Stages of Business Growth

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Robert Likhang FCIS, ACMA, CGMA, CA(L), Principal  Consultant at RL Consulting, a Management Accounting & Business Advisory firm

Introduction

IT is important to assess stages of growth for your business, as each stage has challenges you need to overcome to move to the next stage of growth.

Neil Churchill and Virginia Lewis in the 1983 Harvard Business Review came up with five stages of growth which they called Existence – Survival – Success- Take off – and Resources Maturity.

My article requests you to assess the stage your business could be in and I will attempt to provide you with advice for growth to the next stage.

The stages are not meant to be exact, and your business could have characteristics that do not fit in perfectly with a particular stage.

Once you have identified your stage, the next move is to identify the problem which prevents you to move to the next stage.

The problem may be very obvious, or you may need a management accounting and/or business advisory practitioner to assist you with diagnosis, so that the problem is clearly identified and a strategy is created to solve the problem.

Existence Stage                            

As the name states, the process of legal registration is completed, a business plan is available.

The challenge is often in the implementation of the business plan, either the executive ability or complexity or deficiency of the business model.

What is particularly critical is that the market segment and customer segment who will obtain value from the business have to be clearly identified and the delivery of value has to be done in such a manner that the value is preserved and better increased.

If the business concept was to provide value to young middle class adults and your product or service is not provided through online, you may fail to capture the desired clients.

You may need an experienced business coach or mentor to help you with proper attitude and mental toughness to face the brutal facts as they emerge.

The other reality is that Existence stage may need to be financed your savings, start-up capital which may seem to be eroding with slow growth or mistakes as a result of the panic mode.

Never perform outside your business plan. If there is a need to make changes on the business plan, start there rather than act outside the plan.

Spend money on coaching, training, mentoring and advisory services. Some professional services firm like RL Consulting provide business coaching services.

You have laggards advantage. That is to say you can always learn from those who have been in the business before and you are able to tweak your product or service or business model to differentiate it or to address the weaknesses in competitor products services or business models.

Personal attitudinal advice is that you should not panic, remain focused, and increase your resilience.

Survival Stage

At this stage most of labour pains are gone, and profits start trickling in.

There is still a growing uncertainty as most both your clients and yourself are still trying to establish common understanding.

The services, products, business model should still continue to be improved (continuous improvement).

There is an increasing need to put your ear on the ground to find out how the customers desire, and see where there is a need for improvements.

There is also a temptation to lose focus as the customer’s desires and their diversity could lead to confusion.

The concept of focus on market and customer is critical. Remember you are building business and not making money as yet. Do not try to be everything for everyone, it is a recipe for failure. Those who do not fit in within your business concept are not your customers as such you should churn them. As much as you need a strategy for attracting and retaining your customers, you should also have a Churn strategy.

You need to start formalising your business, look at legal and regulatory compliance, start managing reputation as those issues can kill your business regardless of how excellent your business concept it.

You may engage an outsourced chartered accounting firm like RL Consulting to take over your taxation, company’s compliance and human resources.

Be willing to outsource every non-core functions so that you have time for your strategic business issues. You’re Business Coach and Advisor is a partner at this time.

Success Stage

At this stage, business is well known by customers and financiers (banks) but as well as the competitors.

While the business owner may have taken the business to this stage, his competencies may be insufficient to maintain the Success stage, and the business could start dwindling is not well managed.

The owner should start engaging professional management and restructuring the company to ensure that its organisational design allows improved control and performance.

The owner should slowly move out of the business to allow the professionals to lead it.

Moving out of own business is complex decision for the founder as he still trusts in his abilities and personhood.

Business owners may see the need to move out but would often replace themselves with members of family. The growth from this stage is not about the personhood as it is having appropriate strategy and systems, as well as skilled staff.

Because a successful business is attracting attention of investors and financiers, the temptation is often dilution of focus leading to unwise growth strategies.

The Business Advisors should assist you to develop growth strategies either organic or through mergers and acquisitions, or expanding operations or going to new markets, while professionalising the management team.

Take –Off Stage

This is a time when your business is producing excess profits which can be used to take over smaller businesses.

The business owner needs to concentrate on brand building, reputation and good governance.

Governance is the top in the list, thus a board has to be established, and all governance models such as risk management frameworks, business continuity plans are critical.

Your business advisors remain helpful, and your executive management needs executive coaching. At this stage the business owner has long moved out of the business and working as investor at group level. Often leverage would have been achieved through additional equity received.

Resource Maturity

This is the last stage of growth. It is not static but rather dynamic, which means a number of businesses are at different levels of Resource Maturity.

The company at this level is resource heavy. There are increasing inefficiencies both operating and capital in nature.

Your business advisor could help in areas of governance, corporate finance and corporate strategy.

The board that operates well at company level may not have capacity to work at group level as a different set of skills are required. At RL Consulting we often establish problems with group of companies never realizing their changed position.

Conclusion

The wisdom is knowing where you are so that you can continue to chart ways for the future.

A strategic approach to business management is the number one requirement.

The one thing that determines success, is strategy, and ensure that your business advisor and management accountant is able to help you think above operations.

 

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