Five Stages

The Five Stages of Business Growth

By: The Vanilla Team | Download PDF

Michael Gerber said that most businesses aren’t started by entrepreneurs – they’re started by people having “entrepreneurial seizures.” Although running a business can feel chaotic at times, experts have identified five typical stages that companies go through as they mature. Each stage provides a glimpse of the challenges that you can expect to face as you grow your business.

Stage 1: Existence

During this stage, the major goal is simply to get the business up and running. Owners are required to be entrepreneurial and hands-on. They supervise everything directly and business systems are minimal to non-existent. The emphasis here is on producing products or services and selling them, period.

Stage 2: Survival

During this phase, the business is experiencing moderate sales growth but is still in jeopardy of failing. The founders are still running the company and there is minimal emphasis on management systems, planning, etc. Problems that occur during this stage include conflicts between founders/partners, working capital shortages, and the temptation to diversify into unrelated businesses.

Stage 3: Success

At this stage, the survival crisis has passed and a leader has been chosen. The company is profitable and more attention is being paid to formalizing business functions. Companies in this phase often rely upon a small number of customers for most of their revenue. Typical problems that occur during this phase include: leadership becomes increasingly difficult to access, key employees become disenchanted and leave, reactionary planning is the norm, and financial reporting and control systems are often inadequate for sales volumes.

Stage 4: Take-Off

At this phase, the company has achieved a track record of sustained profitability and has resources for growth. There is a professional management team in place and a strong emphasis on organization. The company has a solid financial base. Problems that occur during this phase include: senior management feels they are losing control of day-to-day operations, heightened vulnerability to inside factors (like politics, bureaucracy, and culture), slow reaction to new opportunities, and increased threats from competitors.

Stage 5: Maturity

At this stage, the company has extensive systems in place and the primary focus is on maximizing return on investment (ROI). Companies in this phase may begin to lose their competitive edge – there may be a lack of new ideas and a trend of eroding profitability. As a result, owners may start to feel frustrated or bored and want out of the business. At this stage, the biggest challenge is for the company to keep innovating and renew itself.