What is Your Small Business Growth Stage?
As introduced in my previous posting, The Search for Growth Continues, I concluded that a 5 business growth stage model was best. It seems to be the most common approach and statistical research supported it too. The following 5 business growth stages form the basis of DE, Inc. business growth model for all our discussions going forward:
- Rapid Growth
Let’s take a brief look at what you should generally expect in each business growth stage.
Goal: Get monthly cash flow to the point of consistent breakeven.
You might think that the foundation business growth stage is the same as the startup stage of a company. But in fact, there are many businesses that have existed for years and still cannot break even month to month.
Businesses in the foundation stage need better owner leadership and management that is focused on creating consistent monthly cash flow. In a later section, you’ll learn about strategies to help you get out of the foundation stage and move on to making real profits.
Goal: Consistently achieve owner-established profit requirement.
The shift at this business growth stage is to move from breaking even every month to profitability. As an owner, you have invested time, money, and hard work into your business. Now that you are breaking even, you need to begin getting a return on investment (ROI).
This means going beyond just making enough to keep the doors open. You must begin expanding the systems created in the foundation stage to consistently meet a profit requirement you have set for your business. Notice it’s a profit requirement and not a goal. That’s because to become independent and financially free, there’s a certain amount of income that the business must generate for you.
Your level of business knowledge needs to increase, too, or your business will begin to stagnate. In a later section you’ll see why so many business owners get stuck here in the survival stage. It’s what I call “nowhere land.”
Goal Path A. Sustain the business’s success created to this point.
Goal Path B. Rapidly grow the business to a large corporation.
When you achieve the self-sustainability stage, your business consistently generates a profit without you, and you have the independence and financial freedom to choose your next goal.
Sustaining success means you are choosing to let your business run itself in a way that keeps it the same size until you are ready to act on your business succession or exit plan. Rapidly growing means you are choosing to grow your business into a large corporation with the help of an executive team.
But beware: self-sustainability is where many owners get mired between self-sustainability and survival. In fact, many owners think they are in self-sustainability when they are actually still in survival. So how do you know if you are firmly in self-sustainability? Take the self-sustainability litmus test.
Litmus test: Does the business consistently generate profit without owner intervention?
If your answer is “Yes,” then your business is self-sustainable and has real value because it is running itself. If your answer is “No,” then your business is stuck in survival because it relies on you, the owner, to consistently generate profit. And being stuck in survival has consequences: you still have a job; and it will be difficult, if not impossible to do what you really want to do, whether it’s to stay the same size until you act on your succession or exit plan or to move to rapid growth.
Goal: Assure that growth does not outpace assets, resources, and systems.
This business growth stage is based on an owner’s decision in the self-sustainability stage to grow the business into a large corporation (as opposed to disengaging and keeping the business the same size).
Self-sabotage can be a problem in the rapid growth stage as many business owners started their business to get out of the corporate grind. Being part of the corporate grind means that you are a cog in a self-sustaining system because you are serving in some kind of operational role. It stands to reason that if you continue in an operational role in your business, then you’ve created your own corporate grind and your own place as a cog.
In the rapid growth stage, large sums of capital are needed as the business takes on more and more customers and therefore requires more people, equipment, and materials. The resources needed to service these new customers seems ever expanding. Properly executed, it is in this business growth stage that a small business becomes a big company. If not managed properly, this stage can be the death of a company. Yet many business owners resist and sabotage their rapid growth efforts by refusing to give up their operational roles. You can combat this problem using DE, Inc.’s Personal and Business Goal Assessment.
Goal: To diversify the company by offering related products or services to existing customers or by entering new markets.
Once it achieves rapid growth, a business moves into maturity. The all-too-typical characteristics of businesses in this business growth stage are that they are big and lethargic. The business has again reached a plateau. It has saturated its market or outgrown its management team’s ability to manage the business’s growth. Businesses in the maturity stage often cannot react to major shifts in the market and die as a result. But well managed businesses in this stage begin to diversify in ways that allow the company to continue to grow.
Work in the maturity stage is accomplished by moving into other markets or finding related products for the existing customer base. These other markets or products are really other entities in earlier stages of the growth model. So you may see different parts of the business begin working at different stages of the growth model.
For example, you might look at new product development as a strategy here. The new product is just another application of the foundation stage. So the growth model can operate at various levels within a business that offers several products or serves more than one market.
What is Your Company’s Business Growth Stage?
So, based on what you’ve read here at what business growth stage are you and your business? Notice I ask at what business growth stage are YOU and your business? This is because as an owner your small business’ growth is a directly reflection of your ability to grow the business!
I have said this countless times in past posts. Based on everything DE, Inc. does for its clients and the results we’ve gotten for them, this is our basic premise for everything we do. The Harvard Business Review papers confirm it. Now DE, Inc.’s approach is 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!!!
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 business growth stage is your company? Why do you believe it is at this stage? How do you plan to move forward? If you want to find out definitively where you and your business are along the growth cycle check out our Business Growth Assessment.