The 5 Stages of Growth in Business

In the May, 1983 issue of Harvard Business Review, scholars categorized five stages of growth in business. These stages are specific to small businesses, which are much more varied than larger enterprises in their management styles, organizational structure, and capacity for growth. As small businesses grow, most will encounter these five developmental stages.

Stage 1: Existence

This is, logically, the very first step to creating your business. You’re finding customers and creating and delivering a product or service. For most small businesses, the company founder is the central player in this stage. He or she has to wear many hats, assessing market demand and competition, finding financing, and determining if the business plan is truly viable.  

Stage 2: Survival

Now that the business is up and going, can it stay in business? At this stage, the owner is still concerned with breaking even in the short term and has an eye to his or her long-term growth goals. The founder is still the primary player, although he or she may have hired some employees at this point. Some stores, including most mom and pop shops, stay in this category. Other businesses grow and move on to stage 3.

Stage 3: Success

The company is no longer living month-to-month, and the founder faces a choice. Should he or she expand, or keep the company stable and profitable? The growth route is much more risky, as the founder puts resources into expanding the business. This is called the Success-Growth substage, and requires diligent attention and forethought; the founder must plan for the future as well as the present. The Success-Disengagement substage is less risky, and in theory the company can stay in this stage indefinitely. The company is large enough and mature enough for the founder to delegate responsibilities to managers and teams, and can take a less active role in the company if he or she wishes.

Stage 4: Take-Off

This is a stage of rapid growth. One of the most difficult problems founders face in this stage is learning to delegate. As the company grows, the founder can no longer have his or her finger on the pulse of every aspect of the business. Managers and leadership teams begin to take over many of the day-to-day duties of running the business. Cash flow is also a concern.

Stage 5: Resource Maturity

Growth in business can be difficult as the company becomes mired down in processes and bureaucracy. The founder wants to retain a start-up culture but also keep up the pace of growth. In this stage, the business has the financial resources to grow and expand into riskier ventures, but this must be done carefully, with an eye to the future.



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