In the May 1983 issue of the Harvard Business Review, Neil C. Churchill and Virginia L. Lewis laid out the 5 stages of small business growth in meticulous detail.
Here we are, some 35 years later, and it’s still as relevant as ever. And reading it again recently has inspired us to develop our own 5 stages, based on our own observations and experiences helping clients scale from solo startups to established businesses.
In this post, we’ll guide you through the stages – from idea to exit – to give you an indication of what lies in store should you decide to grow your own business.
Stage One: The Big Idea
Every business starts with an idea. A little seed that might sprout into something bigger. But before you start making things official by registering a company or scoping out office space, pump the brakes and consider the viability of your idea.
Speak to friends, family, colleagues, professional advisors, specialists, potential customers; really, anyone who’ll listen to your pitch. Gauge their response and take on board their advice and opinions.
Of course, there’s a great deal more to running a successful business than simply hearing you have a good idea. You’ll need to be capable of taking big and important decisions, quickly, and if the market isn’t ready for your product or service, it could be doomed to fail regardless. And then there’s the financial aspect – can you afford to launch your startup? Or will you need external funding?
At the end of the day, you need to decide if your idea is feasible, if you have the stomach for it, and if you have the funds to make it happen. Talk about some deep and intense soul-searching!
Stage Two: The Startup
At this point, you should be satisfied that you have a viable business idea. Now’s the time to make things official and pull the trigger on launching your startup. It is not, however, the time to be rigid and stubborn. You should be prepared to be flexible in your approach, ready to adapt your product or service based on initial customer feedback or pivot entirely if the market dictates. It’s all about nailing a minimum viable product (MVP).
The startup stage is strewn with risks, and it’s little surprise so many fail to make it to five years. You can mitigate those risks by working with professional advisors experienced in guiding startups through the early, choppy waters.
Stage Three: The Scale-up
At this stage, your business should be up-and-running relatively smoothly. And by that, we mean it should be consistently generating income, enjoying a steady and improving cash flow, and winning new customers. You should also have one eye on improving profits and managing expenses.
It can be all too easy to slip into autopilot here, what with everything seemingly ticking over nicely. But if you have designs on growing further, you need to step up as the leader of your business and take on a raft of new responsibilities and challenges.
For example, you’ll have to:
- Monitor the market and fend off competitors;
- Manage increasing levels of revenue;
- Minimise customer turnover;
- Minimise staff turnover;
- Negotiate with suppliers;
- And much more.
Of course, you can’t do it all, so as part of the scale-up stage, you need to hire the right people to complement your own skills, and who are capable of taking work off your plate with little-to-no management. This stage should be about transition as a business leader; from the day-to-day, hands-on involvement of the first two stages, to focusing more on the bigger picture.
Stage Four: The Expansion
By reaching stage four, your business should be running itself. You should have very little to do with the minutiae of it all, delegating to a senior management team you trust to carry out your vision.
With an established presence in your market, it’s now a good time to think about expanding beyond your borders. After all, if you’re not growing, you’re simply standing still. And that’s when complacency can creep in.
Look for opportunities to introduce your product or service to a new audience, or to build on your initial success with a new offering altogether.
But remember, this can be equally as risky as not pursuing growth. Slow and steady growth should always be prioritised over rushing blindly into a new market. Otherwise, you could crash head first into “the wall”.
Stage Five: The Big Decision
The final stage, and another big question: Do you stay, or do you go?
At this point, your business should be reporting healthy profits with cash in the bank to fund further expansion. You now have a decision to make – do you continue to lead the business in an attempt to maintain and ultimately improve this rate of growth? Or do you exit the business with a smile on your face and a swollen bank account?
Only you will know for sure what’s right for you and your circumstances, but it’s a good idea to start the exit planning process when you reach this stage, regardless of your intentions. That way you will have a clear path to either selling up and moving on or leaving your business in a safe pair of hands as you take a back seat.
Plan and Accelerate Business Growth
Just as Churchill and Lewis concluded all those years ago, growing a business isn’t easy. But it can be challenging, and fun. And with careful planning, expert advice, and the introduction of the right systems at the right times, you can effectively work your way through these five stages to build something special.
If you’re ready to step things up, our experienced team is on hand to help you Accelerate Growth.
Contact us today to get started.