Starting a small business comes with challenges and setbacks, requiring its leaders to make strategic decisions for growth. However, the need for growth doesn’t stop once your small business has taken off. Building a thriving and sustainable small business involves overcoming challenges at every stage of business growth. Typically, small businesses go through four stages of business growth: startup, growth, maturity and renewal or decline. Understanding what stage your small business is currently in can help you make the best strategic decisions for advancement. Read on to learn how to identify which stage your small business has entered and how to manage growth successfully.
Stage 1: Startup
The startup stage is typically the riskiest phase of the business lifecycle. This initial stage of starting a small business occurs right after you’ve first created a product or launched a service. During this stage, you’ll likely only have a small team of people working for you. Businesses in the startup stage are not yet profitable and usually focus on one product or service. Typical challenges during the startup phase include limited resources, unpredictable cash flow, and a lack of efficient systems in place.
During the startup stage of your small business, focus on growing your customer base. Other steps to take during this phase of growth include:
- Recruit top talent. The first leaders and employees you hire are the foundation of your small business. Finding talented and passionate people will fuel the company during this challenging stage of business growth.
- Establish processes early. As your small business begins to grow, creating organized structures and processes will help sustain success.
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Stage 2: Growth
Once your small business has exited the startup phase, it’s important to continue scaling up. The growth phase is when you’ll begin to see your business plans pay off as momentum builds. At this point, you’ve grown your customer base and team of employees. Your small business is starting to turn a profit and expand. This stage typically is marked by rapid growth. While making payroll and keeping your small business afloat won’t be a problem any longer, keeping up with growth will be a challenge. Prioritize these goals:
- From digital marketing to accounting, there are plenty of aspects of your small business that can be outsourced during this stage. Outsourcing can help your business grow while keeping costs manageable by reducing your need for additional full-time staff.
- Invest in marketing. Allocating part of your budget to branding and marketing is critical during the growth stage. You’ll finally have the money to do so and focusing on different marketing strategies, channels and campaigns will help new customers discover your business and reinforce your reputation.
- Establish distinct roles. Define specific responsibilities and invest in your employees to maximize the quality of their work and maintain employee satisfaction. Defined roles can reduce inefficiencies by ensuring no tasks are overlooked.
Stage 3: Maturity
Once your small business is profitable and stable, it has reached the maturity stage. You are running a profitable business and have a strong team of employees. This stage typically feels more secure than previous stages as it involves less risk. For some small businesses, the maturity stage may include reevaluating your business goals, which could involve selling, merging or buying another company to continue expansion. The challenge your small business will face in this stage is maintaining the business during times of growing demand. Although the expansion stage gives you stability, you should still treat your small business’ growth carefully. While previous stages focused on momentum, during the maturity phase you should begin looking out for signs of possible decline. Focusing solely on expansion during this stage without maintaining current business can be detrimental. During the maturity stage it’s important to:
- Find new opportunities. Diversify and grow your revenue sources by introducing your brand to new markets, creating add-ons, or developing new products.
- Focus on customer engagement. Investing time and energy into loyal clients or customers will prove valuable during the expansion stage.
- Manage steady increases of operations. Expansion of your small business is necessary but do so carefully without overextending. Hiring additional employees too quickly or over-investing into new business opportunities can negatively impact your business’s cash flow.
Stage 4: Renewal or decline
Once your small business has reached the stage of renewable or decline, preserving success should be your main priority. To continue growing during this phase and avoid decline, small business owners need to continue to innovate and overcome the impulse to stay in their comfort zone. To maintain growth, focus on these steps:
- Reinvest into the business. Successful small businesses will continue to put money back into their operation to sustain growth in fast-changing markets. Because profits are stable during this stage, hire new employees or open new locations to meet growing demand. If your small business, like a doctor’s office or dry-cleaning service, doesn’t have availability for new clients, reinvesting can ensure your business continues to grow.
- Preserve the brand. Maintain your brand while looking for new opportunities for growth to retain loyal customers or clients. Creating new products or launching new services can provide additional revenue, but make sure they align with your current business. Pivoting substantially can turn away current clientele.
Setting your small business up for success
Whichever stage of business growth you’re in, navigating challenges and promoting growth takes strong leadership and effective management. In the beginning, especially during the startup and growth stages, securing a strong client base and hiring top talent is critical. As your small business continues to grow, reinvestment and new opportunities will become important to achieve long-term stability.
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