The Stages of Business Growth
Guest Post by Tina Johnson, Founder & Chief Strategist, CEO Consulting Group
Turning a small home business into a large and successful company is a big deal—and unfortunately, the process can’t always be replicated. While every business’ growth pattern is unique, there are trends and similarities that translate from one sector to another. Here, we’ll discuss the five stages of business growth.
First Stage: Existence
A business in this stage is in its infancy, and the owner should focus on finding customers and the right products for the market. These companies are typically run by a founder or a partnership and have few systems in place. Here are a few questions to answer:
- Do people want what I’m selling?
- Can I profit from my ideas?
The failure rate for businesses in this stage is high: about 20% within the first year and roughly half in the first five years. If you find a marketable product and generate cash flow from it, you’re more likely to make it to the second stage.
Second Stage: Survival
A business in this stage is likely small with few in-place systems. However, the owner has likely found customers who like what they’re selling and keep coming back for more. During this stage, generating enough cash flow to break even is the primary focus. With that accomplished, it’s possible to build a sustainable business model.
Third Stage: Success
Once your business has become profitable, you’ll face a major decision: what to do with the money. Most owners either pour it back into their companies or spend it on themselves. During this stage, think about building systems that ensure continued profitability and finding team members who can help you achieve your goals. If you can succeed here, it’s time to move on to stage four.
Fourth Stage: Takeoff
A business in the takeoff stage is growing rapidly, so managing those developments becomes a top priority. Your company may become decentralized, which creates a new set of challenges. You’ll have to find out how to hire people who can keep up with customers’ demands, how to manage internal growth, how to fund it, and how to keep from overextending yourself. Business owners in this stage must focus on strategies that fuel sustainable growth, and if they do so, they can go forth to stage five.
Fifth Stage: Maturity of Resources
Expansion can’t last indefinitely, and if you’re entering the fifth stage of business growth, you’re coming to realize that fact. If your company has reached stage five, there are systems and resources in place that will allow you to focus on stabilization rather than development. Companies in this stage fail often, mostly because of diminished momentum. However, if you can learn how to scale the business while staying innovative, your chances of success are greatly increased.
Closing Thoughts
It’s all too easy to think that the strategies that worked to get your company off the ground will work forever. However, some tactics are impossible to scale. As you’re striving for the next milestone, keep in mind that what got you where you are may not get you any further.
