From the initial startup stage to launch, and from expansion to maturity, your small business will go through many stages of growth. No small business ever stays the same.
To address the unique needs, opportunities, and challenges of those stages, you need to understand what can happen during each and how to set goals at each point to get the most out of that potential period of growth.
The five stages of small business growth:
Stage 1: Existence
The first stage involves formalizing your business idea into a viable startup. In this seed stage, create a business plan, develop the business, and craft a roadmap for your company. This stage also involves deciding on the product or service you plan to sell to fuel your company’s revenues and profitability.
When your business is just starting out, your strategic growth initiatives should focus on finding the right customers and convincing them to buy your products or services. That means researching who might benefit from what you’re selling and determining why your offer alleviates those pain points. You’ll also need to define your vision and values, which will frame your brand identity and help your target audience better understand what you stand for.
Stage 2: Survival
After you’ve launched your business and your target audience knows you exist, the next stage can be the most challenging. That’s because only a small percentage of businesses make it through their first year — let alone the next five years.
Even if you offer a product or service that’s in demand, you’ll need to do more to sustain the company in the early stages. You must increase new revenue to help the company move from relying on outside funding or your bootstrapping efforts.
Your business development goals should include identifying the most efficient ways to sustain your current growth over the long term and through various economic cycles. Developing customer relationships beyond the first purchase can help fuel that revenue.
Focus your marketing efforts on building credibility and trust, extending brand awareness, and creating loyal new customers. At this stage, it can help to have influencers who convince others of your company’s value.
Stage 3: Success
Your business model has shown signs of market acceptance. This stage is a turning point. It’s when you determine how to maintain that success while continuing to grow. You could exploit the company’s current accomplishments and expand operations. Alternatively, you might decide to focus on the company’s current stability and profitability.
Before picking a path, consider factors like competitive pressure as well as market demand. What are your audience’s current needs, and how could those needs change in the future? How robust are your current operational efficiencies? Can they support an expansion into new markets?
This will help you pinpoint cost and productivity improvements that add to your profit margin. Making any changes now could also better position your company for growth whenever you decide to expand.
Stage 4: Takeoff
During this stage, you’ll need to focus on creating rapid growth by adding new products or services or expanding into new territories. You might even be able to acquire smaller competitors.
Growing quickly through either of these two strategies will usually require a significant cash infusion. Your options might include a strategic partnership with another brand, an initial public offering of stock, or further investor assistance.
Companies sometimes struggle if they reach this stage because they tend to grow too quickly or run out of cash to fund growth opportunities. Outside assistance and additional or new leadership can help steer the company through this challenging growth stage.
Stage 5: Maturation
At some point, your business will mature — but you shouldn’t look at this fifth stage as the final one. It’s true that many companies languish in this stage as leadership struggles to figure out the best way to continue growing. Stagnant revenues could indicate that market conditions have changed. What you offer may no longer be relevant to your audience whose needs or issues have perhaps evolved.
To remain relevant, research what’s changed and how to pivot. In doing so, you may find yourself back at the survival stage, looking for a way to add a product or service or expand into a new territory or audience. You may even want to consider an exit strategy, such as selling your company or merging with another.
Management factors influence business growth
These are general guidelines to follow for each of the stages of business growth, but keep in mind that every company develops in its own way, based on specific management factors. Business growth depends on the financial, human, systems, and business resources available. Having a solid and sustainable source for these resources helps a new business owner respond to the opportunities and challenges during each of these stages.
As the owner of the business, your goals, operational and managerial capabilities, and strategic acumen also play a key role in how your company responds to each opportunity and challenge that appears along the business lifecycle. To ensure you’re an asset that stimulates your company’s growth, continue to assess what you’re doing, get outside advice from an advisor, and continue learning and developing to improve your own capabilities.