The 5 stages of small business growth

The 5 stages of small business growth

Business Finance, News

Whether it’s attempting to improve profitability, add staff or increase market share, every business is trying to grow. If you are trying to scale and finance your small business, understanding where it currently stands will help you create a strategy for moving it in the right direction. In today’s blog, we’ll be looking at the five stages of small business growth and how to manage each of them successfully.

Existence

Businesses in this stage have only just started, and their main strategy is to simply remain alive. They are often small organisations run by one or two proprietors and have minimal business systems in place. During this stage, businesses face challenges of customer acquisition and delivering the products and services they have been contracted for. Most companies do not survive this stage and are quickly closed after the start-up capital runs out.

Survival

Businesses that move to the survival stage are still small and tightly run organisations with minor business systems. However, they have enough customers and can keep them satisfied with their products and services. In this stage, their strategy shifts to:

  • Generating enough cash to recover expenses and cover the replacement of capital assets as they wear out.
  • Generating adequate cash flow to stay in business, earn an economic return on assets and labour, and grow to a sufficiently large size, depending on their industry.

Businesses in the second stage fail because they cannot maintain the cash flow they have created. Therefore, for your business to move on to the next stage, you should focus on developing enough cash flow to generate profit.

Success

Businesses in this stage have begun generating profit, and now, the owners must decide what to do with it. Most business owners either re-invest back into the company or fund personal or other business ventures. If you choose the former option, you must find resources (financial and staff) to sustain your business as it grows. If you choose the latter option, you should focus on sustainability and systems to maintain your profit margins.

Takeoff

Businesses in this stage are growing substantially, and if they’re not well managed, they could end up collapsing. Due to the complexity of the organisation, business owners must hire the right people and delegate responsibilities as soon as possible. To survive the takeoff stage, you must learn how to manage the growth you’re experiencing.

Resource maturity

Rapid growth doesn’t last forever, and for businesses entering the resource maturity stage, their growth has begun to slow down. They have sufficient resources and well-developed systems, and now their primary concern is to stabilise and streamline their operations for the future. In this final stage, you’ll also need to find new markets to grow into to keep the momentum going.

What stage is your business at?

Small business growth – where to find out more

Tower offers a full range of finance solutions – products and services aimed at business development and growth. Regardless of how much capital you need or how big you are as a company we can normally help. Our transaction size starts from as a little as £1,000.00 and we have arranged funding facilities for brand new starts ups with little to no trading history to those turning over millions of pounds. If you’d like to discuss your small business growth, please get in touch today. Or find out more about our small business finance options on our website.

Image by: Tumisu via Pixabay

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