What are the 5 Stages of Business Growth?

September 9, 2022
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There are 5 stages of business growth that small business owners should be aware of. 

Each stage allows describes the progression and growth of your business and outlines what owners can expect. 

Each growth stage can offer insight into your business and its direction. 

There are also unique challenges that may arise in some steps, but there are ways to overcome them. Here’s an explanation of the 5 stages of business growth. 

What are the 5 Stages of Business Growth?

As your small business grows, there are unique stages of growth that describe what your business is going through. These 5 stages can give you an idea of what to expect as your business grows.

1. Existence

During the first stage of business growth, business owners establish their company’s viability. As the owner, you’ll focus most on your organization and formation.

In the existence stage, you may have more internalized concerns, such as:

  • Customer outreach
  • Financial viability
  • Product delivery 
  • Providing services

The existence stage happens to all businesses, but not every business progresses to other stages. There are several reasons businesses may not progress to later stages:

  • Business owners may not have enough of a customer bas‌e. 
  • Products or services may not attract enough interest from customers.
  • Some businesses may not generate enough revenue. 

If you’re a small business owner, and you avoid these pitfalls, your business will progress to the next stage. 

2. Survival

The survival stage is the second growth stage. Businesses in the survival stage have secured customers and customer demand with their products and services. During this stage, many business owners also hire their first employees to streamline operations.

Oftentimes, businesses in the survival stage have lean operations. At this point, focus should expand from customer acquisition to establishing financial stability.  

Many companies can stay in the survival stage, sometimes for years, but not all businesses progress onto further stages. According to data from the Bureau of Labor Statistics, as reported by Entrepreneur, approximately 20 percent of small businesses fail within the first year. However, by the end of the second year, 30 percent of surviving businesses will have failed. By the end of the fifth year? 50 percent will have failed. Only 30 percent of businesses remain after ten years.  

It’s critical that entrepreneurs not only have drive and determination, but also a killer business plan to keep operations on track, so they can make it to the next stage of business growth.

3. Success

Success is the third stage of business growth. Throughout this stage, businesses experience continued growth. This is when the focus should start to include plans for expansion.

The success stage is unique because your small business may fall into two substages, either disengagement or growth.  

Within the disengagement substage: 

  • Businesses have achieved economic stability, earning sufficient profits to sustain themselves. 
  • Owners will also have hired managers to further facilitate work and streamline work. 
  • Businesses can peak at this substage as long as there aren’t changes to the customer demographics or revenue.
  • Owners can begin moving away from their company as managers streamline their company.

Within the growth substage:

  • Business owners themselves are the difference between this substage and the disengagement substage. 
  • The owner is heavily involved in the strategic planning for future steps.
  • Owners can decide to consolidate their business, allowing them to use the earnings to pursue growth.
  • Owners who don’t consolidate their business may focus on hiring managers to help with future development. 
  • Planning and profits remain important in anticipation of growth in later stages. 

4. Take-off

The goal of the take-off stage is to ensure your business can grow quickly and sustainably. Another major focus of the take-off stage is securing the revenue and means necessary to finance continued growth.

At this point of business development, your concerns may revolve around delegating responsibilities, securing cash, and making the organization more efficient:

  • With a solid foundation in place, owners can further delegate responsibility to management.
  • Cash flow’s still a concern, although it shifts from securing initial cash flow to securing consistent cash flow. 
  • Business organizations should continue their operational and strategic planning.

Business owners are almost separate from their business, and this is the first stage in which the owner may no longer work with their company. As with the success stage, companies can revert to previous steps or on to the last one, depending on success in the take-off stage. 

5. Resource Maturity 

Resource maturity is the final business growth stage. Companies at this stage have the finances, management, and staff needed to operate and plan seamlessly. 

For businesses at this stage, there are only two concerns. The first is ensuring your business controls its gains from previous steps. The other concern is to remain flexible despite previous growth. 

Grow Your Small Business with 1-800Accountant

The team members at 1-800Accountant are pros at working with small businesses. Whether you’re in the beginning stages of starting your small business or are in one of the latter stages of growth, we’re here to help. Work with the professionals at 1-800Accountant to help your business growth needs.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.