A growing and thriving business — it’s every entrepreneur’s goal. However, each milestone comes with new sets of challenges. Getting familiar with these five (5) stages of business growth can give you an idea of what you should prepare for based on the level of growth you plan to achieve.
The 5 stages of business growth
The 5 stages of business growth — existence, survival, success, take-off and resource maturity — is a framework developed by Neil C. Churchill and Virginia L. Lewis to quantify the growth of businesses based on the milestones and challenges they’re experiencing.
This five-tiered framework gives a systematic way of categorizing problems, growth patterns and key requirements of small businesses. It also defines the dependence of the business on its owner.
Knowing where your business is can guide you in creating growth strategies and developing business plans.
Read the explanation below to get a better grasp of the 5 stages of business growth:
1. Existence
The existence stage, also known as the start-up phase, marks the beginning of your entrepreneurial journey. It’s the stage where you do everything on your own — from developing a viable product to finding your first customers.
Main concern:
- Business owners at the existence stage are mostly at risk of running out of money. Enough funding is essential for developing a viable product, obtaining customers and covering day-to-day operating expenses.
Systems:
- Minimal to nonexistent
Business owner responsibilities:
As its owner, you have 100% involvement in your business. Among the main responsibilities you must handle are:
- Funding the business
- Conducting market research
- Budgeting
- Creating a business plan
- Marketing and sales
- Finding investors
- Accounting and bookkeeping
Things differ if you started and registered a business with a partner. Instead of shouldering everything, you can share the obligations with the latter based on your agreed-upon arrangement. You may also read this article for more information: What are the Different Types of Business Structures in Australia?
Proper cash management is crucial for the survival of your business. As the owner, you must know how to manage your business’s finances to remain operational. If it sounds too much for you, you can also get external help on a part-time basis to take care of your finances.
2. Survival
Reaching this stage means your business is a workable entity with viable products and enough customers. It also has a limited number of employees. Despite this, as a business owner, you’re still deeply involved in the day-to-day operations. You also make the major decisions about different areas in your business.
Main concerns:
- At this stage, your products are already bringing in some revenue to your business. The next challenge is to reach the break-even point — or the stage at which your total revenue equals total costs — and further increase your customer base. Generating enough cash is a primary concern to guarantee survival.
Systems:
- The development of systems starts to take shape.
Business owner responsibilities:
- Establish or improve the business model
- Start to learn how to delegate tasks to team members
- Implement strategies for marketing, sales, and operations management
Once you’ve successfully broken even, your next challenge is to make profits. This means you earned enough cash to pay for operational costs AND invest in your business’s growth.
3. Success
The success stage signifies that your business is already earning consistent profits and has a strong presence and brand recognition in the industry. Your entity’s headcount is also growing, with a couple of managers to take over duties you’ve previously handled.
Main concerns:
It’s the fork in the road of your entrepreneurial journey. The decisions you’ll make here can have an enormous impact on how your business will move forward. Will you start to disengage from your entity to pursue other personal plans (Success-Disengagement Substage)? Or will you continue to invest in its growth (Success-Growth Substage)?
Systems:
- Well-thought-out systems are already in place. The business follows standard accounting practices, marketing plans, production systems and data security protocols.
Business owner responsibilities:
- With more employees and established systems, the business starts to become independent of you as its owner.
At this stage, it’s crucial to be more acquainted with the idea of delegation. To focus on your priorities — whether it’s to disengage or grow your business — you must entrust your managers with more leadership functions.
The managers must be capable of making strategic decisions for their team. They should also prepare progress reports. This way, you can have a big picture of what’s going on in your company without getting deeply involved in the process.
When you’re at the success stage, it’s crucial to keep your company stable and profitable. You must also have effective cash flow management systems so your business can surpass unforeseen events like Covid-19 lockdowns.
4. Take-off
Rapid growth takes place when your business is at the take-off stage because you can now leverage the streamlined sales, marketing and operating strategies and processes you’ve developed throughout the years.
Getting to this point shows the resilience of your business, its products and the business model. It also signifies your effectiveness as a business leader. You and the business are also more separate, but you still have a dominating presence and stock control. Managers, on the other hand, must be competent in handling the growing and complex business environment. They’re also more involved with the operational and strategic planning.
Main concern:
- Now that you’ve achieved this position, your main concern is to identify ways to finance the requirements associated with your business’s rapid growth. You must also be deliberate with the decisions and actions you make. If you try to grow your business too fast, you may run out of cash. In addition, a lack of effective delegation can also slow down growth momentum.
Systems:
- Systems are more refined and extensive.
Business owner responsibilities:
- Effective delegation to competent managers and cash flow management are two of your biggest responsibilities at this stage to achieve the growth you desire.
Major transformations can happen at the transformation change, which means you’ll face newer sets of challenges. But if you happen to overcome the challenges, your company can become a big business.
5. Resource maturity
After your business’s rapid growth comes the resource maturity stage. At this phase, your company has adequate staff and financial resources. The management is also more decentralized.
Main concerns:
- Proper management is needed to maintain the growth your business experienced from the take-off stage and make it flourish for a long time. In addition, huge companies can often fall victim to bureaucratic procedures. Thus, eliminating inefficiencies while maintaining flexibility is also a top priority.
Systems:
- Systems are extensive and well-developed.
Business owner responsibilities:
- At this point, the independence between you, as the owner, and the business is more pronounced.
Attaining resource maturity requires hard work, effective decision-making, proper delegation and an eye for long-term growth. If you don’t lose sight of your goals and the reason you started the business, you can maintain its longevity and position in the market.
Are you looking for a reliable accounting and bookkeeping service to support your business’s growing needs at any stage of growth? Consider ABJ Solutions. Contact us today to learn more about our services.
