Stating the stages of small business growth can be near impossible because of their unique differences. They vary in idea, size, capacity, workspace or even customer target needed for their growth. Small businesses are unique in their styles of management, organisational structures and the autonomy of their actions.
However, a closer look at small businesses will reveal some similarities of the same problems that have retarded their development and growth at a particular point in their time. Some have thrived through it while others have failed.
These similarities noted in a small business form a pattern that helps in understanding the types, features and difficulties, ranging from a roadside supermarket with three to four minimum-wage employees to a $30-million-a-year tech firm undergoing a 40% periodical rate of growth.
Understanding the stages is necessary for managers and owners of small businesses in handling their crucial challenges; for example, the need to hire more staff and proprietors’ excessive time commitment throughout the early phase.
Here are the pivotal three stages in small business growth:
When an Idea Becomes a Product or Service
Every business starts with an idea. This idea warms the heart because you thought of something that becomes huge.
After the idea, next is the drafting of a plan. This is where challenges come in. It usually revolves around getting target customers and delivering the product or service.
It usually follows questions like:
- Will we be able to attract enough customers, distribute our products, and provide services well enough to turn a profit?
- Do we have adequate funds to meet the significant cash requirements of this early phase?
Regardless of all these questions, no business can thrive solely on an idea, you have to start with a simple arrangement.
Owners are in charge of everything and oversee competent employees. The company’s only plan at this stage is to survive. The owner is the heart of the business, and a primary source of motivation, direction and capital, which he or she gets from relatives, friends or savings.
Take creative agency, Cregital, for example. The founder, Evans Akanno, who said in an interview “I had saved about 600k from freelance projects and started out with registering Cregital, then got a small office in Surulere, Lagos.”
Note, small businesses at this stage span from newly opened restaurants, retail outlets to high-tech firms that have yet to achieve production or product quality stability.
Staying in the Game
When a small business attains this stage, it has shown that it is a practicable business entity with paying customers. The key issue now becomes keeping the customers, maintaining revenues and expenses.
Keeping customers engaged with your business is the priority of any business and also coupled with attracting new customers. Small businesses will have to get innovative in making the customers stay and build their loyalty. This could happen through having integrity or speedy deliveries of products and services.
Revenues and expenses can also serve as a problem in this stage with this question: can we earn enough cash in the short term to break even and cover the cost of repairing or replacing our capital assets when they wear out?
The structure is still straightforward. A general supervisor may oversee a few people at the company. Neither of them makes big decisions on their own; instead, they carry out the owner’s rather well-defined directives.
The leadership at PlentyWaka, which has rebranded to Treepz, is an example of a business that stayed in the game because of proper planning. In an interview with the founder Oneyeka Akumah he says “initially, we were pretty much on a rocket ship, in six months we got over a hundred thousand people riding on our platform. Then the pandemic happened. Coming out of that to start back up, we quickly had to raise some funds. So we secured $300 thousand last year to sustain the business.”
When a firm reaches this stage, the dilemma of expanding or remaining stable and profitable provides a base for alternative activities by the owner.
The owner holds more power over what will happen regarding the moving forward of the business. They can decide either to grow by risking all the revenues generated or the fixed borrowing power of the company and risk it in financing.
The owner can also decide to develop the business by expanding its offering. Remember, these stages in small business do not transit from one to the other so easily. It takes a lot of determination, foresight and patience. As we know, great things take time.