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Each growth stage serves a purpose, allowing businesses to learn and evolve.
November 9, 2023
Data from the US Bureau of Labor Statistics reveals that about 20% of new businesses close within their first two years, 45% within their initial five years, and 65% within the initial ten years.
Why is that? Most startup founders need to understand the phases of a business’s life cycle and how each will affect their company. As a result, they need help anticipating the critical requirements of each stage and making the necessary adjustments and strategic decisions.
Here are the five stages of small business growth and what to remember when moving from one to the next.
At this stage, the business structure is simplest. Typically, the small business owner handles all the essential operating activities. There are usually no investors, and the owner alone funds the entire venture.
The business has demonstrated its viability at this stage. It has found a market for its products or services and acquired a customer base.
The company now has employees, but the owner still makes significant business decisions. The firm probably lacks established systems for hiring, marketing, and more.
At this stage, the business has a strong industry presence. It enjoys financial health, brand recognition, and significant growth.
Furthermore, the company may now operate independently from the owner. It has more employees, a couple of managers, and skilled leaders responsible for decision-making. Lastly, it should have well-established accounting practices, marketing strategies, and production systems.
The business at this stage experiences rapid growth, which is due to the firm’s ability to leverage its well-established sales, marketing, and operating strategies and processes.
To meet the growing demand in this phase, the firm typically requires increased resources across verticals like financing, personnel, and infrastructure.
The aim now is longevity. With a capable team, financial stability, and established systems, it’s all about the owner’s drive and ability to use the resources available to secure the company’s industry position.
Each stage of small business growth has its own unique set of challenges, objectives, and strategies. Use this guide to recognize the growth stage of your small business. This will help you make informed choices and prime your team for later challenges.
Want to know more about starting your small business? Since 2006, Escalon has helped thousands of startups get off the ground with our back-office solutions for accounting, bookkeeping, taxes, HR, payroll, insurance, and recruiting — and we can help yours, too. Talk to an expert today.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.
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