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Small Business Growth in Five Stages

Every business, even the largest ones, goes through peaks and valleys and different stages of success and frustration. What we do know is that we can learn from each other and recognize at which stage our business is and what we can do to reach the next level.

There is a five-stage model for small business growth that we can use to help categorize our own businesses. In their Harvard Business Review whitepaper entitled The Five Stages of Small Business Growth, Neil C. Churchill and Virginia L. Lewis state that the five stages are:

  1. Existence
  2. Survival
  3. Success
  4. Take-Off (Growth)
  5. Resource Maturity

In this article, we will go over each stage of small business growth to help you determine where your business is and what you can do next.

Stage 1: Existence
A small business at this stage is challenging, especially since the owner is doing most of the work. One of the largest pain points is obtaining customers and delivering on the product or service. In order to remain alive, a new business must seek customers.

Stage 2: Survival
A business in this stage is now a more efficient working entity with some profit. The next step here is to ensure that profit remains. Therefore, again, businesses in this stage also need to seek customers as well as start looking at the return on investment (ROI).

In essence, merely staying open isn’t sufficient anymore. The businesses in survival stage must be establishing systems and processes to consistently ensure that ROI maintains and grows. 

Small business growthStage 3: Success
Once systems are established and profits are consistent, the small business is now successful. The choice becomes continue to grow or maintain the success created until this point.

Having systems in place is a vital difference between Survival and Success stages. At the success stage, the owner is no longer doing the bulk of the work. The reason for waning the owner from major tasks is for continued growth as well as the opportunity to sell. And, everyone deserves a vacation once in a while.

Stage 4: Take-Off (Growth)
In this stage, the small business now requires increase in capital in order to accommodate the higher volumes of customers. This means more staff, more equipment and materials and better processes. At this stage, a small business has the chance to be a big company. However, if mismanaged, the small business could fail as a result of poor cost management of expenses over revenue.

Stage 5: Resource Maturity
A small business reaches maturity once it is ready for diversification. The company is now big and runs at a slower pace. This does not mean that a mature company will be unable to react to market changes. Hence, the need for diversification and finding other, related products and markets to tap and to expand the existing customer base beyond the reaches of the original business model. This will keep the company in flux, as parts of the company will now be in varying stages of growth.

Where is your small business?
Sometimes it feels as if your small business is constantly ebbing and flowing through all of these stages at one time or another. Look at your business holistically and determine in which stage your business is. If you are unsure where your business is, the mantra should always be customers and how to keep them happy and returning. After all, they are the ones that will be visiting your website and buying from your online store.

  • Oke Dennis

    Worth reading