Many companies start out as a simple idea. If they do reach their full potential, they will have passed through five very distinct business stages. These five stages are based upon critical points, which an entrepreneur must successfully handle to remain on a growth path – or face a decline in profits.
As an unwritten rule, if a business is growing according to plan, each of these stages are about three years in duration.
Generally, the more forward planning or strategic thinking you do, the less time it will take to travel through each phase. An exception is the start-up or ideas stage that is usually around the six- to nine-month mark.
It is not difficult to tell which stage a business is in. Significantly, the end of each of these five stages marks a danger period, which the business must battle through in order to reach the next, most challenging level.
Stage 1 Innovative Idea Stage
This stage is alive when the owner or manager has a quite high scale of motivation and optimism. The idea has been conceived and developed. Next research has established whether it can be transformed into a successful enterprise.
This is one of the most exciting times when getting into a business venture. Coming up with ideas for products and services to sell, nurturing those ideas until they become a reality and then turning that reality into a viable, ongoing business is the most enjoyable experience for any entrepreneur. Yet, once the business plan has been produced and there is full commitment to making the business happen, it is time to get to work and move to the second stage.
Stage 2 Entrepreneurial Stage
The enterprise is up and running and establishing a name for itself, thanks to the enthusiasm, leadership and creativity of its executives. The entrepreneur is focusing outward in order to market the business and generate new customers.
A company is characterized by long working hours and the sharing of a common vision. Emphasis is on sales and profits and hands-on management. Without this, a company will find itself in crisis mode.
There must be a strong focus on the goals of the organization and steady action to move the business to a higher level of success.
The upper half of this stage sees consistent sales being achieved with budgeted profit margins. In fact, the business reaches a point where the demand for the product or service sometimes exceeds supply and quality control deteriorates if the organization is not prepared ahead of time. In extreme cases, orders cannot be fulfilled due to a lack of staffing and/or product. The business has now been operating for two to three years on average.
There are many small businesses that never pass this stage even though they have been in business for a very long time in another venture. However, once management fully commits itself to becoming more organized and less prone to crisis, it is then in a position to make the transition to the next stage.
Stage 3 Systems Stage
When a company reaches this stage, they are experiencing consistent sales day in and day out, and require a more systematic and disciplined approach to doing business.
Hiring, training and retaining must take on a more structured plan.
A solid management structure must be in place. This should include a focused marketing plan along with a systemized sales and profit-building list of goals. The systems stage requires a high degree of control over the entire operation.
The owner or manager may still be very hands-on, but at the same time, would like to be more focused on business strategies. They are probably dealing with staff control and increased staff responsibilities. Although they recognize the need for staff training, chances are they won’t have a strategy in place to maximize training programs that are necessary for continued success in handling quality customer service. This time is critical to make sure effective sales and service strategies continue to stay consistent.
Many entrepreneurs are required to transform the way they do things at this stage. They are well on the way to building a successful company. They have been very outward looking, have pushed and pushed to the point where they see the light at the end of the tunnel and have a strong vision of where the company is headed.
Most businesses fail because they focus on efforts not results! Others fail because they have poor management and marketing skills and/or lack the financial understanding of their industry.
Systems allow you the support needed for a smooth operation of the business. Many businesses do make this transition and start to spiral down at this point. The decision may need to be made to engage a person or a consultant who can develop the internal processes while the owner and manager continues to concentrate on generating sales and building the brand of the business.
Stage 4 Delegation Stage
Most businesses do not move past developing effective systems. Many become disappointed and unmotivated because they have not yet achieved the financial objectives and lifestyle they were seeking when originally planning out their business venture.
This stage may be dangerous if not entered with a clear head. Often entrepreneurs become financially set within their business and begin to delegate, only to start another business venture.
Often the new venture is another location they may not be ready for at the time, or a new industry they lack knowledge and/or experience in. They stop relying on the hard work and skills that have brought them to this stage.
You often see a successful entrepreneur becoming complacent or too comfortable with their business – beginning to look for new exciting ventures to explore. The problem with this is they may be two completely different businesses that require different skills to succeed.
Strong consideration needs to take place before moving in a new direction such as this. Is it a wise move for the organization or does the entrepreneur simply wish to start back at stage number one with a new company? Is the team ready to handle new responsibilities and is the management team ready to take on a new focus and a new job?
Stage 5 Strategy Stage
Every time there is a new idea or strategy that affects the direction of the organization, the business is compared to the initial ideas stage.
The new strategy may be to change your branded image, adjust your customer focus, add a new product or service or take the business to a much higher level. If changes are dramatic, the cycle of stages will begin all over again. The business will again need to develop and grow through the stages to achieve maximum success.