Recognizing and Managing the 5 Stages of Small Business Growth

Here's how to know whether your business is growing or not

business growthA corner dry cleaner and a fast growing software company may not seem similar, but experience and research has shown that they both go through the same struggles. They may act differently, have different organizations and use different management styles, but they face common problems that happen at similar stages in their growth.

Understanding the stages of small business growth and inherent problems can help you assess where you are in the growth pattern, and help you anticipate what’s going to be required to succeed. Owners, for example, will have to spend an extraordinary amount of time during the initial start-up period, and then have to learn to begin delegating work and authority as the company grows.

1. Existence stage

During the start-up phase, to move from an idea to a business takes customers, cash and stamina. You do everything. You’re the primary source of capital and energy, and if you have help, you supervise them directly. Your only goal is to exist and survive. Formal planning is seldom a part of the process.

At this stage customers are what you need. Not business cards, a letterhead, or a company car. Companies fail at this fledgling stage because they have intricate, detailed product plans and no clue how to identify, attract and sell customers. A company with a clear marketing plan and a vague product plan is more likely to succeed than the reverse.

2. Survival stage

If you make it through the start-up and have proven you have a product that people can and will buy, then survival becomes your primary concern. You have to be able to make enough money to cover your costs. And you need to be able to finance growth.

Mom and Pop businesses rarely grow past this stage. Founders often think of the business as an extension of themselves, and can’t imagine not being at the helm. Owners are satisfied with marginal returns for their effort and investment, and are unable or unwilling to delegate responsibility.

It’s not uncommon for companies to grow broke at this stage. They don’t have enough money to cover the costs of building new products or hiring more people to provide more services. Cash forecasting is job one. Now is the time to start thinking of replacing yourself with someone who knows how to manage a business, not just start one.

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