WHAT STAGE OF BUSINESS ARE YOU IN?The 5 Stages of Small Business

Oct 11

Introduction

Choosing to start a small business is an exciting, but also daunting experience. It's easy to spend hours online researching the best type of business for you, but what steps can you take once you've decided on your idea? In this post we'll explain how to determine the stage of development that your small business is in, and what those stages mean for the future of your company.

What is the small business life cycle?

In this post, we'll look at the five stages of small business growth. The first step in knowing your stage is to determine the nature of your business and its development.

Stage 1: Survival Mode
Stage 2: Lean Startup Mode
Stage 3: Growth Mode
Stage 4: Scale Up Mode (late-stage growth)
Stage 5: Developmental Disruption

Small business frameworks

In this section, we’ll cover the 5 stages of small business growth.

There are many frameworks for small business growth. The 5 Stages of Small Business Growth is one such framework with which you should be familiar. It was created in 2011 by Entrepreneurial Operating System (EOS) founder Dan Sullivan and his team at Strategic Coach. It was created to help owners identify where they were in their businesses and make better decisions about what to do next based on that information.

It's important to note that there are many other frameworks for thinking about small business growth, including:

The life cycle of a company;
The 7 phases of business growth;
The 8 stages of small business growth; and
The 9 steps needed for long-term success

The 5 stages of small business growth

Stage 1: Existence. This is what most businesses start out as when they begin their journey. They have a name and some good ideas about how to run the business, but it's difficult for them to compete with larger operations in terms of price and quality, so they may struggle to make ends meet at first.
Stage 2: Survival. As the business grows, it will eventually reach a point where it can no longer maintain its current levels through internal resources alone—it needs outside investment if it wants to continue growing while remaining profitable, which means that some hard decisions need to be made about whether or not those investments are worth making at all (and if so, what kind?). If you've ever been involved in a company merger/acquisition process before then know that these kinds of decisions aren't easy ones! However once those tough choices have been made then things should get easier from there because now you have more resources available instead just one person doing everything themselves like before."

Stage 1: Existence (0-3 years)

The first stage of business is the startup phase. Starting a new company is exciting, but it also comes with a lot of uncertainty and risk. In this stage, your business is trying to find a niche, get customers and build brand recognition, get funding and find investors, find a team (if it's an early-stage startup), and find a location (if you're not already operating out of home).

In this phase you'll likely be working long hours because there are so many things you need to do in order for your company to survive—you're still trying to prove yourself as an entrepreneur which means that there isn't much time for relaxation or personal hobbies right now!

Stage 2: Survival (3-12 years)

The survival stage is the most difficult and challenging of all. It is also where most small businesses fail. The larger your business becomes, the more difficult it becomes to survive.

What do you need to do? You have to make a lot of money fast and then keep making more each month. The only way you will be able to survive is by making sure that your revenue eclipses all of your expenses every month. If it doesn't, then you'll go out of business before long.
What are the challenges? This is where things get tough because there are so many different factors involved with surviving in this stage: competition from big companies; lack of capital; insufficient marketing efforts; poor leadership skills; lack of proper management procedures/policies...the list goes on and on! There are almost too many problems for one company during this stage so any mistake can lead directly back into failure again if not addressed immediately via proper planning (and usually involves spending money).

Stage 3: Success (12-20 years)

You have made it! You are making money, and you are growing. You may even be making some big moves. But there is always room for improvement, so don't let your guard down just yet.

You need to focus on your customers more than ever now—it's a balancing act between listening to them and giving them what they want, but also staying true to what makes your business special.

You will also want to focus on your product or service more than ever before: it needs to be the best it can be so that customers keep coming back for more! And finally, make sure you're keeping an eye on your team—you've got a lot of people relying on you now, so try not to let them down!

Stage 4: Takeoff (20-25 years)

At this stage, you’re likely to be experiencing 20% year-over-year growth, with revenue of $1 million or more. You’ll also have more than 10 employees, and you may find yourself developing a new product or service or expanding into a new market.

Stage 5: Maturity (25+ years)

Maturity (25+ years)

You’ve made it. Congratulations! You’re earning a decent salary and have the ability to grow your business without worrying about making ends meet. Your company has reached steady state growth—sales are increasing at about the same rate as costs are increasing, so you can anticipate your revenue stream in future years with relative certainty. In this stage of small business growth, you should focus on expanding into new markets and competing with larger companies.

A solid understanding of your stage of development can help you determine what your next steps should be.

Understanding the stages of small business growth can help you determine what your next steps should be. The stages of small business growth are not a set path, but rather a guide to help you understand where you are in the process and what might be waiting for you down the road.

If you're just starting out as a business owner, it's important to remember that there's no right or wrong way to build your company—you'll find out what works best for your team over time.

Conclusion

We hope that this article has given you a better idea of what to expect as your small business grows and that it’s helped clarify the various stages along the way. While there may be some differences between each business, in general we can expect our businesses to go through these five stages at some point in their existence. If we keep this framework in mind when planning out our strategies and goals, we’ll be able to prepare ourselves for whatever comes next!

Jeana Marino