The Five Stages of Small Business Growth

Abstract

Develops a model relevant to small and growing businesses that delineates five stages of firm development. These stages are: (1) existence--concerned with garnering customers and delivering the product or service contracted for; (2) survival--firms have demonstrated that they are workable business entities, but the key question becomes whether there is enough money for the firm to break even and stay in business; (3) success--here the decision facing owners is whether to exploit the company's accomplishments and expand or keep the company stable and profitable, providing a base for alternative owner activities; (4) take-off--concerned with how to make the firm grow rapidly and how to finance this growth; and (5) resource maturity--companies have the advantages of size, financial resources, and managerial talent and will be a formidable force in the market if they retain their entrepreneurial spirit. Each stage is characterized by an index of size, diversity, and complexity and described by five management factors: managerial style, organizational structure, extent of formal systems, major strategic goals, and the owner's involvement in the business. In addition, this research identifies eight factors prominent in determining firm success or failure. They include: financial, personnel, systems and business resources and the owner's goals for him/herself, operational abilities in doing important jobs, managerial ability and willingness to delegate, and strategic ability for looking to the future. Knowing which development stage the firm is in will help managers, consultants, and investors make more informed choices and prepare the company for later challenges. (SFL)

Keywords: Firm control, Management skills, Firm performance, Firm growth, Growth strategies, Business stages, Startups, Established firms, Growth firms, Expansion firms, Firm management, Firm survival