In the five stages of small business growth, each business will go through different challenges and opportunities. However, it is important to understand each of these stages and how to deal with them effectively in order to maximize your business’s potential. Steve Jobs, the late co-founder of Apple, he said, “The only way to do great work is to love what you do.”
Stage 1: Existence
Businesses in this stage vary from newly started restaurants and retail stores to high-technology manufacturers that have yet to stabilize their production or product capability. Many do not survive past this initial phase, and others close because they simply cannot accept the demands placed on their time, finances, and energy.
During this stage, the primary concern of small business owners is getting the products or services they have developed into a workable product that draws in enough customers to allow them to break even. They also have to focus on scalability and developing enough cash flow so that they can generate profits sufficient to reinvest in their company.
Stage 2: Survival
Survival is the second stage of small business growth and focuses on determining whether a business can break even and generate enough profits to reinvest and grow. This is a vital test because businesses that cannot break even may be forced to fold or sell, sometimes at a loss.
A company that reaches this stage has shown it has the capacity to deliver a product or service that customers want, that will generate sales and profit, and that can balance revenue with expenses effectively. However, it has not yet figured out how to develop a system that will allow it to scale or step back from its day-to-day operations.
This is an important time to set goals and establish processes that will allow you to reclaim your time while allowing you to focus on your business. It is also a good time to invest in systems that will help your business run more efficiently.
Stage 3: Growth
In the early stage of your small business, you need to develop a viable product or service and market it effectively. This involves researching your target audience and identifying pain points they can alleviate with your offering.
Once you’ve developed a product, you can begin building your business and planning for growth. The main challenges at this point are acquiring customers, delivering your product, and keeping enough cash flow to sustain your business.
Stage 4: Takeoff
After a small business has proven itself in the survival stage, it can begin to scale up its operations. This involves hiring and keeping employees, managing equipment, and scheduling work.
The biggest challenge is to find ways to increase revenue and improve profit margins without running out of cash. This requires creativity and planning.
A successful success-growth strategy can allow a business to grow to a larger size and become a dominant force in the market. However, this is a very high-risk endeavor.
Stage 5: Resource Maturity
After a successful takeoff phase, businesses enter the resource maturity stage. This is where companies consolidate the financial gains of rapid expansion while maintaining the original entrepreneurial spirit.
At this stage, the company has a decentralized management structure with experienced senior staff, and all the necessary systems are in place. The owner and the company have separated to a large degree financially and operationally, but the company must keep its entrepreneurial spirit and continue its growth path.