As introduced in my previous posting, The Search for Growth Continues, I concluded that a 5 stage model for your small business growth, much like the one described by Neil C. Churchill and Virginia L. Lewis in their Harvard Business Review whitepaper entitled The Five Stages of Business Growth, would be the easiest for most small business owners to understand. The following 5 stages form the foundation DE, Inc. will base all our discussions small business growth discussions going forward:
- Rapid Growth
The only change I made to the Churchill & Lewis stages was renaming stage 4 to Rapid Growth. I believe this title better personifies what is really happening within this stage rather than the “Take-off” title given by Churchill & Lewis. Let’s take a brief look at what you should generally expect in each stage.
Goal: Get monthly cash flow to the point of consistent breakeven.
Some might think this is the startup stage of a company. But in fact, there are many businesses that have existed for years and still cannot breakeven month to month. Businesses at this stage need better owner maturity, company systems, or both to create consistent monthly cash flow.
Goal: Consistently achieve owner established profit requirements.
The shift at this stage is to profitability. You have invested time and money into your business at this stage. Now you need to begin getting a return on investment (ROI). That means going beyond just making enough to keep the doors open. You must begin creating systems in your business that consistently generate profits. Your level of business knowledge needs to increase or the business will stagnate.
Goal: One of two possible choices exists. It is based on the owner’s desire – grow or just sustain the business’ success created to this point.
This is a key turning point for the business. It is where we find many of our clients mired between success and survival. Many owners are in survival mode but believe they’ve created success. The business consistently generates profits, but the OWNER does it, not systems which is a critical difference survival and success. In a success stage, the business owner can disengage from the business and it will continue consistently generating a profit. This ability is what gives a business real value. Without it the owner has just created a job for themselves. It will difficult, if not impossible, for them to sell their business in this condition.
Goal: To effectively manage finances to assure growth does not outpace the financial resources.
This stage is based on an owner’s goal to grow the business set in the success stage. In the rapid growth stage large sums of capital are needed as the business takes on more and more customers requiring more equipment and materials. Also, the number of employees to service these new customers seems ever expanding. Properly executed it is in this stage that a small business becomes big company. If not managed properly, this stage can be the death of a company.
Goal: To diversify into other markets or find related products to sell to the exiting customer base.
The characteristics of this stage are big and lethargic. The company has again reached a plateau. It has saturated its market or outgrown its management teams’ ability to manage its growth. Companies in this stage often cannot react to major shifts in the market and die as a result. But, well managed companies in this stage begin to diversify in ways that allow the company to continue to grow. They accomplish this by moving into other markets or finding related products for their exiting customer base. These other initiatives are really other entities in earlier stages in the growth cycle. So you see different parts of the company and different stages of the growth model.
At What Stage is Your Small Business Growth?
So, based on what you’ve read here at what stage are you and your small business growth? Notice I ask at what stage are YOU and your business? This is because as an owner your small business’ growth is directly tied to your ability to grow the business! I have said this countless times in past posts and based everything DE, Inc does for its clients on this basic premise. Churchill & Lewis’ paper confirms it based on statistical facts.
It’s time to take a hard look in the mirror and ask why is your business stuck. If you are serious about growing your business maybe you need to grow yourself first? Remember, the success formula – personal growth, business leadership, life success. Help is just a click away!!!
What has been your experience? At what stage of growth is your company? Why do you believe it is at this stage? How do you plan to move forward?