The 5 Stages of Business Growth Explained

The 5 Stages of Business Growth Explained

Every new business and start-up, big or small, goes through the five stages of business growth. These phases include existence, survival, success, take-off, and resource maturity. All stages of small business growth come with challenges that every company will have to overcome.

Knowing where your business is in the cycle can help you see the solutions you need to implement, create growth strategies, and plan for the future.

Whether you’re still toying with a business idea or have already taken the plunge into entrepreneurship, this guide will give you a bird’s-eye view of the stages of starting and growing a business.

Contents: 5 Stages of Business Growth

Stage 1: Existence

In the existence stage, also called the start-up phase, the company’s business structure is simple. For the most part, the owner manages the operations or performs all important operating activities. At this point, in the absence of investors, the owner is also the one funding the whole venture.

For many, especially solo entrepreneurs, formal planning such as profit forecasting for the company is at a bare minimum. For the best potential for success, the owner should do market research and create a business plan.

Having the necessary capital is critical in this stage. The business needs funding to develop a viable product, deliver the product or service offerings to customers, and cover daily operating expenses—this is why running out of money is a small business’s biggest risk.

Also, remember that at this start-up stage, the brand is still trying to acquire new customers. So even if the business has revenue, there probably isn’t much in terms of profits. To survive the existence stage, entrepreneurs should learn about available options for raising money or finding investors to ensure they’ll have the cash on hand to make their vision for their business happen.

A huge part of a company’s longevity and success also stems from proper cash management. So, the owners must have the business acumen or learn early on how to manage the organization’s finances. They’ll deal with the delicate balance of having the right amount of cash to cover expenses and pay current obligations while also ensuring that no capital sits idle when it can be invested to expand the business.

Many businesses in the existence stage who are successful in introducing their products and services start looking to expand. Expansion may mean modifying or improving products to match customer feedback, increasing production, developing more products, or breaking into another market to increase their customer base.

Stage 2: Survival

Survival is the next phase following the existence stage. At this point, the business has proven that it’s a viable brand; it has found a market for its products or services and has acquired customers.

Also, most companies in this stage still operate with a simple structure. Even if the company now has employees, the owner oversees and makes the major decisions for the business. They may not have any systems in place for hiring practices, marketing models, etc. In addition, some businesses may still be operating with minimal formal planning, with the goals for the company existing only in the mind of the owner.

After the initial excitement of breaking into a market, which is an accomplishment itself, the strategy at this stage of growth is to survive—which means the business needs to start looking for ways to make money consistently. Most companies expect not to make much, if any, profit in the first few years of operation, but they should at least break even and generate enough revenue to cover expenses and replace capital assets as they wear out. The alternative is running out of money, with the end result being either selling the company or selling its assets.

To move to the next phase of business growth, the company must be making profits. Making a profit means generating enough cash flow to stay in business and fund growth. Of course, profits don’t just come from increasing production; growing a customer base is part of this step.

The owner must look into establishing or improving its business model. It’s time to learn, understand, and implement proven methodologies for marketing, sales, overall management of the company’s operations, and more. Business owners should learn how to delegate tasks and start building a collaborative team with the skillsets to help the company get to the next level of business growth.

Stage 3: Success

The third stage of business growth is success. At this maturity phase, the company is thriving. It has established a strong presence in the industry to ensure consistent profits. Plus, as a mature business, it has the brand recognition and size to be financially healthy.

At this stage, the business would have grown enough to add more employees and probably a couple of managers. The brand might even be completely separate from the owner at this point. Accounting practices, marketing plans, and production systems would also be in place. With other skilled leaders in place, the owner won’t need to supervise every aspect of the company.

Now that the business has become profitable and achieved success, the main strategy is to keep the company stable and profitable and to manage cash flow so the business can weather rough times. The company can cruise in this place indefinitely as long as there are no disruptions in the industry or management issues.

Stage 4: Take-off

Even if a business owner simply wants to maintain its successful position, environmental changes and trends in the industry may compel expansion. This next stage is where companies can experience rapid growth because they can leverage the streamlined sales, marketing, and operating strategies and processes they have in place. Now, the main concern is how to grow and how to fund that growth.

The brand can pursue many routes to expand, such as merging or buying another company. The leadership may also choose to increase the brand’s market share by developing new products and moving into new markets. Some companies also look into adding products and services to their existing offerings.  

Stage 5: Resource maturity

After a successful take-off where the company has achieved the rapid growth it aimed for, the main concern of businesses entering the resource maturity stage is proper management of the financial gains from the last phase. It should also carefully review its systems and processes to resolve inefficiency issues that come with rapid growth.

At this point, the goal for the company is longevity. The business has the staff, the financial resources, and well-developed systems in place to achieve this goal as long as the owner keeps their entrepreneurial spirit and takes advantage of the resources available to maintain the company’s standing in the industry.

Upwork is at your side at every stage

At every stage of business development, there are new challenges to overcome. As a business owner, it may feel like you’re always in need of capital and some type of support—and at every phase, you can rely on services from Upwork to help you connect with talented professionals who have the skills and experience to assist you in achieving your business goals.

Every person you bring in to support you at each phase of the business life cycle can either cost you time and money or complete the task expertly and help you move forward. With Upwork, you can connect with talented professionals and hire the right person for the job the first time. You can also browse our Project Catalog™ and shop for projects already planned for you by talented experts who know them best.

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The 5 Stages of Business Growth Explained
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