Regardless of company size and industry, every business must undergo stages of business growth. That’s the sole aim of a business person – to build an enterprise that thrives and stays profitable regardless of changing times and trends. A person achieves this by using different stages of business growth.
However, this is not as easy as it seems. Growing a business involves overcoming challenges, and finding a way out of turbulent situations that typically plague businesses. It involves having an idea of what these challenges are and having a plan to surmount them.
Statistics show that businesses with a mapped-out plan and strategy are more likely to succeed.
So in this article, we will help you understand the different stages of business growth and what characterizes them. You will also learn the different problems you’ll face in each stage and how to manage these problems.
Stages of Business Growth
From small businesses to large companies, every business goes through these four stages of business growth,
- Start-up phase
- Growth phase
- Maturity phase
- Startup Phase
This is the stage where you actualize ideas and turn them into a profitable business. At this stage, the company is just entering the market and is merely beginning to find its place.
You’re actively learning what it takes to thrive and be successful in the industry, and right now, your sole aim is to get and probably retain customers, develop and test out your products, and build a brand identity.
This stage is the most difficult stage of business growth as it is filled with so much doubt and uncertainties. Most businesses don’t go past this stage as they cannot handle the financial and mental strain that comes with running a startup.
Most financial expenses a startup face is covered by the owner
Challenges most companies face in the startup phase
- Competing with existing competitors:
No matter the industry you’re in, every market is saturated. So what makes you stand out in a crowded market? How is your product different from the competition? What makes you unique? What reason would customers have to choose your product/service over more familiar brands?
If you find it difficult to answer these questions, then your potential customers will have a hard time too. And if they can’t find an answer to these, they don’t have any reason to stay with you. You need to be explicit about what you bring to the table as a brand.
Leverage your competitor’s weaknesses and play on your strengths. How you go about this will determine how well you succeed – or fail.
- Poor planning: It’s incredible how poor planning can affect a business. Setting measurable goals with deadlines helps guide a business towards achieving its short-term and long-term goals.
Areas like sales, staffing. marketing and funding should be part of your business plans. However, strict planning without preparing for surprises and the unexpected will also result in failure.
- Establishing their customer base:
This is a very important part of startup growth, and a lot of businesses fail to achieve this for a variety of reasons.
One of these reasons is that they fail to gain customers’ trust. They ignore the specific needs of their customers.
Customer feedback is crucial, as it communicates customers’ thoughts and opinions about a product or its features. Ignoring this can lead to a loss of connection with your customers, and is an easy route to failure as a startup.
One way of avoiding this is to focus on creating the best experience for your existing customers. This will not only help build your customer base but will increase customers’ brand loyalty.
- Hiring the wrong people:
This is one of the biggest challenges startups face in the digital age. The success of your business at this stage and the rate at which it will grow depends largely on the kind of people you hire to make up your team.
Aside from having the necessary skillset, your team members should share your goals. All these are relevant in spurring business growth in the baby stages.
- Financial challenges: This can be in the form of insufficient capital or mismanagement of funds. Starting a business, you will need funds to pay bills, make loan payments, or hire the needed staff.
Lack of capital means you won’t be able to carry out these necessary day-to-day activities. It also reduces your chances of attracting the attention of investors.
Managing your cash flow, having an alternative means of raising money and finding investors is a way of maintaining financial stability in this early stage.
- Neglecting marketing and sales:
Most startups neglect marketing and sales, either out of ignorance or as a way to cut expenses and reduce spending.
This can be detrimental, especially for SaaS companies that believe sales can grow online organically and marketing teams are not necessary.
- Growth phase
Unlike the common misconception, this stage is not marked by merely having increased sales or overall revenue.
A company has entered the growth phase when they have an established business model and are working towards strengthening the company’s position in the market.
At this point, more people have been hired to fill key positions, and there is an increase in cash flow and general customer satisfaction.
There is an increase in profit, and competition becomes intense. However, you don’t have to worry about making payroll or turnover during the growth phase.
To scale this growth stage, you need to constantly seek out external investment opportunities to encourage future business growth.
This is the phase where you will decide whether to rely on debts or equity finance to fund your business operations.
Making it through this phase successfully will entail revisiting your business plans, and making changes where necessary. This will help you adjust your business strategy to fit your current needs and goals.
Challenges most companies face in the growth phase
- Maintaining effective management
- Balancing out the increase in expenses with available funds
- Managing increasing customer base: Company growth often means an increase in new customers. Sometimes, this means more customers than the company can handle.
To catch up with your customer influx, it is advisable to hire more employees or install additional software to automate your processes.
This is another important stage of business growth. The maturity phase is usually marked by stability, predictable revenues that attract investors and multiple product spinoffs.
It is attained as a result of prolonged hard work and the perseverance of core team members and staff. It is at this point that the importance of growth merges with other business interests.
Businesses in this stage should have procedures and teams in place that allow the business to run with or without the owner. The business should have enough funds to invest in opportunities such as new products or acquisitions.
While general business growth is about continually expanding, nurturing a business to maturity phase involves staying alert and looking out for decline.
From this stage, the primary objective of a business should be to prevent business stagnation and ultimately decline.
You could do this by developing new products, entering a new market or by merging with another company. The business section of the Houston Chronicles talks about this in detail.
- Renewal/Decline Phase
Just like every normal growth, there comes a stage where a company either renews itself to adapt to trends and changing times or declines in sales, revenue and general performance.
Usually, companies enter the decline stage long before they notice. Unlike popular opinion, a lack of strategy does not cause a business to decline.
Rather, a changing economic landscape, new competitors or adverse market conditions are some of the things that drive a business towards failure.
Some signs that your business is at the decline stage may include an increase in customer criticism and disrespect. Initiative declines, and the business starts to experience things like delayed payments from clients and an increase in employee turnover.
At this point, you either have the option to reinvest in the business to reclaim its position in the market or to cash in before the situation gets worse.
Various ways business owners can revive a declining business include:
- Adopting new policies
- Upgrading technology
- Changing operating procedures to suit their changing environment.
- Pursuing new expansion opportunities
- Doubling back on your strengths and competitive advantage
Setting up your Business for Success
No matter the growth stage your business finds itself in, you must have strategies in place to see your business through that stage and ensure long-term business growth.
The moment you lose sight of the different things that need to be done in each stage of the business cycle, the moment your company stops offering value to its customers, it loses its positioning in the market.
Positioning your business for prolonged success involves maintaining the growth phase business mindset all through the business cycle.
This way, innovation, positivity and experimentation can help you take on challenges as they arise and move forward toward a permanent state of business maturity.
In conclusion, a company’s success is ultimately dependent on how it handles and thrives through each stage of business development. And how that business chooses to adapt will determine whether it becomes a thriving enterprise or a failed venture.