To Grow a Company, Entrepreneurs Must Take the Business Through Several Common Developmental Stages
Whether you’re a small business owner who runs a local restaurant or you’re the CEO of a tech startup, your company will go through the same five stages of business growth, according to the Harvard Business Review. Understanding the five basic growth phases—before embarking on a business idea or while in the earliest maturity stage—can help company founders and owners develop an effective business plan that sets the company up for success.
Grow Your Business Through the 5 Stages
The Harvard Business Review established the five major stages through which you can grow a business:
- Resource Maturity
Each stage is characterized by size, diversity, complexity, managerial style, organizational structure, formal systems, strategic goals and owner involvement.
The First 2 Stages of Growth and Development: Existence and Survival
During the first two stages of business growth and development, your company is just starting out. You’re likely facing challenges, such as obtaining customers and providing existing products or services.
During the “existence” stage, business owners determine target audiences, find new markets, ensure product or service delivery is available on time, and more. It’s also a time to ensure the company has enough funds to cover the demands of this early stage. The main strategy right now is focusing on keeping the business alive.
To meet such cash flow demands, many business owners look to funding. This can include small business loans, commercial real estate loans, business loans or conventional construction loans. Extensia Financial, its sister company LendThrive and its partner companies provide the aforementioned loans ranging in size from $2 million to $15 million for businesses in all stages.
Once a business has secured the necessary funding and successfully obtained a customer base, it may enter stage two. The second phase, known as “survival,” proves the business can be a prosperous endeavor. The issues the company faces include generating cash to break even, covering repair costs and staying in business.
The Last 3 Company Growth Stages: Success, Take-Off and Resource Maturity
The third stage, which is labeled “success,” leaves owners with one major decision-making question: Should they expand the company or remain stable?
Companies seeking expansion and growth move into the fourth stage, which is known as “take-off.” In this phase, business owners must create a business development plan outlining how the company will rapidly grow and how they’ll finance that growth. The two major areas of focus include 1. Delegation (Will the owner delegate responsibilities?), and 2. Cash (Is there enough cash flow to meet growing demand?)
Businesses that reach the fifth—and final—growth phase experience rapid growth and typically have optimal management systems in place. The main concerns facing such successful companies include consolidating and controlling financial gains and retaining an entrepreneurial spirit.
Management Factors Influencing Business Growth Strategies
There are several management factors that influence business growth strategies. Understanding and planning for these factors will aid in your company’s growth and success.
- Financial Resources
- Personnel Resources
- System Resources
- Business Resources
- Owner’s Goals
- Owner’s Operational Abilities
- Owner’s Management Style
- Owner’s Strategy
The Benefits of Understanding the Stages of Business Growth
There are four major benefits of understanding the stages of business growth. They include:
- Easily assessing current challenges
- Anticipating current requirements
- Providing a basis for evaluating the impact of government regulations
- Assisting consultants and accountants in determining financial problems and solutions
Tailoring Your Business Development Strategy
Knowing these five growth stages can help you tailor your business development strategy. The stages can inform all decisions and prepare you for the challenges ahead.
About Extensia Financial
Established in 1998 and headquartered in Simi Valley, CA, Extensia Financial offers competitive and collaborative commercial real estate loans. We partner with credit unions and connect them to investors across the United States. Additionally, we uniquely support and guide our partners through the entire full lifecycle of loans. Extensia Financial is a proud member of the AVANA Family of Companies.