Identify Your Place in the 4 Stages of Business Growth
Every business, whether it’s big or small, goes through the 4 stages of business growth:
- Renewal or decline
Each of the stages of the business life cycle, also known as maturity phases, growth phases or growth stages, have unique challenges and your business will need to find creative approaches to overcome them.
By learning about each of the growth stages, you can find out where your small business currently is in the cycle. This can help you plan for the future and create an appropriate business growth strategy.
Stage 1: Startup Business
Many people consider the first stage of a business’ life cycle to be the riskiest. In fact, only about 80% of startups with employees survive the first year, according to the U.S. Bureau of Labor Statistics.1 There are many reasons why businesses fail. Not making necessary changes to your business model can be one.
In the startup phase, you’re spending most of your time and effort to bring your business idea to life. You’re likely trying to get the word out about your product or service, while balancing other key responsibilities. As a startup, it’s not uncommon for you to wear many different hats to get your business up and running.
Al take your business to the next level, you need to make sure your company is efficient and has a system in place to allow for growth. This means:
- Hiring employees
- Knowing how to delegate tasks
- Establishing a creative culture
As you move from the startup phase and into the growing stage, prepare to take calculated risks. Learn from your successes and failures, and use that knowledge to pursue new opportunities for growth.
Stage 2: Business Growth
Your business plan is paying off. Consumers know about your product or service. Your revenue is increasing. Your business has less turnover. And your market share and customer base are growing. After being in business for a few years, your company is going through rapid growth.
While it’s an exciting time for your business, managing for growth is important. Staying focused on your business goals in this stage can be challenging. It’s a good idea to:
- Set goals that let you grow with purpose, so you’re using your resources in the most effective way.
- Maintain capital, because without it, you won’t be able to meet financial obligations.
- Create realistic, accurate forecasts to help drive your goals and stay on track.
Make sure you hire employees to help run your business and keep up with customer demand. The growth stage may also mean it’s time for you to manage business relationships with vendors and suppliers. Without a hard-working team, it’ll be difficult to accelerate your business growth.
Stage 3: Business Maturity
When you reach this stage, you likely feel safe and secure. It’s a different feeling than the first two stages in the business life cycle. The startup phase was risky, because you didn’t have an established product or service. And in the growth stage, you had to manage how your business grew so it still accomplished its goals.
Mature businesses have more brand awareness with consumers, and a strong presence in their target market. It’s unlikely a startup or business with less experience can take over your company’s position.
So, with a strong cash flow and the ability to quickly address issues that may come up, what makes the maturity stage challenging? One of the biggest risks is staying stagnant.
As a mature business, you shouldn’t just sit still. Your company has a chance to expand. You can increase your market penetration to ensure a larger percentage of customers are using your product or service. Or you may want to develop new products to tap into a new market. For some business owners, the maturity stage may bring thoughts to sell, merge or buy another company to expand.
Stage 4: Business Renewal or Decline
While every business wants to avoid a decline, it’s bound to happen to almost everyone. This can happen for a variety of reasons, such as:
- Not pursuing opportunities to expand during the maturity stage
- Changes to the industry affecting customer demand
- Competing businesses having better products or services
- Not reacting to technology updates or advances
It may be hard to tell if your business is in a decline. You may feel like your customers are increasing, and you’re meeting their growing demand. But, if your business has seen several years of dropped revenue, you’re in a decline. That’s why it’s important to regularly look at your finances.
When your business is in this stage of the life cycle, you have two choices: sell or reinvest. If you decide to sell, you’ll want to work with the right people to make sure you’re following state and federal finance laws.
Reinvesting in your company can result in its renewal. Ideally, you want to start this process before your business is in a decline. For example, if you notice there’s a change in the industry, modify your strategy. If your business is already in a decline and you decide to reinvest, you’ll want to quickly find out how you can address the new needs of your target market.
Whichever stage of business growth you’re in, knowing where you are can help with your company’s strategic planning and long-term success. Whether you’re a new or mature business, don’t get too comfortable. Find opportunities to change and make your business more valuable.