The five stages of business growth

Small and medium-sized enterprises (SMEs) will go through five stages of growth during its business life-cycle. Each stage will reveal different challenges that require different strategic solutions from the business owner.

When you understand the five different stages of the business life-cycle you will be better prepared for the obstacles that you will need to conquer in order to succeed.

While it is true that each individual company encounters unique problems, the vast majority of businesses go through a common journey, experiencing common problems in a common sequence. Here are the five stages of that journey.

 1  Start-up and survival

You have a lightbulb moment and come up with an idea for a business. After conducting some research and gathering feedback from friends, family, and colleagues, you decide to start your business.
This is where you discover if your idea is feasible and if you have the skills required to get your fledgling idea off the ground.
 

• The priority is to get clients and prove that your idea is viable.
• The team is one to two people at this stage.
• The main challenge you are grappling with is, can you generate consistent profits?

 2  Small and sustainable

The business has survived the start-up stage and has proved it has a viable proposition. It is now trying to establish itself in its target marketplace so it becomes an established and sustainable company.

The business is consistently generating revenue and adding new customers. This is where you are fine tuning your business model and implementing proven methodologies to acquire customers and deliver a predictable customer service experience.
 

• The team has grown to 2 to 20 people. Turnover is £200k to £2m.
• The priority is to find, win, keep, and grow profitable clients.
• The main challenge you are grappling with is, how do you get more good customers and stabilise your product/service quality?

 3  Struggling to grow

The business is now hitting a ceiling of complexity. It is too big to be small and too small to be big. You often feel like you are wrestling an octopus. The business has lost its entrepreneurial/dynamic flare, but it lacks the structure and systems to get to the next stage. You are still getting dragged back into the day-to-day operations of the company.

Growth is sucking cash. The company is trying to generate enough cash to (i) repair/replace/upgrade its capital equipment/infrastructure and (ii) finance growth to a size that is sufficiently large given your industry/market niche.
 

• Turnover is heading towards £10m. Revenue per employee is £100k. 
• Business valuation multiple is two to four. 
• The main challenge you are grappling with is whether to exploit the company’s accomplishments and expand, or keep the company stable and profitable, providing a base for alternative owner activities.

 4  Scaling growth

You have now reached the stage in which your business can expand and spread its roots into new markets and distribution channels. In order to start capitalising on the success of your business, you will need to capture a larger market share and find new revenue.

Your company has installed robust systems and structure. The company has grown large enough to hire functional managers to take over certain duties previously performed by you. The company can now run without your day-to-day involvement.

• The business is a valuable asset. Turnover is £10m to £25m. Revenue per employee is £150k. 
• Business valuation multiple is three to six.
• The main challenge you are grappling with is, how do you find more A-players for both your leadership team and your sales team?

 5  Seniority/maturity

Your company has now arrived. It has the advantages of size, financial resources, and managerial talent. If it can preserve its entrepreneurial spirit, it will be a formidable force in the market.

• At the final stage of the business life-cycle, your business has a dominating presence in its market. Your business could still be growing but not at the substantial rate as you have previously experienced.
• The main challenge for the leadership team is how to best react to major shifts in the market and diversify, so as to allow the company to continue to grow.

Formula for business growth

If you have ever felt frustrated that you cannot take your business to the next stage of growth, there is a simple formula you can follow.
 
When I say simple, I do not mean easy. Running a marathon is simple, you just put one leg in front of the other for 26.2 miles. However, the training required and the act of running a marathon is certainly not an easy task.

With that in mind, here is the formula for business growth. PERSONAL (SKILL) GROWTH = BUSINESS GROWTH.

The skills and strategies that get you to one level of growth are not the same skills and strategies that get you to the next stage of growth.

In order for your business to grow to the next stage, you have to develop the required skills first. There are two ways you can get those skills. You can invest years in learning yourself through trial and error, or you can work with somebody who has already taken companies like yours to their next stage of growth.

The first step in understanding what is required to get your business to the next stage of growth, is to accurately understand your current situation. I have produced a business analysis tool called the Current Reality Audit, which will accurately identify what you need to do to break through to the next stage in your company.
 
I am giving three free Current Reality Audit’s to qualifying companies. To find out more, send an email to Nick@theprintcoach.com and put the words ‘Current Reality Audit’ in the subject line.


Nick Devine is the founder of The Print Coach. He helps print and packaging companies win new high margin accounts with guaranteed results. Visit www.theprintcoach.com for more information.


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