The Four Stages of Business Growth

No two businesses are exactly alike, and that means the journey of every business will be different. But no matter the type of business or industry, there are four common stages of growth in the business life cycle, each with its own set of challenges.

The more prepared you are in advance for each stage of growth and the challenges that might come along with it, the greater your chances are for a successful business in the long run.

Let’s dive right in and take a look at each of these growth stages to help you be better prepared for the potential challenges.

Four Stages of Business Growth:

  1. Startup
  2. Ramp-up
  3. Expansion/Maintenance
  4. Maturity

 

1. Startup

 

The startup phase is a struggle for most businesses. Sure, being part of a startup can be exciting – but, easy? Not so much. It’s no secret that 80% of new businesses fail during this stage — and when you’re in the thick of it, it’s not hard to understand why.

It simply won’t matter how good your business idea is if you can’t manage the array of operational and financial challenges of launching a new business.

At this stage of growth, you’re likely bootstrapping your business. Bootstrapping is when you’re funding a business with personal finances or very little capital. This means resources are extremely limited, so there’s a significant risk of burnout.

Common Challenges:

  • Limited resources (such as money, time, and staff)
  • Implementing a business plan
  • Poor cash flow management
  • Pricing products or services too high or too low
  • Preparing a realistic budget
  • Lack of processes and systems

Suggestions:

  • Put as much energy as possible into acquiring clients.
  • Develop your position in the market.
  • Manage your cash flow carefully.

2. Ramp-up

 

As your business matures to the ramp-up stage, it’s picking up more momentum – you’ve got a customer base and money coming in, and you’re starting to build your team of employees and/or contractors. Yee-haw!

But, wait. This stage can get messy really quickly when the business operations can’t keep up with the new business flowing in.

Also, even if your business is earning more revenue at this stage, you might not be making a profit yet due to increased expenses. For this reason, there could still be some financial strain until you’re able to balance things out.

Common Challenges:

  • Insufficient cash flow
  • Operations overwhelmed
  • Supply isn’t keeping up with demand
  • Building to support growth today and in the future

Suggestions:

  • Delegate responsibility and gather additional resources as soon as possible – this might mean outsourcing or even bartering with other businesses.
  • Having a solid budget and managing your cash flow are incredibly important.

If your business is stuck in a rut, be sure to check out: 10 Common Reasons Why Businesses Fail to Grow.

3. Expansion or Maintenance

 

This is the stage when your hard work seems to be paying off, and you’re faced with the option to either expand and grow your business or maintain it at this level for the long haul.

At this stage, you’ve got your systems and processes nailed down, you’ve secured your market share, and you might even be entertaining plans to sell or scale the business. Having accurate, up-to-date financial records will be especially important at this stage since you could be sharing this data with potential investors, shareholders, or other interested parties.

Expansion is, of course, optional. Otherwise, if you’re happy with where your business is currently operating, you can maintain it at this level indefinitely. No matter if you plan to expand or maintain your business, you’re likely to face some significant operational challenges at this stage.

Common Challenges:

  • Operational inefficiencies
  • Hiring, training, and managing staff
  • Poor planning and execution
  • Creating (and actually sticking to) a budget
  • Developing a long-term growth strategy

Suggestions:

  • Now is the time to manage your inner control freak and learn when to let go.
  • Hire more help or outsource some responsibilities, and then trust those people to handle the details.
  • Make sure you have a clear picture of your finances and outline a reliable budget to guide you, as this will inform your decisions about the future.

4. Maturity

 

Once the shiny newness of your business has worn off a bit, it will reach the final stage of growth, or the maturity stage, which is when there’s much less rapid growth and change to contend with. That said, this isn’t a time to just kick back and put the business on auto-pilot.

When you’re sustaining a mature business, you’re likely to face challenges related to having more employees, more expenses, and a lot less flexibility than in the early days. Complexities and inefficiencies in your operations can really bog down your business and prevent it from keeping up with competitors.

Common Challenges:

  • Keeping employees motivated (and happy!)
  • Greater operational challenges
  • Less agility (leading to slow, clunky processes)
  • Loss of momentum
  • Decreased sales due to failure to innovate

Suggestions:

  • Focus on boosting company culture and inspiring your employees.
  • Do a thorough review of your finances and identify any operational inefficiencies that could be hurting your bottom line. (Consider hiring an outsourced CFO to help with this.)
  • Streamline your processes as much as possible to keep everything running smoothly.

Which of these phases of growth is your business in? Can you relate to the challenges discussed here? We’d love to know your stories in the comments below!

Are you more of a visual learner? We now have an infographic that you can download here: Four Stages of Business Growth Infographic.

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