5 Stages of Small Business Growth

Small Business

5 Stages of Small Business Growth

Every business, large and small, experiences similar stages of growth. For small businesses, these stages can be particularly significant. Getting a startup off the ground is hard work.

By understanding the stages of business growth, you can find out where your business currently resides and be better prepared to shepherd it through the coming phases of maturity.

Stage 1: Opening the Doors

It takes passion, courage, and an entrepreneurial spirit to launch a small business. Perhaps you have a product or a service that about and want to turn that into a money-making enterprise. Now what? You must face the biggest challenges of any new business:

  1. Finding customers
  2. Providing your product or service to those customers

This can be difficult sometimes because with most small businesses, it is just one, perhaps two people who are doing everything: building the product/service, delivering that product/service, marketing, selling, managing customer expectations – all in addition to managing the business itself: finances, licensing, hiring people, managing people, managing property, payroll etc.

Having passion, courage and an entrepreneurial spirit is not enough. Your skills are put to the test. And if you are like most businesses, money is tight, working long days and weekends is a fact of life and having a social/personal life is out of the question. You are the company, and the company is you. Processes and organizing are minimal to nonexistent. The strategy is just to keep the company alive.

Stage 2: Survival

Once you get to Stage 2, your business has demonstrated it has enough customers and keeps them sufficiently happy that they stay/return. Now it becomes an issue of balancing expenses versus revenue. How do you generate the most sales possible while efficiently managing the cost of doing business?

Perhaps your staff has grown; however, communication must be even more refined. Processes are still minimal; however, your planning must improve to ensure your survival. And you are still the company, and the company is still you.

This stage can go on for a very long time too: Barely making enough revenue to pay the bills. Businesses have to strive to get over the hump to the next stage. Some die trying.

Stage 3: Realization

You have operating procedures in place. You are retaining customers and attracting new ones. And the margins on your products/services are consistently healthy.

The question for you now is do you work to simply keep the company stable and profitable, or do you push further growth by investing more and risk the company you have built?

This realization and stability also allow you the opportunity to pull back a bit from the decision-by-decision operations; however, you run the risk that the people you have hired will make decisions that are damaging to the business. Communication, delegation, and accountability become paramount.

Stage 4: Lift-Off

When you get to Stage 4, the key issues to solve are how to experience rapid growth and how to finance that growth.

It is important here to look at the managerial effectiveness of your organization. You won’t have the time here to manage day-to-day operations and decision making. So, do you have the managers and the frontline workers to do what is required of them? Have you built controls on performance to ensure it?

And does your company have the financial disciplines and controls to effectively manage your growth?

Finally, have you built the operational and strategic planning practices and management competency to be able to effectively build to your vision?

Stage 5: Maturity

By Stage 5, your business will need to be able to have the flexibility and entrepreneurial spirit it had when the company was small and the processes and professional management to carry the company into the future.

Budgeting, strategic planning, and costing systems, are a must. Systems must be well established and reliable.

The company now has advantages of size, financial resources, and managerial talent; however, must also have business models, growth initiatives, performance monitoring and management and a culture developed to continue on the right track.


Along the way through these 5 Stages of Business Growth, you as the owner need to change and grow. Our next article will explore the skills small business owners need. Watch for it!

At True North Skills, our focus is to help small businesses build and strengthen their success. Check out our Small Business page, call us at 425.835.2124 or schedule an exploratory call to discuss your needs, schedule a Small-Business Analysis or learn how our Business Coaching can make an impact on your ability to make better decisions for your business.

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