There are 4 stages of growth that every business progresses through: startup, growth, maturity and decline or renewal. 

Every business encounters these stages at different times and under different circumstances. 

Recognizing what stage of growth your business is in will help you determine your next steps.

The 4 Stages of Business Growth

1. StartupGetting a business up and running
2. GrowthScaling your business with new clients and additional financing
3. MaturityStabilizing your business; perhaps acquiring other companies
4. Renewal or DeclineReinvigorating your company or succumbing to new competition or changing conditions 

 

1. The Startup Phase

Every business begins as an idea and, from the moment it’s created, becomes a startup. The first phase of the company growth cycle is one which some businesses find themselves occupying for years. 

During this stage, your main priority is to find and obtain customers, develop a product or service and build a brand identity.

If you’re wondering if your company is in the startup stage of business growth, consider the following questions:

  • Do you have enough customers to be viable?
  • Do you have enough resources to deliver your products on time? 
  • Can your services compete with your competitors’?
  • Are you profitable? 

If you answered “no” to some or all of these questions, you’re more than likely still in the startup phase. 

As you might expect, this stage often is chaotic, marked by turbulence and self-doubt. However, of all the stages of business development, the startup phase requires a confident and headstrong owner to steer the company toward growth.

Breaking Out

The key to success in this stage is to take risks, explore new ideas, tweak your business model and formalize processes that have proven to work. This is a critical juncture in many entrepreneurs’ careers since the startup phase is where most businesses fail.

2. The Growth Phase

The growth phase begins once you know exactly what your business model is—and so do your customers. 

By the time you reach this phase, you should have a refined marketing budget comparable to other similarly sized companies in your industry or niche. 

Here are telltale indicators of the growth phase of a business’s life cycle:

  • Long-term business financing is secured
  • You no longer worry about turnover or making payroll
  • You’ve maintained multi-year client relationships
  • You’re regularly reinvesting profits into the company
  • You’ve hired several key high-level team members

During this stage, profits are usually strong and competition is tight. The pre-eminent challenge associated with the growth stage is maintaining effective management in the face of constant growth and expansion. 

To break through this stage, you need to develop your managerial skills as you grow your team by learning how to delegate authority and empower your employees.

Constant investment and reinvestment is the name of the game when in the growth stage. To continue building your business, you need to be willing to dip into cash reserves to spur future growth and tap into new revenue streams or secure external investment.

This is a good time to decide whether you should rely on debt or equity financing to fund your operations in the years ahead, as both encompass a range of benefits and drawbacks.

Scaling Successfully

To successfully make it through the growth phase, you need to hunker down and formalize all of your workflows and operating systems. As your team expands and you make critical hires, one of the keys to business growth is to have standard processes that all team members can easily follow.

3. The Maturity Phase

The maturity phase is marked by rapid year-over-year growth and a solid core of employees who are now coming up on a decade or more of service. 

The maturity phase is marked by predictable revenue, the acquisition of other business entities and multiple product line spinouts.

Mature businesses also are prime for investors to buy because they are consistent performers that can reliably generate revenue in the future.

For this reason, if you’re successful enough to grow a business to the maturity phase, you’ll need to consider whether it’s in your best interest to turn to an external investor or continue expanding the company.

Maintaining Stability 

While small business growth is about constantly expanding upward, growing a business at the maturity phase is all about vigilance and looking out for signs of decline. Some of the warning signs that a business may be declining include:

  • Frequent receipt of late payments
  • High employee turnover
  • Branch-outs from the business’s core
  • Increase in criticism, disrespect and blame 
  • Diminished aspirations 
  • Decline in initiative 

If any of the above indicators of decline are present in your business, you need to consider if your company is headed toward the last of the business life cycle stages: decline or renewal.

4. The Decline or Renewal Phase

The standard 4 stages of the business life cycle include a decline or renewal phase, in which the company can branch out into gradual decline or renew itself to adapt with the changing times. 

Often, this stage is not the direct result of business strategy. In many cases, new technology, changing consumer preferences or market conditions can steer a company toward irrelevancy.

At this point in the corporate life cycle, it’s critical that company leadership adopt new policies, standard operating procedures and formal systems to suit the changing environment.

As with evolution, in which successful species develop better behavioral adaptations in the face of adversity, businesses have to stave off competition by constantly improving their product lines, service models and functions over time.

Remember the Titans

Think of some of the most famed U.S. companies that folded: Blockbuster, Woolworth’s and Kodak. Each of these companies failed to make critical changes necessary for survival. Let each of these once-great businesses serve as a reminder that no business is too big to fail—constant growth and renewal are needed to fend off decline.

Adapting to Survive

The renewal or decline phase is, of course, paramount for assuring a company’s success. 

In this phase, the leadership of the business must constantly search for new growth opportunities and new markets to break into. If necessary, costs need to be cut and budgets must be tightened to sustain cash flow. 

How a business chooses to adapt will determine whether it remains a thriving enterprise or a failed venture.

Positioning Your Business for Success

No matter where your company finds itself in its life cycle, set your sights on strategies to ensure long-term business growth. 

The key to prolonged success is to maintain the growth mindset entrepreneurs often have in the early stages of their businesses’ life cycle. This way, innovation, positivity and experimentation can help you adapt to and capitalize on changing conditions so you can move toward a state of business maturity.

 

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