Only 49% of businesses have a clear plan for business growth and are unaware of where they are in the growth cycle. There are essentially four stages of business growth and it’s essential to understand which stage your company is in, because this will have a big impact on how you plan and run your business. My guide to planning an unstoppable growth strategy covers the key elements to focus on when developing your business growth strategy.
Understanding the Four Stages Of Business Growth
It can be easy to think your business is growing if you see a 2% y/y growth in sales. In fact you might actually be losing valuable smaller customers because you’re focusing on growing larger ones. Or be failing to invest in the right things at the right times in order to fuel continued growth – which could be losing you overall market share.
Unless you can identify which stage of business growth you’re in you can’t guarantee success at every step. Let’s look at these stages in more detail.
When you’re starting up a company you’ll be spending time networking and trying to come up with ideas for selling your products or services. You probably won’t have too many processes in place because you’re still getting a sense of the market and working out how to bring in a profit. This is an exciting time for a business, and it requires an entrepreneurial spirit.
To grow your business you need to work out a sustainable business model that gives you enough cash to hire other people and grow.
As your business becomes established in the marketplace this is the time to look inwards and examine who to hire so they can manage your key operations.
You should be spending time on activities that are helping the business grow – as well as identifying any factors that could be hindering your development.
Make sure you devote time to developing your relationships with clients and encourage employees to take ownership of these relationships too. The growth phase will require significant investment and you may have to sacrifice profits to fund growth or seek outside funding, either by investors or debt. If you decide to go down the investment path you’ll have to give up some equity in your company.
By this stage your business will hopefully be growing steadily. You should have employees who have been with you for many years, and the company will have more stability than in the previous stages. You may be taking out regular dividends and have professional managers in place to oversee operations.
Mature businesses are able to defend their market position and expand into new markets and territories based on brand recognition. It’s important however to look out for signs that changes need to be made – especially those involving whether to cash out or reinvest for further growth.
Business owners are often in denial about the fact their company is in decline – in fact they often feel their top clients are demanding more of their services or products and see their market as stable.
If revenue is declining over a period of three quarters consecutively then your company probably started to enter the decline phase at least two years ago. This means it’s time to take action and look for ways to change things up. Other warning signs a business is in decline is when the owner is starting to take cash out of the company ready for retirement without putting any extra investment in – for new technology or people.
The majority of declining businesses leave things too late. The most successful companies identify early on that their business model needs to be adapted to a changing market and decide to start their renewal efforts before decline sets in. If you decide to cash out you’ll need to assemble the right bankers, accountants and mergers and acquisitions consultants to help you do things properly.
A surprisingly large number of businesses fail to identify where they are in the growth cycle and therefore fail to take the appropriate actions. It’s essential to make an honest appraisal of where you are in the 4 stages of business growth. Only then can you ensure your business will stay strong over the long term.
To help you identify where you are on your journey you could consider seeking the advice of a growth consultant. They can help you develop the right strategy to move you forward to the next stage – or advise you when it’s the right time to cash in.