Big Business: What Are the 5 Stages of Small Business Growth?

The end goal for most small businesses is to grow into something larger: to outcompete their rivals and become a larger and richer company. Yet what does small business growth actually look like? 

There are five key stages that most small businesses will go through as they grow into a larger business. Recognizing where you are in this framework and how to proceed to the next stage is of the utmost importance if you want to grow and thrive.

In this guide, we’re going to take a closer look at the stages that your small business will go through and what each of them involves. Are you ready to learn more about growing your business? Then read on!

1. Existence

The very first stage that a small business needs to go through is proving that it can exist and survive. This stage is all about proving that your business idea is workable and that people are going to want to use your services or products.

This stage is all about finding that most precious business resource: customers. As well as finding customers, you need to be able to deliver your product or service on time. 

There are several key questions that you should be asking yourself during this stage:

  1. Are we getting enough customers?
  2. Are we delivering what we promised to?
  3. Is this business model sustainable?
  4. Do you have enough cash to cover all the costs of getting started?

This step is the most crucial of all. It’s make or break, and where you’ll test your business idea to its limits. If you can survive, you’ll move on to the next stage.

It can be very emotionally difficult to fail at this stage but remember that most small businesses do fail, and many of them never make it past stage one.

2. Survival

Now that you’ve proven that your business has what it takes to exist, you need to prove that your business can survive. While this may seem like a similar stage to existence, there are some crucial differences.

In general, this stage is all about being able to balance your books. You need to make enough money that you can cover all of your expenses and make a profit or at least break even. Even if you’ve got a lot of customers, if your business costs too much to run, your business won’t survive.

You likely don’t have too many staff at this point, which makes matters easier. It’s also worth bearing in mind that a lot of businesses actually stay in this stage indefinitely by design. If you’re not trying to grow into a larger business and just want to make enough to pay yourself a wage, there’s no incentive to go beyond surviving.

The key questions that you need to ask here are:

  1. Will we be able to break even?
  2. Will we make enough of a profit to grow and to make more profit?

3. Success

This is where, if you want to grow your business, you need to make a crucial decision. You’ve survived and thrived: do you want to grow the business further or would you rather keep the business at this stage, earn a reliable income, and focus on another business? If you feel entrepreneurship calling, the second option may be very appealing, but if you’re happy where you are, why not stick with it and grow?

If you decide to grow beyond this stage, then you need to start making long-term strategic plans. How are you going to grow your business into something bigger and what will that look like? How are you going to finance this strategy, and can you afford it right now?

When you’ve got a plan, you’ll need to put it into play and start the execution phase. 

4. Takeoff

So, you’ve got your plan for rapid growth and you’re ready to put it into action. Now’s when things start to grow prodigiously, so long as you’ve planned everything right.

There are a few different key decisions that you need to make during this stage. Are you going to delegate your responsibility as owner to a manager or keep working behind the scenes? You should consider whether delegation will result in a net positive for growth.

You should also consider how you are going to fund your rapid growth. This kind of growth often requires business owners to spend a great deal of money and potentially take out loans. Are you sure of your financial foundations?

This is also the time to make sure that your plan doesn’t result in your company growing too fast and running out of cash.

5. Resource Maturity

At this stage, the company should have the resources necessary to embark on long-term strategic planning without the same kinds of risks that we encountered in stage three. It should be able to consolidate the growth that was made in stage four, too.

The company should still be a small business and maintain the plus points that come from this, such as a greater entrepreneurialism than larger businesses, and increased flexibility. However, this is also the stage where businesses can attempt to grow further, so long as they don’t lose ossify. Ossification refers to companies that have become stagnant and are unable to grow further, which results in them losing out to their competitors.

Resource maturity is all about managing what you have, or, if you’ve delegated to a manager, making sure the business is in capable hands. Then you need to decide the next path to pursue!

Small Business Growth Will Almost Always Follow This Framework

Small business growth tends to be similar regardless of industry, country, and other factors. It will almost always follow this framework, so knowing and understanding what each stage involves is vital for the long-term success of your company.

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