In the heady world of small business your average tyre repair shop and software start-up may seem light years apart. But according to a seminal study by Harvard Business Review they’re not as different as you think with all small businesses working through the same five stages of business growth, and the challenges each represents.
Here are the five stages of business growth and how you can identify your path to success.
If you’re reading this as a business owner who started up themselves, chances are “you’ve been there and done that”. This is the phase of business where the enthusiastic entrepreneur does everything themselves, perhaps with the assistance of a couple of staff who answer directly to them. The focus at this stage is customers; how to get them, what to offer them and how to keep them. It’s about creating a viable income stream, with many businesses failing after they exhaust their initial capital.
Once you’ve proven your existence, a business is in survival stage, and it’s a place where many stay. This is a critical time for business where they can begin to generate revenue or languish at the just above break-even point using the owner’s energy and direction for a minimal return.
The important questions at this time are: In the short term can we generate enough return to break even and cover the costs of equipment repair? Can we generate enough revenue to fund growth into something viable?
If you’ve reached success stage, chances are you’re enjoying a solid return for your efforts but now there is a vital decision to be made. Do you sit back and enjoy the income you’ve built or do you use your revenue as a platform for further growth?
At this point income should be fairly healthy and an owner can choose to step away from the business utilising the resources of staff to enjoy the income and lifestyle return, they can sell their business for a fair profit, or consolidate their resources and grow.
If the latter is the path you choose, planning is imperative. The business will need to have enough cash and expert staff to handle future needs, while systems will need to be implemented that cater to your future direction.
At this point delegation and cash are the key focus areas. The business will be evolving at a rapid rate and chances are you may have incurred debt to take it to the next phase.
There will also be significant changes to how an owner operates amid an altered business structure, where the organisation is often departmentalised and decentralised. Key systems and procedures will be refined during this period, often overseen by managers. The owner may still be intrinsically involved in the company but will be separate from day-to-day operations, and may have opted to employ a company head to lead the growing enterprise.
At maturity a company will be stable, proven and experienced. It will have certain power and recognition in the market, but will not be without its challenges. The focus now is on maintaining position with an eye on competition, developing technology and continued market share, where innovation and diversity will continue to play key roles.
This is a point where many businesses stagnate, relying on their past instead of recognising future opportunity. If a company can maintain its entrepreneurial spirit, flair and hunger while enjoying its strong market position it will have the best chance of prolonged success.
Throughout the five cycles of business, planning is key. In the early stages that includes strategies to attract and retain customers, and further plans for investment and growth. Later it will focus on the implementation of systems and procedures.
Whatever your stage of the business cycle, an expert business coach can help you make the next leap, providing the assistance, planning and support required to take your business beyond existence and survival to success and even maturity.