We usually think that the initial stages of business growth are the challenge, and then it’s smooth sailing once you start making money and clients. There are five hoops to jump when you have a business. They are growth spurts that can be uncomfortable at times. It’s important to categorize the problematic growth patterns that all businesses tend to go through, especially small to medium sized businesses.
All businesses are different and yet, they do experience similar problems that come up during stages of development. By understanding the characteristics and problems, it becomes easier to prepare and manage the stages of business growth you’ll face.
Stage 1 – Existence
The initial phase is that of existence. You are working on getting customers and delivering the products or services you are being paid for. Questions you may want to ask yourself in order to properly develop strategies during this time should include whether you can get the customers you need and can you deliver the product you have promised? Other questions might be whether you can expand to a bigger sales base in the future. Will you have enough money to make it through the start-up phase?
As the owner, you’ll want to do everything and directly supervise your employees. They should be fairly competent, but of course not too competent or you’ll be overpaying wages you can’t afford during this phase. Your strategy is to stay afloat. You will perform all the important tasks, and many people will be looking to you for direction.
Stage 2 – Survival
When you reach the survival stage, you will have proved that your business is a workable entity. You have enough customers to sustain the business, and you’re able to satisfy them with the products and services you provide. So you now exist, but how much money are you actually making? This is the main issue in the survival phase. Revenue vs. expenses.
Can you generate enough money to break even? Can you cover emergencies such as a necessary repair or replacement of a machine you need for your business? Can you generate enough money to stay in business, or even to finance a growth in your business?
You have kept your business small within the survival stage. You don’t have a lot of employees, and you may or may not have a manager of some sort at this point. You are still making all the decisions. While in the survival phase, you are just trying to cash forecast to see if the business will be profitable. During this phase, you may grow in size, and in order to move onto the next stage, you will need to prove that you are profitable consistently. Otherwise, they continue to be the “mom and pop” stores and go out of business when they retire, or it’s a matter of the business closing down.
Stage 3 – Success
Success should be the pivotal moment in one’s business, but it doesn’t come without growing pains. When you own a business and it becomes successful, you have to ask yourself whether you’ll want to exploit the company. Will you expand the business, or will you keep it stable and profitable? Will you use your business as a platform for growth? This is the biggest question in this phase.
The business can become a support for yourself. You have the ability to disengage from the company while still making money. While disengaging from the successful business, you can start a new enterprise. Maybe you just want to retire early.
Stage 4 – Managing the Expansion
Your business has grown now. This is the point where you can grow it quickly if you can find a way to finance the growth you want. You’ll want to ask yourself whether you can delegate responsibility to others. They should have managerial skills, and have been with the company for long enough to understand your vision. The business could be quite complex to run at this point, so you want to be able to delegate to high performers.
If you’re getting bigger, do you have the necessary funds to grow your business? Can you handle a high debt-equity ratio? Are you willing to be patient about where your business is going? Operational and strategic planning are essential during this phase. This will be done by managers within the organization. If you can rise to the challenges financially and managerially during this phase, your small or medium business can become a big one. People fail during this phase mostly because they try to grow too quickly or they simply run out of money.
The good news here is if you fail during this phase, you can potentially go back to being the smaller company you started as. It may take some time to get out of the hole, but you may have to start near the beginning again.
Stage 5 – Managing Resources
This stage is to help you manage long-term gains and success. It’s about creating a solid business that can stand whatever economical storms occur. Your biggest concerns during this stage are consolidating and controlling financial gains when your business grew. There are advantages to a small business, and you may wish to hold onto those. Flexibility, response, and entrepreneurial spirit can get lost when your business grows too big. These are the fundamental reasons of success for many businesses, so try to hold onto those values.
You have to expand the management force quickly to ensure that there are no obstacles in the way of growth. You want to ensure that your company is highly professional and to do this, you’ll want to implement budgets, standard cost systems, and strategic planning. You now have the staff and the money to take part in detailed operational and strategic planning. You have plenty of experienced staff and systems that make it easier to run the business.
Your company has made it. It has managers that run it well, you are independent from it, and it’s large and stable. If you’re also able to keep the entrepreneurial spirit, it becomes a special kind of company that people want to be a part of.