24 May The five stages of small business development
Back in 1983, the iconic Harvard Business Review published the five developmental stages that still apply to start-ups over 35 years later. Whether your company is launching a new app with minimal staff and infrastructure to consider, or a day-care nursery with over ten employees in a sprawling building, these are the five main life cycles that most small businesses encounter and the obstacles each bring into play.
In this first stage, businesses are typically small organisations in which the owners do most of the work and directly guide their employees. The company is focussed on building its client base and consistently delivering the services or products on offer.
In reaching the second stage of business growth, the company has proved that is a viable business. Revenues at this point aren’t capable of funding any significant growth, and making it to the next month is the main goal. Owners continue to be intricately involved in the every-day operations of the business, although a manager may have been appointed by this stage.
Goals have been achieved and a reliable cash flow makes it possible for owners to decide to either use their business to support their lifestyle or to invest profits back into the business to enable further growth. Owners typically hand over even more duties to supervisors or managers for the majority of operational duties.
The main concerns at this stage are not only limited to planning and fast-tracking growth but also establishing how to sustainably generate sufficient revenue to feed that growth. This increase in turnover comes down to an increase in staff, equipment and materials, as well as more effective internal processes.
Ownership and management are now wholly separated and decentralised, systems operations are running smoothly. Diversification of products and services is a viable option. It is crucial for established businesses to retain the original entrepreneurial spirit which played such a big role in its original success.
While original and viable business ideas are plentiful, it takes careful and strategic planning through all the phases and life-cycles of your fledgling business to see it through successfully. Owners who are able to identify these phases as they apply to their own businesses, adjusting their focus and scope accordingly, are bound to reap the rewards. As famous French author, Antoine de Saint-Exupéry wrote, “A goal without a plan is just a wish.”