When it comes to aspects like the number of employees, type of management, and kind of products or services they provide, small businesses truly run the gamut.

But according to Harvard Business Review, there is still a common thread between them: they all go through the same stages of development.

As you begin your entrepreneurial journey, the road ahead might seem uncertain. By understanding the general framework for small-business growth, you can better foresee what you may face in each new chapter and prepare to tackle potential obstacles and challenges you encounter head-on.

Stage 1: Existence

The launch of any business is exciting yet fragile. Many companies never make it out of this beginning stage due to challenges such as establishing products and services, acquiring customers, and securing enough money to cover the initial costs. For a brand-new business, obstacles like these can often feel too large to overcome if it isn’t well-prepared and willing to take chances.

Because finances are limited, the founder often makes up the entire staff, stretching themselves and their skill sets to tackle a host of tasks. They are marketing, sales, product delivery, and customer service all in one. Planning and forecasting are almost nonexistent since the company is putting all its focus on getting the products or services to the customers while negotiating a very low profit margin.

Investors play a key role by providing seed money, using their reputation to add credibility to fledgling businesses, providing guidance to new entrepreneurs, and even offering to connect them with potential customers, partners, or vendors.

Stage 2: Survival

At this point, the business has enough customers and sustainable revenue to stand on its own two feet as investor funding wanes. However, profit margins are still minimal in this stage, so you should begin turning your attention toward growth and taking a closer look at your business practices to determine how you can improve your chances of success.

For example, are you marketing to the right audience? Finding and retaining customers is an important piece of the puzzle for financial stability. Do you have efficient workflows in place? If you’ve hired staff, they need to have clear roles and responsibilities. Are your products and services making your buyers happy enough for them to leave positive reviews and recommend you to others? Word of mouth can make all the difference in expanding awareness of your brand and earning the trust of prospective customers.

Stage 3: Success

Reaching this stage means you’ve established a stable customer base and healthy profit margins, opening up several options for you. Some entrepreneurs choose to go big or go home by investing everything back into the company to push for even more growth. Harvard Business Review calls this the success-growth substage.

On the flip side, others are content with enjoying steady profitability, especially if they want to step back from day-to-day operations and give more of the responsibility to managers and other leaders. This substage is referred to as success-disengagement; a company can remain here indefinitely provided it has the right leadership to navigate and adapt to any changes in the market that may arise.

Stage 4: Take-off

If you went with option one and navigated it successfully, you would have made big risks that yielded potentially big rewards. Rapid revenue growth is one of the hallmarks of this phase as demand for products and services increases. This is the time to consider expanding into new geographic markets and offering new products. Operations must be scaled as well, such as by onboarding more employees, putting the right management in place, opting for more sophisticated technology, and implementing workflows that maximize efficiency.

This can be a make-or-break moment for businesses. If you steer the ship with an eye toward smart leadership and adequate cash flow, your business can flourish. If not, you may still have an opportunity to sell at a profit before it sinks.

Stage 5: Resource maturity

Finally, true sustainability has arrived! At this stage, you’ll have the luxury of strategizing more long term, focusing on longevity and dedicating resources to whatever will bolster your business’s resiliency. This typically involves pivoting toward refining processes, resolving system and workflow inefficiencies, and managing cash flow.

The challenge in this phase is balancing the structure needed to keep things running smoothly with the entrepreneurial spark that kick-started your business in the first place. To put it another way, be mindful of implementing too many corporate policies that restrict rather than inspire your employees.

From this business-development blueprint, you can more clearly identify what needs and adversities you may face at each stage of growth. Armed with such knowledge, you can better prepare in advance to gain the best shot at realizing your dreams.

TAKE ACTION:
Use this guide to determine which stage your organization is in,
and then create a checklist of steps you can take to ensure you’re on the path toward growth.