Understanding The Five Stages Of Small Business Growth

Whether it is a small business or a start-up, every business changes. There are five stages of growth, each with unique challenges and requirements that business leaders and entrepreneurs have to deal with.

Understanding these stages and where your business is in that cycle will help you better understand the solutions you need to implement. It will also help with creating growth strategies and planning for the future. There are five stages of business growth, and we will look at each so you can better understand and plan for them.


The existence stage is also known as the start-up stage. It typically involves formalizing your business idea and determining whether it is viable. At this stage, the business has a simple structure where the owner manages everything and performs all critical functions and activities. Many companies still need investors at this stage, so the entrepreneur has to fund the whole business independently.

Formal planning for profits and demand forecasting is minimal because the entrepreneur is just trying to get the business off the ground. Creating a business plan, doing market research, and creating a business roadmap is crucial when a business is at the existence stage. They give the company something to aim at and a direction to follow.

Because they must fund the business themselves, entrepreneurs must find capital to create viable products, deliver them to their customers, and cover operating expenses. This high demand for cash is a primary reason running out of money at this stage is the most significant risk for small businesses.

Once the business has viable products, the next thing to do is find the right customers. The industry needs to find ways to market and advertise its goods to attract these customers and convince them to purchase. The market research the company does at the beginning of this stage is always helpful with this.

Entrepreneurs have to understand that, in addition to having few paying customers, their profits will be low due to the capital requirements at the existence stage. For this reason, cash management and exploring ways to raise capital or find investors are crucial.

Once the business has had a successful existence stage, the owner can start thinking about expanding. Doing so involves improving current products according to customer feedback, introducing new products, or increasing their customer base by introducing their products into new markets and to new customers.


This is typically the most challenging stage for most businesses. The business launch is complete at this stage, the industry has a few products, and customers know about the company. Most businesses operate with a simple structure at this stage where they have several employees, have hiring structures set up, and have marketing strategies going. 

Once the excitement of the launch passes, the next step is to focus on growth that helps businesses survive. Increasing revenue by acquiring more customers and selling more products is crucial for staying afloat and having the funds to keep growing. 

At the survival stage, the business owner should take everything they have learned and find ways to improve their business model. Doing so will include improving methodologies and strategies for marketing, customer acquisition, sales, and operations management. The aim is to find methods, practices, and processes that help the business sustain its growth through market and economic turbulence.


This is the maturity phase, where the business has been accepted in the market and has enough market presence to sustain profits. It also has enough brand recognition, has created enough brand awareness, and has enough customers to remain financially healthy for a long time.

The business should also have more employees to match its growth and a few managers to coordinate things. The business and brand might be separate from the owner at this stage because they can be more hands-off with the company. With skilled managers and leaders in place, the business owner can be less involved in running the business. 

However, business owners who want to remain in leadership positions should continue exploring ways to keep their businesses successful as they grow. 

Now that the business is thriving and profitable, the business owner can focus on either growth by expanding operations or cruising in place on current success and profitability.


The fourth stage of business growth is known as take-off. If business owners leverage their business’s development, success, and profitability, they can continue expanding into new markets and territories, acquiring even more customers, and developing new products. 

Alternatively, they can focus on the stability that brought them success in the first place. Factors like market demand, competitive pressure, customers, current needs, and the need for change will determine if they take this path or decide to explore additional growth and expansion. 

Regardless of their path, business leaders must be prepared to change or expand depending on prevailing market conditions. Leveraging the streamlined processes you have in place in marketing, sales, and operating procedures and strategies will help the business with the change and expansion.

Growing through this stage requires a way to fund that growth. Some options include mergers, strategic partnerships, initial public offerings, investors, and acquiring businesses with a positive cash flow.

Business leaders should learn to taper their growth at this stage. While you want to grow as fast and as big as possible, doing so without a plan and too quickly runs the risk of running out of cash. When businesses run into this issue, they typically seek investor assistance or new leadership to help them get out of it.

An alternative to funding the business is increasing market share even further by pushing into new territories and challenging competitors. The company might have to develop new products that are an excellent fit for the new markets and regions for better reception and profitability.


At this stage, the business is mature and can sustain itself. Proper management of available resources, especially financial ones, is crucial. Resolving inefficiencies in systems and processes that rapid growth might have introduced will also help.

The goal of this stage is to ensure business longevity. The business has everything it needs, including staff, systems and processes, and financial resources to achieve longevity with proper stewardship. The owner has to keep their entrepreneurial spirit and the need for growth to ensure the company remains a force in its industry for decades.

This stage is challenging for a specific reason: business leaders often need help finding ways to grow when their businesses reach maturation.  Stagnant revenues, changing customer needs, and market changes can quickly cause businesses to return to the survival stage without proper leadership.

Seeking help to remain focused and finding new ways to keep the business will help avoid such stagnation. Joining a business growth club to learn from other ambitious business owners is an excellent way of doing this and ensuring the continuous growth and longevity of the business. 

With the support, stewardship, and advice of peers and mentors, business owners can develop the skills they need to lead, inspire and ensure continuous growth. To create this growth mindset, you can join the business growth club at https://inspirent.co.uk/business-growth-club/, where you will be put in a group and paired with a Business Growth Partner who will help with business growth and success.

Research is also crucial at this stage as it will help the business owner learn what has changed, how the market behaves, and whether they need to pivot. In some cases, a business might need to return to the survival stage but with the funds to ensure rapid success the second or third time around.

Exiting the Business

Although this is not one of the stages of business growth, it is something entrepreneurs should consider. What do you do if you need help finding new ways to grow a business when there is stagnating revenue and the industry needs to catch up in brand recognition? An exit strategy allows business owners to recoup their investments while leaving the company in capable hands.

A business owner can also exit a business because they are no longer motivated to keep it growing. Exiting is also a good idea if the market has changed so much that the company has started losing its place.

There are various options for business owners who want to exit a business. Selling is the preferred option for many as the owner can recoup their investment, pay their debts, and handle all other financial obligations quickly. 

The second is a merger or acquisition. A merger is where the business is combined with another, and it often results in the formation of a new company. An acquisition is where another fully absorbs the industry without constructing a new business.

Growing a business is what every business owner aims for. There will be challenges to overcome as you develop a business, so it is essential to understand the different stages of business growth, their challenges, and possible solutions. Understanding them is also necessary for learning how to leverage each to get to the next stage of business growth.

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