5 Clearly Defined Stages of Business Growth

5 clearly defined stages of business growth

The 5 Main Stages of Business Growth

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There are 5 stages of business growth that every professional should be aware of. Identifying which stage that a business currently is in can assist with a variety of activities and processes, ideally contributing to both rapid growth and overall success.

Business owners must always make sure to remember the high rate of small business failure. In fact, studies conclude that only around 50% of small businesses survive past their first 5 years in operation.

After gaining a sufficient understanding of growth stages, business owners can make sure that they are suitably dedicating both the hard work and strategic planning necessary to create and sustain a successful business model.

The 5 main business growth stages that all business owners should be aware of include-

1. Development

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Every business begins as a business idea that will either be discarded or undertaken. If an entrepreneur decides that a business idea is worth undertaking, business plan formation will likely be the next step.

An excellent business plan helps guide an organization through every life cycle stage. A business plan is also a commonly utilized tool for business finance initiatives including during meetings with outside investors.

A successful business plan is reviewed and updated as a company evolves. Maintaining an accurate and realistic business plan helps entrepreneurs to not only better understand their organization but also to make sure to address pain points before they develop into larger issues.

2. Startup

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The startup stage of business growth is widely considered to be both extremely stressful and difficult. Due to the stress involved, many entrepreneurs give up entirely on their new business at this stage.

Additional reasons that business fail at this stage range from cash flow issues to business model problems. However, with hard work and enough resources available, some new business owners survive the startup phase and its challenges which include-

  • Customer base establishment
  • Employee onboarding
  • Cash flow management
  • Business finance requirements

3. Growth

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With enough hard work and resources, organizations move past the startup phase and into the growth phase. At this point in the business life cycle, a consistent cash flow and growing customer base are usually accomplished.

A significant challenge of the growth phase is market share control problems, especially with aggressive competitors. Many business owners assume the solution to competition is expansion, but in actuality, those efforts may be counterproductive.

Additional challenges commonly experienced during the growth stage include-

  • Cash flow adjustments
  • Market share competition
  • Customer service capabilities
  • Rapidly expanding customer base
Instead, business owners should focus on business model improvements and optimizing existing processes. All of the hard work that a business owner commits to developing existing business components is well worth the bottom line profitability increase potential.

Another common consideration for the growth stage of the business life cycle includes greater investment in sales and marketing efforts. Ultimately, the objective of the growth stage is to accomplish revenue growth with a limited amount of business costs expended.

4. Expansion

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The expansion stage of business growth consists of various challenges, ranging from market share control to the acquisition of competitors. One main priority of business owners during the expansion phase is to locate new opportunities for revenue and profit.

An important consideration for all business owners during the expansion stage is in regards to research. For example, business owners must make sure that they have appropriately researched new markets before expanding to a new geographical location.

A streamlined business plan is especially helpful during the expansion stage of the business life cycle.

5. Maturity

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Reaching the maturity stage of the business life cycle is a huge accomplishment. Business owners should take great pride in the fact that their business idea has come to fruition and maturity.

The maturity phase is the final business growth stage but should never be a stage business owners occupy for an extensive period of time. Getting too comfortable in the maturity stage is a reason that many businesses fail unintentionally.

Mature businesses can still grow at the maturity stage but may do so at much too slow of a rate to maintain a competitive edge. Therefore, a mature business in the growth maturity phase must decide between expanding or exiting.

In the expansion option, the business owner of the mature business identifies a way for the company to return to the expansion phase such as through new markets or new opportunities recognized. In the exit option, business owners explore selling the mature business to a third party.

  • A growing business consists of five stages primarily, beginning at the development phase and concluding with the mature business stage.
  • In order to best grow business operations, a sufficient understanding of these five stages should be accomplished by all business owners.

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