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The 4 Stages of a Growth-Minded Small Business

Here at Teik Oh Dot Com, I aim to be a one-stop-shop for growth-minded small business owners, where they can go to get inspiring and practical ideas to improve their business and become successful.

While I offer different tools and give advice for small business owners at different levels of development, I thought it might be useful to describe the way a small business can develop, and what their owners need to think about at each stage.

Knowing which level of development you are in is important because you can then focus on the different aspects of your business that need special attention at each different stage. A growing small business will usually go through 4 stages of development.

These are the startup phase, the growth phase, plateau (or reinvention), and decline (or succession).

The early stage of the startup phase is obvious.

This is where you move from just a great idea into building the business model and opening your doors and make your first sales. However, there are a lot of moving parts to align at the start and you can download my free report on what you need to know when you first startup. In this early phase, you need to make sure that you have fully researched your business idea and then set your business up carefully.

However, the startup stage could last 1, or even up to 3 or 4 years. What defines this stage is not a fixed length of time but how soon you establish your business so that it runs more or less “automatically”. This means you are no longer making it up as you go along, you have prepared a business plan to take you to be an established business, and you have established your essential business systems.

The other concerns you will have to focus on early include your sales strategies. While you are busy up-front with organising and starting your business, you may not need a full-blown marketing plan, but you certainly need to have identified your target market and what your product can do for them. From this, you need to set up some early sales strategies – periodic offers and sales events, cold-calling schedules, warm contact conversions and so on, just to drive initial traffic to your door.



You will also need to think about hiring staff, but one word of advice I have about that is not to hire staff as you feel you need them. Start a strategy now about who you need, what type of people these should be to fit in with your vision in the future, and when you need them. To do this I suggest you draw up your completed organisation chart, showing your business empire once you have attained your vision, and organising the functions and therefore people in the complete picture. Then, you can identify the people you need now, and gradually fill in the spaces.

If you have established your business successfully and you find yourself moving along your chosen strategic direction, your small business will enter into the growth phase. The common factor in the growth phase is that the business grows exponentially quickly. People have found your product and like it, and your early marketing has succeeded.

Small business owners have to take particular care in the growth phase because the danger of “overtrading” threatens. Overtrading is where your sales start to overtake your resources and your cash flow suffers because of the delay between paying for the increasing volume of the raw material of your products or services, and the collection of sales from customers. As well, your other resources may also not be catching up – your staff are momentarily overworked and the systems designed for one level of activity start to fail at the increasing levels of activity. This means that you need to understand your numbers and to obtain financial reports regularly.

Control of cash flow takes on primary importance as a back-room function so you need the right accountants onboard, whether working for you or as your external advisors. Make sure you choose the right ones!

In this stage, the growing small business needs to pay attention to its structure and make sure it has effective processes to predict business growth and cater to it. Small business owners need to enter into the strategic (long-term) planning/annual planning cycle. In this cycle, you need to put together a long-term plan that looks ahead 5 to 10 years to predict and plan for the resourcing of growth. This cascades into annual business plans aligned to the bigger picture, but that details the steps to be taken day-by-day from year to year.

You need to make sure that you are controlling your sales pipeline through a focused marketing planning process. This defines your target market even further than before, and the marketing messages that ensure they attract the ideal customers during the growth phase, as well as set out a focused marketing campaign to stay organised while developing your expanding markets. It is no longer effective to rely on some short term sales strategies, you now need to look at marketing as a total system that not only affects sales but overall branding, messaging, marketing channels, the sales funnel, customer service and product delivery, and even pricing strategy.

In the growth stage, you also need to pay attention to team-building, human resources systems like annual performance reviews and succession training, and improvement of your systems and procedures. You have the opportunity in the growth stage of setting up your business so that it runs by itself and where you are providing strategic management and leadership rather than working directly in your business. In this stage of growth, you need to show your leadership qualities in yourself as well as your senior people.

The next stage of business growth is something you need to recognise as quickly as possible.

This is the stage called Plateau where your business growth has slowed and the business starts to coast. You and some of your key people start to show signs of being tired. The business doesn’t excite you enough to jump out of bed every morning anymore. If you’re not careful, working in the business starts to become a chore.

However, I also like to call this stage Reinvention.

If you recognise that your growth and your excitement are beginning to stall, this is an opportunity for you to reinvent the business or the business model. This is the time to prepare your next strategic plan with new eyes. This time, instead of looking ahead as the same business, start long-term planning with a new question: “What new opportunities are open to us now?”

In the Plateau/Reinvention stage of the business, you can go two ways. First, you can reinvent the business and start afresh. This requires innovation and possibly new people. You can review your purpose and vision and see what new thinking is required, then review your organisation chart and add new branches and go out and interview new people with a new purpose in mind. A new planning cycle should be entered into to find new areas to conquer and reinvigorate yourself.

If you are successful in reinventing yourself, the business should enter into a new Growth phase again, and there is no reason why a business cannot cycle between growth and reinvention continuously.

The second route is to start planning for succession. Maybe you feel that the next challenge for the business is not yours to lead for whatever reason. If this is the case, you should start to focus on building a strong management team that can either run the business under management without you, or that can provide structural value for any new owner, thus increasing future sale value. Succession planning becomes a key focus.

Even at this time, you should not take your eye off the numbers and financial performance. It is so easy to let the discipline slip in the Plateau stage and the financial performance starts to suffer.

I believe it is also important to conduct a business review regularly so that you can recognise the symptoms of fatigue and plateauing. A comprehensive business review that checks on the management, the processes, and the finances, will reveal any weaknesses and what to do about them. Even if you don’t conduct business reviews at least once every few years, if you feel that growth has become stagnant, you should conduct one then.

If you have chosen succession, or if you did not recognise that your business was in the Plateau stage, then you enter into the Succession/Decline stage of the business’ life.

This is where, either you plan for succession in your business or arrange to sell the business, or where it gradually slips into decline because you have taken your eye off the ball.

Of course, you need to not lose sight of the value of your business. There may be occasions when you simply decide to close it down, but generally, your business will have some value and you will be able to sell it to recover some of your investment.

In this stage, internal succession planning, perhaps to a family member, becomes the focus. Otherwise, developing a value-profile of the business becomes a key necessity. This is where you ensure that all the automated systems in the business are refreshed and work, that patents and intangible value is legally protected, that markets are shown to be engaged and still responsive to the business, that the financial performance is still returning a good return, and that key management and staff are intact and provide value to the business structure. These are the characteristics that increase the value of goodwill in the company.

When you start your business, you don’t usually look so far ahead to consider closing it down or selling it!

But you should be aware of the different stages your small business will go through as it grows, hopefully into a medium-sized business and then into a large business. You may be hoping to build a business empire lasting generations. This means that you need to be aware of the stage your business develops into, and be prepared to focus on key areas at each stage.

Teik Oh Dot Com aims to provide growth-minded small business owners with all the tools to foresee, identify, and process all the tools you need in each stage of development. Make sure you subscribe to the blog posts containing valuable, practical information to help you grow your business successfully.

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