Readers of this article are usually business owners or senior managers who are interested in maximising the
efficiency and profitability of their companies. There was a great deal of interest in the study of the five stages of
small business growth. The ability to identify at which stage your company has reached and what the next step
should be is a complex and time-consuming task. Many business owners choose to call in a third party to assist
with this task.
If business owners do not recognise the importance of understanding which stage of growth your company has
reached, then I would urge a word of caution. The author Lewis Carroll is credited with saying “if you don’t know
where you’re going, any road will get you there.”
In order to identify exactly where your business currently stands, Churchill and Lewis offer a comprehensive
overview of the Five Stages of Small Business Growth
T H E F I V E S T A G E S I D E N T I F I E D
Each stage of growth is characterised by a different impetus to expand and threatened by a different crisis. If
you are unaware of which stage your business is currently going through, then how can you predict the crises?
How do you know you are going in the right direction?
Factors to consider when attempting to analyse the growth stage of your small business are the size,
complexity and the age of your company. These parameters have an impact upon the journey that your
business will take as it grows and develops
The Five Stages of Small Business Growth are classified as follows:
Stage 1 – Existence
Although growth has been achieved through
creativity, the business is open to a crisis of
leadership. The creative founder finds that they are
unable to provide the kind of leadership needed to
move to the next stage therefore a leader must be
found to begin to structure the creative chaos into
an enduring business.
Stage 2 – Survival
Growth is achieved at this stage by the delegation
of roles, responsibilities and decision making. With
more people than ever now making these
decisions, they may not align match up to the
company strategy.
Stage 3 – Success
Growth has now been achieved through
delegation but the business is open to crisis of
control. The business owner finds that, by
delegating the decision-making, this can lead to
decisions which are not aligned with the central
strategies of the company.
Stage 4 – Take-off
Now growth is being achieved through coordination but the business remains open to a
crisis of bureaucracy. This alignment leads to
central policies and procedures that may work
against the effectiveness of people working closer
to the customer.
The business owner and managers may have
distanced themselves from what is commonly
known as the front line. In doing so, there is a
danger of losing sight of what is important to the
customer.
Stage 5 – Resource Maturity
Growth is now being achieved through collaboration. The business remains open to various forms of crises at
this stage. For example, rapid growth resulting in operational inefficiencies or shared services is involved in
mergers. Management restructuring can create a crisis in itself. As a company evolves through each stage, it is
critical for the owner to know when to give up control and delegate responsibilities.
W H A T C A N G O W R O N G ?
In Stage One, the Existence Stage, the main problems of the business are to obtain customers and deliver its
product service. Companies may feel at this stage that they cannot gain enough customer acceptance or
product capability to become viable.
In the Survival stage, the business has demonstrated that it is viable. The main problem is encountered when
attempting to make the shift from mere existence to the relationship between revenues and expenses – for
example, your cash flow. Some businesses earn only marginal returns on invested time and capital, and
eventually, they go out of business as this situation is unsustainable in the long term.
In the Success stage, the owner is running a successful business and has options for growth. The company
may stay at this stage indefinitely providing that environmental changes (for example, the development of a
superior product by a competitor) does not destroy its market niche or ineffective management reduces its
competitive abilities.
In the Takeoff stage, the focus is to grow rapidly and finance this rapid growth. This is a pivotal junction in the
company’s life. If the owner is successful, the company can grow into a big business. If not, it is usually sold at
a profit.
In the Resource Maturity stage, the company needs to now focus on streamlining and integrating operations
after the operational inefficiencies brought on through rapid growth. If the company does not maintain its
entrepreneurial spirit, it may enter the sixth stage of Ossification. This is characterised by a lack of innovative
decision-making and the avoidance of risk.
N E X T S T E P S
This is only a brief overview of the elements of the Five Stages of Small Business Growth. There are other
elements to consider such as the effect and requirements of management style, strategic focus, systems, and
processes.
What is important for any small business owner or director is to recognise which stage their business has
currently reached. Here at Fluere, we frequently perform health checks to review companies and categorise
their stage of growth as well as their future potential.
It is our belief that recognising a company’s stage in development and future growth is important, as well as
understanding this impact on business factors.
We seek to work in partnership with businesses and assist them to identify not only the current status of the
business but also how to manage and deal with the most common problems that will arise.
