Stages of Growth for Small Businesses

Nearly all major corporations started out as small businesses. As you navigate your enterprise, you will go through several stages of growth. Each stage has its own challenges and opportunities. 

Startup Stage

Also known as the seed stage, startup businesses are the first iteration of a business idea. As the founder, you may handle all operations or delegate a few tasks to a few employees or contractors. Founders usually manage their subordinates directly and are involved in many of the key operations of the business.

At this stage, you are determining if your business model is viable. This includes your ability to capture enough market share to generate profit and increase sales on proven products or services. 

The startup stage is often cash-intensive. Capital may come from outside investors, but generally, founders invest their own money. Businesses that do not earn sufficient revenue are at risk of closing when investment capital dries up. 9 out of 10 new businesses fail in the first stage. 

However, startups that gain a foothold in the market and generate solid sales can advance to the next stage.

Survival Stage

The survival stage is focused primarily on cash flow and profit. Sales figures show that there is a customer base for your products, but you will need to figure out if your revenue can adequately cover your current and projected costs.

Any changes to your business model could greatly impact your outcome. For example, if your supplier changes their pricing or if the economic landscape affecting your customers changes, you may have difficulty pivoting.

While this may sound precarious, many small businesses operate successfully at the survival stage for long periods of time. This is especially likely for founders who want operations to remain under their control until they close the business. 

Taking a surviving company to the next level requires investments in marketing, branding, and customer acquisition. Increasing your firm’s profile and expanding your consumer base can mitigate risks and keep revenue stable over the long term.  

Success Stage

The success stage is considered a make-or-break point for most companies. You’ve determined and proved there is demand for your service or product, and sales can sufficiently fund expansion. 

Business owners at this stage take one of two pathways. Many double down on proven strategies and aim to maintain stability. Others may invest significantly in growth to take advantage of their market position. 

Both decisions can lead to profitable, established companies. In order to maintain or advance from the success stage, you must deeply analyze your business. Review and standardize work processes to ensure you can maintain quality as you expand. 

You should also look for new market opportunities and strategies to widen your profit margins. Businesses at the success stage also require long-term planning. You may not want or be able to run the business forever. It is wise to invest in resources that can show you how to exit plan strategically. 

Rapid Growth Stage

This stage is similar to the startup stage in that the focus shifts to internal investment. The main difference is that capital goes towards funding new products and entering new markets. Companies of this size can sell stock to generate funding.

The biggest threats to businesses at this stage are broad economic changes and poor leadership. Companies may invest too heavily into growth, leading to severe shockwaves if customer demand suddenly drops. On the other hand, ineffective leaders may prevent the company from responding sufficiently to market changes. 

It is not uncommon for businesses to seek out executives with expansion experience to take the helm. As the founder, you may make the decision to step aside or appoint new management to navigate this phase.

Maturation Stage

Businesses at this stage have grown as large as they possibly can. They dominate the market share and implement a rigid hierarchical management structure. Companies may have acquired smaller firms or merged with their competitors. 

As the founder, you may remain involved with business decisions at the executive level, or be removed from operations altogether.

Mature businesses can operate for many years at this stage. However, many decline over time due to sweeping industry changes. Longevity at this stage relies on the company’s ability to pursue new, enterprising opportunities.