Understanding Different types of Business Growth Stages

At a time when entrepreneurship is encouraged, achieving business growth is a challenging task. In fact, it is essential to recognise the types of business growth stages to know the next steps you must take.

Knowing the types of business growth stages your company must go through to reach the top can prevent unexpected disasters. You have to know what these stages imply. Identify those that put the continuity of your business at risk and those that drive it to its full development.

This post explains the different business growth stages your company must go through to succeed. We also introduce you to the features that will guide your business on the right path.

The growth and evolution of a company should not be assumed as something natural. It is a process that should be encouraged and properly guided.

Business Growth Stages For Small, Medium and Large Companies

According to the article “The Five Types of Business Growth Stages” by Neil C. Churchill and Virginia L. Lewis for the Harvard Business Review, several researchers have also determined the different stages of business growth.

Let’s see in more detail what they are:

Existence

This is where most companies start. The main priority at this stage is to sell the products or services, to validate the market. At this time, types of business growth will come in the form of an increase in sales, as well as survival.

This stage is characterised by the fact that the founders or owners are in charge of the entire business operation, from the provision of the service or production of the product to marketing, administrative work, etc.

In this growth phase, we should know the types of business growth ideas related to the business model and our target market. It is common for the operation of the business to depend 100% on the owners. That is, if the owners are absent, everything stops.

In the business existence phase, you should focus on the following:

• Validate if the business model is viable and sustainable
• Consolidate the company’s products and services
• Get customers who are willing to pay for products or services
• Generate recurring and stable income for the company

Unfortunately, the mortality rate of companies in this stage is high. According to OECD figures, 31% of small businesses close in their first year of operation, and in the case of sole proprietorships, the rate exceeds 40%. Here types of business growth can be tricky, and it is important to have a solid business plan.

Survival

Types of business growth include the survival stage. In this stage, the company starts to have a stable income from its products or services and begins to have a team of employees.

When a company reaches this stage, there is no doubt that it is a viable business entity. It has enough satisfied clients with its products and services.

At this moment, a new element arises: the relationship between income and expenses must be favourable. The new goal is to be profitable. In this case, types of business growth ideas will be related to stabilising income and expanding the team. Formal planning will often be limited to ensuring cash flow. The focus will remain on survival, and the key player will remain the owner.

The survival stage has an approximate duration. Even many companies could not get out of it and remained there for a long time because they needed business growth ideas or strategies. They will generate a marginal return in that period, a product of the capital and time invested.

Success

In this phase, a dilemma is presented to the owners. They must decide whether to take advantage of the progress and move towards expansion or remain profitable and stable.

Let’s explore both alternatives:

SUCCESS-DISCONNECT STAGE 

In this context, the company is financially healthy. It has grown and has reached a significant size. In addition, it has gained a place in the market, guaranteeing attractive and constant economic income.

This could be a permanent situation as long as nothing changes significantly, such as the business environment or the efficiency of your business administration. Regarding management, emphasis should be placed on preventing money from escaping amid the boom.

In this scenario, the distancing of the owner stands out, who will seek to dedicate himself to other activities of his interest. Business management will remain in the hands of the different departments, which will be dedicated to maintaining the current situation.

SUCCESS-GROWTH STAGE

This alternative implies the consolidation of the company and the concentration of resources for growth. The owner becomes intimately involved in the process and uses the company’s liquidity and debt capacity.

Everything assumes the risk of financing the growth of the organisation. Systems are coupled: strategic planning and personnel management are put under a futuristic approach.

Take Off

This phase involves approaches that are key to advancing to the next level. Some of them are:

• The delegation of authority by the owner to managers trained to properly manage your business’s rapid growth. This will give a wide margin for free decision-making.
• Sufficient availability of the necessary funds to cover the expenditures required in the growth process.
• If the owner can withstand the high debt-to-equity ratio, he should refrain from harming the growth process through impatience or bad investments.

At this point, the organisation decentralises. Systems have become more extensive and specialised. Operational and strategic planning occurs at the hands of some managers in particular.

However, the presence of the owner continues to predominate. In short, this is a crucial stage in the life of any organisation. If the challenges it poses are overcome, the company will be on its way to achieving greatness.  

In the take-off stage, it is necessary for the owner to delegate authority and for the company to decentralise management.

Resource Maturity

In this phase, the owner is quite distanced from the operational and managerial processes. This is the point every entrepreneur wants to get to. Why? Because it means that the company has added important achievements:

1. It has a large size.
2. It has a lot of financial resources.
3. You have valuable managerial talent.

However, there are still challenges to overcome. Maintaining and controlling the gains made during rapid business growth is necessary. It is also essential to be flexible and have a great entrepreneurial spirit.

The management force must have the ability to quickly and appropriately eliminate errors. It will have to go against the inefficiency derived from accelerated growth. It will also require the professionalisation of the company and the standardisation of its costs.

Conclusion

The types of business growth stages that reach resource maturity are the dream of every true entrepreneur. At Curiousowl, we know that the goal goes beyond what is strictly economic or financial.

Achieving it represents the materialisation of a vision that pursues transcendence through a significant contribution to society. 

Therefore, we like to accompany our clients to walk with firm steps towards putting that vision into action.