What You Should Know About the Different Stages of Business Growth
Regardless of industry, businesses share commonalities when it comes to the ups and down that come with growing from a startup to a mature company.
In an American Express Trends and Insights post, Tom Harnish writes that you'll need to understand the stages of growth and its underlying issues to provided a clearer picture of how you can cultivate success for your small business.
He adds that business owners will have to spend an extraordinary amount of time during the initial startup period before they learn to delegate work and authority as the company grows.
Every stage of the business life cycle, otherwise known as maturity phases, or growth stages or phases, contains its own set of challenges which requires businesses to think creatively to get around them, according to a post by The Hartford's Business Owner's Playbook.
The five commonly cited stages of growth are existence, survival, success, take-off, and resource maturity.
Here are the growth stages and what to look for when going through the cycles of growing your small business.
Existence. You're at the beginning of the growth stage when you move from an idea to forming a business.
"It takes customers, cash and stamina. You do everything," Harnish writes in the Trends and Insights post.
He adds that this stage means you're the main supplier of capital and energy and are the direct supervisor of any additional helper. The only goal here is to exist and survive, Harnish writes.
Survival. From the initial level, new businesses at this stage are looking at how to survive.
If you reach the survival phase, you've demonstrated you have a workable business entity.
A business in this stage has enough customers and satisfies them sufficiently with its products or services to keep them, explains an article in the Harvard Business Review (HBR) magazine.
"The key problem thus shifts from mere existence to the relationship between revenues and expenses," it says.
To move from survival to the next level, you have to plan and then make decisions.
"At some point, every small business owner comes to a crossroads," says a post by Act! "Are we going to stay small, or will we strive to grow?"
Creating a plan to develop a system that allows room to growth is critical.
"This means hiring employees, knowing how to delegate tasks, establishing a creative culture," the Business Owner's Playbook says.
Also, you'll need to continue to innovate, lest you risk falling behind the competition.
"Cultivate a creative organization that is encouraged – and possibly incentivized – to look for new opportunities, find ways to become more efficient, and find new ways to promote your products and services," says The Hartford post.
Success. Consider your business in the success stage when your revenue increases and your customer base grows.
This is also a delicate time when it comes to managing growth - to avoid the pitfall of "growing too fast," an oft-mentioned misstep in entrepreneurial circles.
If you continue to follow goals that let you grow with purpose, you'll be able to use your resources most effectively, explains The Hartford blog.
The success stage is when your business grows to a level that can support itself indefinitely, says Jennifer Nelson in a Startup Nation post about the five stages.
During this stage, she writes that you can choose whether to scale the business for more significant growth and success or step back to reclaim time and allow the company to function independently.
Take-off. If you go for expanded growth, you're moving to stage 4, take-off.
"The key problems are how to grow rapidly and how to finance that growth," says the HBR article.
This stage involves rapid growth and expansion, which, if successful, will take your business from small to big, writes Nelson.
One of the primary challenges is implementing more complicated business structures.
"Rapid growth requires more complicated business structures," she adds. "Delegating, managing large teams, maintaining vision and cash are common challenges."
Resource Maturity. The fifth stage is resource maturity.
"When you reach this stage, you likely feel safe and secure. It’s a different feeling than the first two stages in the business life cycle," says the Business Owner's Playbook post.
In resource maturity, the HBR article says, "The greatest concerns of a company entering this stage are, first, to consolidate and control the financial gains brought on by rapid growth and, second, to retain the advantages of small size, including flexibility of response and the entrepreneurial spirit."