give it to everyone

This second major inflection begins just after the early stages are completed, where clever thinking and selective action proves the value, brick by brick. The enterprise now moves to one that is driven by scale, muscle, resources, and reach. Low touch businesses model such as SaaS, may make the transition, and scale up, but higher touch businesses, where products must be lifted into boxes, or where customer interaction is more significant can struggle.

Scaling up these higher touch models quickly enough is often a bigger barrier than is worth climbing. There are almost certainly many existing businesses who are already well placed to give the proven proposition to the whole of the proven market. Typically, this is where the entrepreneur and his investors exit. There's a great fit, too, because companies with scale are rarely adept at the kinds of product innovation that suit smaller, entrepreneurial businesses. The entrepreneur will think ahead and know which bit he's building, what the imperatives are, which bit is next, and why.

(c) 2010, 2011 Peter G. Osborn