In this article, I identify a company’s Growth Stages and discuss the common issues, success factors and problems for each particular stage. As a Company grows and matures, it is important the organisation understands how to plan effectively for new challenges, issues, markets and problems. A good Business Plan will identify issues a company encounters when flourishing, and how to overcome these challenges and obstacles in a Strategic Plan. Here is a checklist of the growth stages companies experience and their inherent issues and challenges.
Small Business Growth Stages – The Characteristics and Challenges
– Basic Existence Stage
- Main Issues and Characteristics
- bringing Customers
- Delivering the product and service
- workable Services
- Expand from key customers to broader sales base
- Have enough Cash on Hand to cover Cash Flow demands
- proprietor performs all Management functions
- Often a lack of Planning & Systems
- Business just trying to continue viable
- Have yet to stabilize production or product quality
- Trying to gain sufficient customer acceptance
- Business has strong demand on the Owner’s time, cash and get-up-and-go
– Survival Mode Stage
- Main Issues and Characteristics
- Business demonstrates viability as business entity
- Satisfies a base of customers
- Focus shifts from existence to managing Cash Flow
- Generate enough Cash Flow to break even, stay in business and finance growth
- Focus on Market Niche exploitation
- Simple organization and the owner begins to delegate to a manger. However, strong direction and control still rests with the Owner.
- Planning concentrates on Cash Flow Forecasting
- Systems development & execution in early stages.
– Obtaining Success Stage
- Main Issues and Characteristics
- Exploits its Market Niche
- Obtain Strategic goals
- Expansions is important but stableness, control and profitability are key as well
- Owner’s Options:
- Expand and Grow the business
- exert Stability as a means of support to the owner
- Owner considers disengagement from the business
- Market penetration
- Competitive Edge
- Functional Management & Owner Delegation
- Management & Key Employee Competence
- Generating sufficient Cash Flow
- Planning for rough patches
- Professional Staff: i.e. Controller, CFO, CEO
- Production/ Service, Marketing, Strategic and fiscal Systems established
- Operational Budget Management
- Growth Strategy Options
- Consolidate Company, develop efficiencies and marshal resources
- Use Retained Earnings and Cash Flow, leveraged with Finance, to grow the Company
- Cash Flow Management & Profitability are key concerns to finance growth goals
- Develop Key people and management
- Strong Operational and Strategic Planning
- Growth requires the owner’s deep involvement (verses disengagement)
– Rapid Growth Stage
- Main Issues and Characteristics
- Committed to a Growth Strategy
- Concerned with adequately financial backing the growth stage
- Need good ownership delegation to improve managerial effectiveness.
- Enterprise develops complexity. Performance Control Systems are important
- Established Expense and Budget Controls to maintain strong Cash Flow.
- Profitability Planning Systems are critically important
- Effective Financial Planning, Forecasting, Modeling and Strategy
- Very skilled, experienced and competent Management Structure
- Company systems are tested, adapted and exceedingly delegated, but there is strong Strategic Leadership from Top Management
- Capacity to become a big business
- Strong Potential for Business Sale Premium
- Effective Delegation and reliance on talented Managers & Key Employees are keys to success
- Founding Entrepreneur(s) can opt out of business and have a more advisory role
– Maturity Stage
- Main Issues and Characteristics
- Consolidate and Control profits
- Retain advantage of proportional small size, nimbleness and flexibility
- Quick market change response time
- Still retains the entrepreneurial spirit
- Growth causes inefficiencies so must ensure the Management Structure continues to grow and evolve. Strong Managerial Talent
- Strong Budget, Operational and Strategic Planning capability and focus
- MBO System (Management by Objectives)
- Cost Systems
- Extensive & well developed company systems and Management Structure
- Strong Financial Resources
- Convert Entrepreneurial spirit to a Formidable Market aim
- Strong Market Niches and Competitive Edge
- Exceptional Risk Management
- Profitability boosted by successful Innovation
- Strength in Market Branding and Recognition
- Maintain Competitive Edge by anticipating Market changes and adapting better and faster than competitors
As experienced Business Consultants, I work with companies in a wide spectrum of growth and age, and I find these growth stage characteristics and issues are pretty close. While not an absolute, it gives a good checklist to review and keep in mind when analyzing your business, particularly when developing a SWOT Analysis in your Strategic Planning. It also lets you know as a business owner where your business should be, and if it is on the negative side of things, then you know where you need work. If you are doing better than indicated for your stage you are ahead of the curve and pat yourself on the back. But reckon, business is fluid and can change at a moment’s notice- keep working hard to stay ahead and use these growth issues and characteristics as a forecasting tool! Knowing what challenges lay ahead in your company’s growth is an excellent strategic planning tool!
About this Article’s Writer
Frank Goley is a business consultant, business turnaround consultant and business plan consultant for ABC Business Consulting. He has been helping companies to succeed for many years. Frank wrote his first business plan over twenty years ago. He is an expert in developing business plans, marketing plans, funding plans, strategic plans, turnaround plans, web marketing strategies, and project specific business plans. Frank is also a business coach and a web development, web marketing and web seo consultant. Frank is the author of a business plan book, The Comprehensive Business Plan Workbook – A Step by Step Guide to Effective Business Planning, and he has over 130 published articles on business success strategies. He also writes the Business Success Strategies Blog.
