4 WAYS TO GROW A SMALL BUSINESS

Growth Phase

The five management elements of managerial style, organizational structure, the level of formal systems, significant strategic goals, and the owner's engagement in the business are used to describe each stage, which is distinguished by an indicator of size, diversity, and complexity. In Exhibit 3, each stage is shown, and this page provides narrative descriptions of each stage.

Growth Stage

They start by assuming that a business must evolve and go through all stages of growth or fail to exist. Second, the crucial initial phases of a company's birth and growth are not adequately represented by the models. Third, these frameworks neglect other elements like value contributed, the number of locations, the complexity of the product line, and the rate of change in products or manufacturing technology and instead define firm size primarily in terms of annual sales (although some mention the number of employees).

We combined our knowledge, a literature search, and empirical study to create a framework applicable to small and developing organizations. The framework that resulted from these efforts outlines the five developmental stages depicted.

Characteristics of small businesses at various stages of development

Existence is stage one.The business's main issues at this point are finding consumers and providing the contracted product or service. The following are a few of the most important inquiries:

Can we attract enough clients, distribute our goods, and offer services effectively enough to sustain our business?

Can we broaden our sales base beyond that one primary client or the pilot production process?

Are we financially secure enough to meet the significant cash requirements of this startup phase?

The structure of the company is straightforward; the owner manages everything and directly oversees employees who ought to have at least average competence. There are few to no formal planning or systems. The company's only goal is to continue existing. The owner is the company, does all the necessary work, and provides the majority of the energy, direction, and capital, along with family and friends.

New restaurants, retail stores, and high-tech manufacturers are all examples of companies in the existence stage. These businesses have not yet stabilized their production or their product quality. Many of these businesses never succeed in gaining enough client acceptability or product capabilities to be profitable. When the start-up money runs out in these situations, the owners close the business and, if they're lucky, sell it for its asset worth. (Exhibit 4's endpoint 1 is shown.) Sometimes business owners depart because they can't handle the demands the company makes on their time, money, and resources. Companies that survive transition to Stage II enterprises.

Development of small businesses

Stage II: Survival.

By getting to this point, the company has proven that it is a viable business. It has enough clients and keeps them happy with its offerings to maintain them. The fundamental concern thus moves from mere existence to the connection between revenues and expenses. The following are the primary concerns:

Can we produce enough money in the short term to break even and pay for the upkeep or replacement of our capital assets as they become worn out?

Can we, at the very least, produce enough cash flow to maintain our operations and fund development to a scale that, given our industry and market niche, is sufficiently significant to create a profit from our assets and labor?

The structure is still straightforward. The business could have a small staff that is directed by a general foreman or a sales manager. They both follow the owner's fairly clear directions rather than making any significant judgments on their own.

The development of systems is minimal. At best, formal planning is cash forecasting. Survival is the main objective, and the owner continues to be associated with the company.

The business may expand and become more profitable in the Survival Stage, progressing to Stage III. Or it might, as many businesses do, spend some time in the Survival Stage receiving marginal returns on time and money spent (see endpoint 2 on Exhibit 4) until going out of business when the owner quits up or retires. This category includes "mom and pop" shops as well as manufacturing companies who are unable to successfully market their product or method. Some of these struggling companies have eventually grown financially viable enough to be sold, usually at a little loss. Or they could entirely fail and disappear from view.

Stage III: Success. Owners must choose now whether to capitalize on the business' successes and grow or maintain it steady and profitable so that it may serve as a foundation for future owner initiatives. The choice between using the business as a platform for growth—making it a substage III-G company—or as support for the owners as they fully or partially withdraw from the business is thus a crucial one. Refer to Exhibit 3. The desire to launch other businesses, run for office, or simply pursue hobbies and other extracurricular interests while keeping the firm more or less in the same state could be the driving force behind the disengagement.

Substage III-D. The company has reached real economic health during the Success-Disengagement substage, has the necessary scale and product-market penetration to guarantee economic success, and generates average to above-average earnings. As long as environmental change does not eliminate the company's market niche or ineffective management does not weaken its ability to compete, it can remain in this stage indefinitely.

Organizationally, the company has expanded to the point that it frequently requires functional managers to assume ownership of certain tasks that the owner formerly undertook. The managers should be capable but need not be of the greatest caliber because the corporate objectives restrict their ability to advance. Cash is easy to come by, thus the key priority is to prevent a cash drain during good times that would weaken the company's ability to weather the inevitable bad times.

Also joining the team are the first professionals, typically a controller in the office and sometimes a production scheduler in the factory. There are some basic production, marketing, and financial procedures in place. Functional delegation is supported by planning in the shape of operational budgets. The business's owner and, to a lesser extent, its management, should be keeping an eye on a plan to essentially keep things as they are.