Every start-up or new business has five stages of growth. All these phases of small business growth face challenges that every company must overcome. It helps you know where your business is in the cycle and lets you find solutions for problems and create growth strategies. Whether you are toying with your idea of a small business or have already started it, the guide below will let you understand the stages of small business growth.
Stage I: Existence
In the beginning, all start-up or small business owners worry about finding and signing up potential customers and being able to deliver their services or products. They cope with the query of whether they will get enough buyers and can provide products or services promptly. They also grapple with whether they can move from the beta phase to being able to scale and whether they have enough cash to meet all the requirements.
Stage II: Survival
Businesses have proven their basic business strategy in this phase and have true operating distress. In this stage, the focal point is the relationship between expenses and revenues. Entrepreneurs evaluate whether they can generate enough profit to cover the repair/replacement of assets. They also determine whether they can grow finance to earn an economic return on labor and assets.
Stage III: Success
It is a pivotal stage for entrepreneurs where the business reaches economic health. Here, owners debate whether to leverage the company as a platform for growth or consider it as a means of support for them. Thus, there are two tracks to the Success phase.
- Success-Growth: In this substage, the entrepreneur pulls together all resources and risks them with the intent of financial growth.
- Success-Disengagement: The company can maintain itself forever in this phase, barring external changes. Managers take over the operational duties and plan to maintain the status quo.
Stage IV: Take-off
At this juncture, owners know that they are assured of growth. Here, they worry about how to grow quickly and arrange finance for growth. Both strategic and operational planning is actively done by assigning managers real responsibilities.
Then, entrepreneurs grapple with structural and organizational problems of how to construct the company and delegate to managers and in what way. In terms of finance, the owner often has to tolerate a high debt-equity ratio and manage cash flow and expense controls.
Stage V: Resource Maturity
The stages of small business growth give fair ideas at this step. Now, the company has the financial resources and staff to engage in detailed strategic and operational planning. It has a distributed management structure with a senior, experienced team, and the necessary systems are in the right place. As a result, the entrepreneur and the business have separated both operationally and financially.
If the company can continue its entrepreneurial spirit, it is highly likely to succeed. But it should avoid “ossification.” Ossification occurs when the corporate culture and innovation stalls begin to avoid taking risks. The basic key is maintaining a culture attentive to the market and environmental changes.
Final Words
At every stage of small business growth, new challenges always exist. As an entrepreneur, it may feel like you always need capital and some support. However, you can connect with talented professionals with skills and experience that can assist you in achieving your goals.
