2018-04-26 10:55:50 Growing a Business English Learn about the five different stages that a small business goes through as it grows from an initial idea to a big corporation. Discover... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/04/Female-entrepreneur-researches-growth-stages-for-small-business.jpg https://quickbooks.intuit.com/ca/resources/growing-business/small-business-growth-stages-planning/ Understanding Small Business Growth Stages

Understanding Small Business Growth Stages

3 min read

Planning to build a business? It pays to be prepared — when you’re ready for each stage of growth, you can tackle new challenges with confidence. Every company is different, but you can expect to travel through some version of these stages as you move from concept to big business.

Stage 1: Existence

The first stage of growth is one of the most exciting. You have a name and a company, and your goal is simple: Get customers and deliver a great product or service. As you move through this stage, you learn whether or not your business is viable and figure out what changes you need to make. Depending on your startup funding, you’re probably doing everything yourself or with a small team. Since your business is relatively small during the existence stage, it’s a great time to experiment, test market products, and get feedback from your customers.

Stage 2: Survival

After you’ve found a model that reliably brings in customers and revenue, your company enters the survival stage. You’ve tested your idea, you know that you have a great product, and you have enough customers to keep operating. During this stage, your main goal is to start bringing in more money than you spend. This is an important time — for many companies, it determines whether the business succeeds or fails. To make it through to stage 3, you might focus on bringing in more customers and choosing the right pricing. It’s also a good idea to spend on things that can help you grow, such as marketing and great employees.

Stage 3: Success

Stage 3 is the holy grail for small businesses. You’re making a healthy profit, customers are happy, and the orders continue to come in. During this period, you have a choice. Do you want to stay the same size or expand the business? If you’re happy where you are, you can use the profits to pay yourself and your employees generous salaries. If you want to grow, you can reinvest profits into the business. Regardless of which option you choose, it’s important to build a cash reserve to carry the company through rough times. Realistically, you can stay in the success stage as long as you like, usually until you decide to grow or sell the business.

Stage 4: Take-Off

Once you decide to invest seriously in the growth of your company, you enter the take-off stage. Many business owners in this stage choose to get loans or investors to pay for fast growth. You might use the financing to buy more equipment, move into a bigger facility, or hire more people. In addition to funding, this stage usually means that your role in the company changes. As business increases, it’s difficult to do everything yourself — usually, that means that you need to hire managers and step back from day-to-day operations. Formal planning becomes extremely important at this point, especially if you want to transition from a small or medium business to a big, multi-branch company.

Stage 5: Resource Maturity

After your business grows, you reach a point where things stabilize. Profits are strong, staff is well-trained, and your operations are running smoothly. This is the perfect time to plan for the long term. How can you continue to grow and mature? How can you stay innovative and entrepreneurial? At the resource maturity stage, many companies opt to diversify or look for exciting new ways to serve customers.

Whether you want to stay small or build an empire, it’s useful to understand the stages of business growth. When you know what to expect, it’s easier to weather the storms on the road to success.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

A Guide to Finance & Accounting for Small Business Owners

As a small business owner, you probably have plenty of questions on…

Read more

Self-Employment & Small Business Tax Guide

How to File Taxes for a Small Business Navigating the Canadian tax…

Read more

Financial Variance Analysis: How to Calculate Variances

As a small business owner, you know how valuable it can be…

Read more