How to plan for and monitor your small business growth stages
Much like a child, the growth of a business takes on a relatively predictable pattern of development. And just like a child going through their terrible twos or fearsome fours, each stage of business growth embodies its own unique challenges. Finally, just as a mother must transition from breast-feeding to bottles and from diapers to potty training, businesses must be prepared to transition from one norm to the next and tackle new challenges head-on.
It’s a Boy (or Girl)!
The first stage of the business life cycle is the emergence of a thought or idea. This is commonly referred to as the seed stage. This is where a new business is born. This stage is arguably the most exciting of them all because it transforms a thought into a vision. The potential opportunity laid out in front of you becomes real and the roadmap to get there begins to materialize.
The First Steps
Up next is the start-up stage. At this point, the business has become a legal entity, acquired some customers and a few employees and has started generating some revenue. Feet are on the ground but most likely profit margins are still in the negative. So just like a toddler learning to walk, businesses in the startup stage can heed warning from the 180 degree shift from laughter to tears that inevitably accompanies a fall.
When a child learns how to walk, even if they have the most confident and steady mindset in the world, the muscles in their legs are far behind. No matter how mentally advanced or ready they think they are, we have all seen what happens when a child tries taking off before they are physically ready. Even if the child knows exactly where they want to go, taking too big of a leap and trying to land on a leg that is still limber and wobbly will actually land them flat on their face.
In a similar way, any business in the startup stage needs to learn how to walk before they can run. Although rapid growth sounds like a dream, this has been the root cause of many startups’ ultimate failure.
Adolescence – The Growth Spurt
The startup stage segues into the growth stage and the business now has legs (i.e. profits) that are strong enough to support its aspirations. The biggest challenge during this phase is the growing pains that accompany adolescence. Increased customers and sales require a more formal operation and an ever-changing business strategy to match the growing demand. As the business moves toward the maturation phase, it becomes increasingly more difficult to maintain comprehensive oversight on a 24/7/365 basis. Because of this, one of the most critical drivers of success in this stage is willingness to delegate responsibility across the business and/or outsource certain operational functions. Just like parents need to let go and trust their teenagers to make good choices, business owners need to relinquish a certain level of control.
All Grown Up
The final stage of growth is maturation. The awkward stages are in the past. The future is full of potential but also responsibility. The scariest part of the maturity stage is what comes next in the cycle: the decline/exit stage. Fortunately, the beauty of the business growth cycle (as opposed to human development) is that the stability enjoyed during the maturity stage presents an opportunity to return to another start-up or growth stage. Whether it is in the form of a new business strategy or if it means an acquisition or merger, businesses that take advantage of calm waters by taking the initiative to plan new journeys are the ones that build enough momentum to sail right by the decline/exit stage of the cycle.
The Destination is the Journey
The most important thing to remember when going through each stage of the business growth cycle is to make the most of every moment. In the words of Andy Rooney: “everyone wants to live on top of the mountain, but all the happiness and growth occurs while you’re climbing it.”
Angie Picardo is a staff writer for NerdWallet. Her mission is to help consumers stay financially savvy, and save some money with high CD rates.