Small businesses are the heart of the economy. They generate more than half of the nation’s job growth and contribute significantly to global financial wellness. 

Notwithstanding the challenges that accompany entrepreneurship, small businesses are increasingly thriving. The secret to success is persistence. To be a successful entrepreneur, you need to know how to lead your team through the necessary stages of growth in small business startups. 

By the end of this article, you will know and recognize the four stages of growth in small business management and understand how to lead your company through each. 

Why is Understanding Stages of Growth Useful to Your Small Business?

Different stages of small business growth require different approaches. Innumerable variables are involved in the production, marketing, and sale of products and services, and it is impossible to manage them all without being overwhelmed. 

There are tangible actions you can take to understand and predict a business’s behavior and growth. The Dynamic Growth Model (DGM) refers to a small business’s four discrete growth stages. Understanding the DGM will lend you the confidence to persist through difficult moments and the faith it takes to see a small business through to success.

How to Grow a Small Business into a Large Business

The first and most crucial step toward growing your business is establishing a clear and comprehensive vision. Once you have set the foundation, you’ll be ready to launch into the next phase: promoting growth.

The primary drivers for business growth apply to every business across all four stages of the DGM. For example, if you were looking for how to grow your barber business, you would want to connect with your customers and community, market your business well, and take tips from other successful entrepreneurs in your area. 

If you don’t have an idea of where to start, however, here are a few tricks that can help.

Maintain Consistent, Effective Marketing

Marketing is the key to reaching your audience and driving sales. To ensure you are continuously promoting your business and inviting more customers into your community, you should make sure you’re keeping in touch with clients through social media, internet searches, and email.

Prioritize Growth and Quality 

Growth and quality are often inversely correlated. Developing an understanding of growth and quality and when to focus on each is essential to last success. Alternate your focus between quality and growth to ensure that scaling your business doesn’t mean sacrificing the value of your product.

Plan Your Growth Strategy

To grow your business, you will need a firm understanding of the stages and strategies for growth. With your team, develop quarterly plans for growth, accounting for quality in the process. If you were wondering how to grow a video production business, your team might be able to help you think of strategies you wouldn’t have otherwise considered. 

Four Critical Stages of Growth in Small Business, When They Occur, and How to Survive Them

The four stages of growth in business often occur in consecutive order and require different responses from leaders. Why is an understanding of stages of growth useful to

your business? Understanding the demands of each step can mean the difference between success and failure.

The Start-Up Stage

This stage represents the beginning of your entrepreneurial journey. At this point, you are building and launching products and focusing on raising capital and developing marketing strategies. This stage consists of dramatic highs and lows, as you are still testing products and strategies. 

Success during the start-up stage depends on your ability to acknowledge misconceptions and errors and adjust rapidly. You must maintain confidence and humility to defy the expectations of what your business is “supposed to be.”

The Grow-Up Stage

At this stage, your business gains momentum. Your focus will be primarily on sales as you seek to build a loyal consumer base and generate enough capital to justify the existence and operation of your business.

During the grow-up stage, the complexity of your operations is likely to reach new heights; you will need to delegate tasks and hire the right people. You will likely have to consider some fixed expenses as you work out potential flaws in your business model.

Again, you will need humility to navigate this stage and appropriately delegate tasks successfully. You must clarify roles and allow people to perform those roles with sufficient freedom and trust. 

The Scale-Up Stage 

At this point, your business is likely experiencing consistent growth. You have tested and selected employees, products, and strategies to identify what works for you. You have solidified systems and processes and have developed consistency in your operations.

Businesses face important decisions about their potential for continued growth during the scale-up stage. Your business will likely need to expand into new markets and develop a more robust sales infrastructure.

To succeed during this stage, you will need either financial understanding or the help of a finance expert. You will need to take risks and trust in the long-term potential of rewards. You must exercise flexibility and comfortably invest money in your business.

The Dominant/Enterprise Stage

The final one of the stages of growth in small business has two names for two conflicting considerations. At this point, your business will have widespread recognition and established employees, and you can comfortably depend on an influx of profit.

However, you must consider whether or not to continue expansion (typically by acquiring other companies) or rest on your laurels. You may also struggle with the sheer volume of employees, expenses, operations, and day-to-day tasks.

Continue to remain open-minded, humble, and flexible. Think towards longevity rather than short-term success. Don’t forget to keep quality front and center as you continue to grow. Remember that you will have to make short-term sacrifices for long-term gains.

The Top Business Growth Examples in 2020

While preparing your growth strategies, reading up on other small businesses that have made it big can give you an idea of some business growth examples that work. 

Etsy

Etsy, the online marketplace for hand-made goods, was one of the fastest-growing companies from 2019-2021.

At the start of the pandemic, the company provided free shipping, developed its secure selling and buying technologies, and re-branded itself as a marketplace for hard-to-find items. It successfully moved from the scale-up stage into the dominant phase. At that point, Etsy’s total profits grew from $96 million in 2019 to $493.5 million in 2022.

E-Plastics 

E-plastics, a small San Diego-based company that produces plastics and fiberglass, experienced tremendous growth from 2019 to 2020.

In 2020, the company’s employees developed the first sneeze guards, catapulting the company into the scale-up stage as it expanded into unprecedented markets. This was made possible by the leadership’s trust in quality personnel.

Before You Go 

Now that you know the different stages of small business growth, you can successfully lead your company through each discrete step to becoming a household name.

Remember that the essential characteristics of a good leader are not just management skills; they are one’s ability to remain humble, flexible, and open to others’ suggestions.

About the Author, James Webster

James Webster, founder and CEO of ROK Financial has almost two decades of experience within the financial services industry. His passion for helping small business owners and his innovative way of thinking, has allowed him to run multiple successful businesses including National Business Capital & Services. Under the National name, the team was able to help secure over $1 Billion in financing for small businesses nationwide.