The Four Stages of Business Growth

Growth is a necessary part of change and development in any business. An expanding business or enterprise will go through a standard business lifecycle as its market share or footprint increases. As a company’s size and revenue climb, it will enter the maturity stage, becoming more established in the industry.

Although steady growth, expansion, and maintenance are the ultimate goals of any business, some will experience failure, decline, and eventual closure. According to the Bureau of Labor Statistics, about 35 percent of new companies will fail during the first 24 months, approximately 50 percent will fail within five years, and 65 percent of businesses will close within 10 years of operation. 

It’s important to understand the four stages of business growth to launch and manage a successful business. Recognizing these growth phases can help you plan for your company’s next stage and drive your business forward. However, failure to identify your company’s current growth phase could lead to stagnation or decline. 

1. The Start-up Stage

   The first stage of the business lifecycle—the startup or development stage—tends to be the riskiest. This is the stage when a business concept turns into reality.

2. The Growth Stage

   Businesses enter the second phase once they’ve established a strong customer base, tangible profits, healthy cash flow, and increased market share.

3. The Maturity Stage

   The maturity stage is characterized by stability and steady cash flow. A mature business has control over its customer base, so you’ve likely established a solid market share in your industry. You are also somewhat protected from the risk of competition with similar startups.

4. The Renewal or Decline Stage

   To ensure business renewal, it’s important to demonstrate strong leadership skills and flexibility to adapt to changing circumstances. This may require upgrading your technology, pursuing new opportunities, developing new products or services, or learning new skills to boost your competitive edge.

Here are some common red flags that can lead to business decline if not addressed: 

• Employee turnover is increasing. Are employees leaving for jobs at other companies? 

• There are online complaints and poor reviews about your products or services. 

• Clients are paying their bills late or later than usual. 

• Teams are finding it difficult to collaborate. 

• Management is showing a lack of innovation, organization, and leadership.

• Your company’s market share is decreasing, and competitors are producing better products.

What should you do if you’re experiencing business decline? You typically have two choices: Reinvest or sell.

Reinvesting in the company can bring about renewal. However, you will need to conduct thorough market research, dramatically modify your business plan, and consider investing in new technology. If you decide to sell, get the best advice from a trusted business consultant. You should have a solid exit strategy to obtain the best deal.