If you’re running a small business, you probably know the stages your company will go through on its journey. But if you don’t know how these stages relate to one another or how they affect your operation, then it’s hard to adjust your expectations and act accordingly.
In this article, we’ll cover all five stages of small business growth and explain why knowing about them matters for everyone, from entrepreneurs starting out to established companies looking for new growth opportunities.
In the end, we’ll cover some essential things you need to build up (like hiring a reliable accounting service in Niagara) to progress from stage to stage. Let’s dive in!
The Five Stages of Small Business Growth
Stage 1 – Existence
The first stage of business growth is existence. This is when you are just starting and building your company from the ground up. While this stage can be a lot of fun, it can also be very stressful and challenging.
You will have limited resources and a small customer base at this stage. You’ll need to focus on your core competencies while building relationships with people who can support your efforts to become successful as an entrepreneur.
It’s essential to be careful with how much cash flow you have at this point because there will probably be many months where the business is not profitable yet—and that’s okay!
The most important thing about this stage is perseverance: stick with it until things start paying off. Talk to quality bookkeeping services in Niagara to ensure you have the necessary resources to continue.
Stage 2 – Survival
In this stage, you are still in the beginning stages of your business. You may have just started or have been working on it for a few months.
However, you now have a more reliable flow of customers and cash moving through your small business.
The number one rule in this stage is to be clear and goal-driven with your communication. You want to start building on your reputation and enter a state of community recognition. This means everything from your social media marketing to the phone in your service area needs to be communicated effectively.
Try not to spend more than what comes into the company. This will allow you some room for error as well as make sure that there isn’t anything unexpected happening like an expensive repair bill or something else out of the ordinary expense coming up unexpectedly when all your energy should be focused elsewhere (like finding new customers or growing sales).
Stage 3 – Success
Your business is growing, and you have a steady stream of customers. You have a team of employees. You are now making money, but perhaps less than you’d like. Or maybe you’re in a lucky position: your company is doing well enough that it’s cutting into your personal finances—but at least it isn’t losing money!
You have a firm foundation of income at this staging point, and it is time to expand. The company has found a foothold with a reliable customer flow, and people are actively offering suggestions about new products you should offer, collaborations with other local businesses, or marketing endeavors that speak to complementary targets.
Stage 4 – Takeoff
You’re on the way to a takeoff. Congratulations! You may be struggling with the feeling that everything is going wrong, but you will soon see that your business has reached a point where it can finally start moving forward sustainably.
You absolutely need to hire a tax accountant in Niagara at this stage. Now is when you’ll be growing at a rapid pace, and that means numerous implications for your annual or quarterly tax obligations. You want to maximize pre-tax wealth for active reinvestment, and a qualified tax accountant can get you into the right operational headspace.
Stage 5 – Resource Maturity
The fifth stage of business growth is referred to as Resource Maturity. At this point, your company has enough resources to sustain itself and grow further. It’s a good idea to plan for this stage before you get there because it’s easier to manage growth when you have access to the right tools and personnel than it is when a sudden influx of new customers or clients occurs unexpectedly.
Businesses at this stage can support themselves through their own resources but may need additional help if they want growth beyond what they currently possess.
Why Knowing Your Stage Matters
The most important thing to know about the 5 stages of growth is that they are fluid. You will find yourself moving back and forth between them without any warning, and that’s okay!
You can use this knowledge to adjust your expectations and operations accordingly. If you think your business is ready to scale up but find yourself still in the first or second stage, then perhaps it’s time to rethink what success looks like for your company right now.
Alternatively, if your business has hit an unexpected roadblock (or two) along the way, don’t worry: it doesn’t mean things aren’t working out just yet! It may simply mean that before moving forward with plans for expansion or development, there are some things left unfinished from earlier stages of growth that need attention first—and that’s okay too!
How to Progress to the Next Stage
Now that you know the stages of small business growth, it’s time to figure out which stage your business is in.
Once you know where you fit, the next step is to determine what growth stage you want to achieve next.
For example, if your company has been in operation for a while but hasn’t yet reached profitability and is struggling financially, its best bet would be to focus on improving its bottom line by paying down debt or raising funds through venture capital investments.
Some critical suggestions for improving your stage level include:
Have Your Financial Resources in Order
Once you’ve secured a solid foundation, it’s time to build up your business. Unfortunately, this is where many entrepreneurs make the mistake of thinking that growth means hiring people, buying equipment, and investing in marketing. All these things are important, but they are not the activities that determine whether your company will grow—they’re just tools.
To succeed at this stage, you need to track cash flow and profits.
You might be tempted to think that profits are all that matter at this point—after all, how much money do I have left after paying myself? But money in the bank isn’t enough; if it dries up too quickly or doesn’t last long enough between paychecks (when revenue is slow), your company could suffer serious setbacks.
The best way to ensure proper cash flow management is by having a close relationship with your bank and keeping an eye on interest rates so that you know when it’s time for a new loan or line of credit. Hiring accounting services in Niagara is a big step in the right direction.
Maintain a Great Team
Many entrepreneurs get caught up in the thrill of a new business and forget about their employees. They may be tempted to hire someone who can be trained for little money, but this is often a mistake. Reliable people are worth more than gold because they will help you succeed as well as make your life easier by not jumping ship when things get complicated.
Streamline Your System
This is one of the most important parts of growing a company because there are so many moving parts and so many things to consider at any given point in time. At this point, you may find yourself overwhelmed by all the decisions that need to be made daily.
If you find yourself getting bogged down by decisions or feeling stressed out from trying to keep up with everything, it’s time to make some changes. Use automation whenever possible and delegate tasks to streamline operations.
Grow Your Business Resources
This can be anything from machine equipment to physical marketing materials you hand out at the counter. You want to have a plethora of resources ready to scale at a moment’s notice so that any new opportunities can be fully maximized.
Take Your Time and Adopt a Growth Mindset
Having a clear understanding of the different stages your business will go through in its life, you can adjust your expectations and operations accordingly.
You can plan for the future, making expenditures and hiring decisions that are more economical. You can also be more profitable by focusing on core competencies and playing to your strengths as a company rather than trying to do everything yourself.
Finally, having this knowledge helps you create a long-term vision for how you want to grow as a company so that each new stage is a natural outgrowth of where you’ve been before.
We at HQ Accounting hope that this article has helped you to better understand the business stages your small business will go through. Knowing these stages is important so you can adjust your expectations and operations accordingly.
No matter which stage you find your small business hitting, be sure to speak with our bookkeeping services in Niagara. There is always a need for comprehensive money management to ensure you have the capital, covered expenses, and future resources to grow and expand. So reach out and book your 15-minute discovery call today!