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7 Stages Of Business Growth: SME Edition

Every year, millions of new businesses launch, but less than half make it past the five-year mark. The key to success lies in the 7 stages of business growth.

Each of these stages has its own benefits and challenges. Every company goes through these growth phases, and no journey is the same. To take advantage of each business growth stage, you need to be able to forecast future problems and address each challenge individually. Continue reading to explore these stages and uncover the secrets behind their success.

Key Takeaways

  • The 7 stages of business growth are the seed stage, start-up stage, growth stage, established stage, expansion stage, decline stage, and exit stage.
  • It’s essential to learn how each growth stage operates and craft the right steps to succeed at each stage for your small business to thrive.
  • Businesses may not progress through these stages chronologically. Firms may swiftly move from start-up to exit, while others may choose to stay in one stage and avoid growth.
  • Your company’s success depends on your ability to adapt and navigate through various business growth stages, predict upcoming challenges, and make sound decisions.

What Are the 7 Stages of Business Growth?

The seven stages of business growth provide a roadmap for a company’s life cycle. Understanding each stage helps underscore the shifts and challenges your business may encounter as it evolves. Here are more details about each of these stages, as well as key problems, solutions, and sources of financing.

Seed Stage

The early days of your company’s existence are meant for focusing on getting things off the ground. This stage is often associated with “seed funding.” This is when you’re seeking early investments from friends and family or angel investors. But for bootstrapped businesses, this means making the first steps and establishing solid foundations.

  • Key problem: The most common difficulty that businesses face is market acceptance, which they will have to overcome. 
  • Solution: At this point in the company’s growth, you need to focus on matching the business opportunity with your talents, skills, and interests. Other focal points include selecting a company structure, obtaining professional advisors, and developing a business plan.
  • Sources of financing: Sources of funding in this stage may include friends, family, angel investors, and personal savings. Some companies choose bootstrapping.

Start-Up Stage

Your company now has a presence in the market. It’s offering products or services, and you’ve secured your first clients. At this stage, businesses start noticing significant growth and need to ensure they have the resources to support it. 

  • Key problem: It is critical to have a clear vision of where you want your business to go in the coming days, weeks, and months. The main problem is not to use up whatever money you have. Instead, you need to figure out your clients’ needs and conduct a reality check to see if your firm is on the correct path.
  • Solution: Businesses need to build a customer base and market presence and manage cash flow.
  • Sources of financing: Companies may choose to continue collaborating with angel investors at this stage. Alternatively, they may take a bank loan, Crowdfunding, find a VC investor, or start a strategic partnership.

Growth Stage

The growth stage is the period in your business’s life cycle when it starts to acquire popularity in the market. At this stage, your revenue and customers are growing. So profits are good, but the competition is becoming more fierce.

  • Key problem: The most serious difficulty that growing businesses face is dealing with the never-ending stream of issues that come with daily operations. Effective management, as well as a new business plan, are required. Learn how to teach and delegate to overcome this stage of development.
  • Solution: Businesses are more formal in managing rising sales and consumers in the growth life cycle. To deal with the increase in business, you need improved accounting and management systems. In addition, you will need new employees to handle the rise in business.
  • Sources of financing: Banks, earnings, partnerships, grants, and leasing possibilities are the most common sources of cash.

Established Stage

Your company has now evolved into a flourishing firm with a stake in the market and devoted consumers. Sales growth isn’t dramatic, but it’s sustainable. As a result, business life has grown more routine.

  • Key problem: The Millennial generation, often known as the “generation me,” is growing up in an era of upheaval and globalization. They are a group that expects to be rewarded for hard work—and expect everything from cheap living to higher pay once they join the workforce.
  • Solution: A successful life-cycle business will be dedicated to growth and efficiency. To compete in a mature market, you’ll need enhanced company procedures and automation, and outsourcing to increase output.
  • Sources of financing: There are several ways to make money. You can get it by selling items, doing a job, or investing in the stock market. Profits, banks, investors, and the government are just a few.

Expansion Stage

After the ‘established stage,’ also known as the maturity stage, a company can try to reach new markets. This is an exciting period for any organization seeking to attract new customers and distribution channels.

  • Key problem: The challenge is that you must first plan and research to grow into new markets. You should focus attention on businesses that complement your current experience and skills. Moving into unrelated fields can be extremely costly.
  • Solution: Add new goods or services to existing markets or branch out into new ones and appeal to a broader range of consumers.
  • Sources of financing: Joint ventures, banks, licensing, new investors, and partners.

Decline Stage

Economic, social, and market developments may hurt sales and profits. As a result, many small companies might not even survive this stage. The question is, how long can a company sustain negative cash flow? 

  • Key problem: Businesses in the decline stage of the lifecycle are fighting declining sales, profits, and negative cash flow. They are basically shutting down. If it’s time to move on to the final lifecycle phase—exit.
  • Solution: Investigate new business ideas and possibilities. Reduce expenditures and look for methods to maintain cash flow in the declining stage.
  • Sources of financing: Suppliers, clients, and property owners are examples of money sources.

Exit Stage

It’s an excellent chance for your business to profit from the investment and years of hard labor. You can do this by selling the company to a more prominent company and making a good profit!

  • Key problem: The primary challenge in the Exit Stage is orchestrating a successful business exit strategy. This involves determining the fair market value of your company, making it attractive to potential buyers, and navigating the complexities of the selling process. For businesses at the decline stage, the potential need to consider bankruptcy adds an additional layer of challenge.
  • Solution: Get an accurate assessment of your firm (your company’s operations, leadership, etc.) Create legal buy-sell agreements and a business transition strategy as part of the process. Find a company valuation partner. Consider your accountant and financial advisers for the best tax approach for selling or shutting down your firm. If a company cannot exit the market and is at the decline stage for too long, it might have to file for bankruptcy.
  • Sources of financing: Some common sources of funding are private equity firms, strategic acquirers, and business brokers.

Navigate Growth Stages for Smart Decisions

The lifecycle of a business may not progress in chronological order. For example, some firms will rapidly go from start-up to exit, while others will choose to avoid growth and remain in the current stage.

To sum it up, your company’s success or failure depends on your capacity to adapt to its life cycles, which change constantly. Change is inevitable. What you concentrate on and overcome right now will alter in the future. Understanding where your company sits in these 7 stages of business growth can assist you in anticipating forthcoming difficulties and making the best business decisions possible.