In Part I of our blog post, we discussed the concept that a business has a lifecycle, just as living things do. You have probably noticed that start-ups have different qualities and organizational needs than growing businesses and established, “status quo” businesses. For example, Uber has different challenges than Bank of America, and as a consequence, takes different actions.
In the excellent Harvard Business Review article we mentioned yesterday, The Five Stages of Small Business Growth by Neil C. Churchill and Virginia L. Lewis, the authors defined the stages of small business and provided characteristics that they displayed. In our previous blog post, which paraphrased the stages, we discussed the first stages:
- Stage I: Existence
- Stage II: Survival
- Stage III: Success
- Status Quo Model
- Growth Model
Now, let’s review later lifecycle stages and how to recognize them:
Stage IV: Take-off
In this stage, main problems are how to grow rapidly and how to finance that growth. Key questions are:
Delegation—Can the owner delegate responsibility to others to improve managerial effectiveness of a fast-growing and increasingly complex enterprise?
Cash—Will there be enough to satisfy the great demands growth brings and a cash flow that’s not eroded by inadequate expense controls or ill-advised investments?
- The organization is decentralized and, at least in part, divisionalized—usually in either sales or production.
- Key managers must be very competent to handle a growing and complex business environment.
- Systems, strained by growth, are becoming more refined and extensive.
- Both operational and strategic planning are being done and involve specific managers.
- The owner and the business have become reasonably separate, yet the company is still dominated by both the owner’s presence and stock control.
This is a pivotal period in a company’s life, according to the authors. If the owner rises to the challenges of a growing company, both financially and managerially, this can become a big business.
Stage V: Resource Maturity
A company in this stage has:
- Staff and financial resources to engage in detailed operational and strategic planning.
- Management that is decentralized, adequately staffed, and experienced.
- Systems are extensive and well developed.
- Owner and business are quite separate, both financially and operationally.
Where does your company fall in this business lifecycle spectrum? Where do you want it to be? Take our online quiz to find out more today.