This post will discuss the four stages of growth that a business organization might experience. Harvard Business School cites five separate stages that a small business or start up endures during a company’s growth phases. Other periodicals state four to five stages of development. The focus will be to discuss each growth phase in detail in comparison to Harvard Business School.
The first stage of a new business operation is the “owner does everything stage.” Whether it is the accounting, sales, production, promotion of product or services that the business delivers to the customer. This is where the individual is the go to point for all operations. (McCubbrey 2009) This includes obtaining necessary licenses, conducting market research, creating a business plan, bank accounts, business insurance, attorneys and the like. (Fairfax County n.d.) Harvard Business School calls this the “existence stage” where it is the company’s strategy is to “simply remain alive.” (Churchill May-June 1983) It is noted that most start ups do not survive this stage due to not enough capital or the business owner just cannot maintain the hours and energy to make the business survive. (Churchill May-June 1983)
Stage two is a result of the owner having the ability to hire more individuals to an organization. The hiring of competent employees helps with expanding the client customer base, forecasting sales, refining your marketplace and branding issues. (Fairfax County n.d.) This is another opportunity to streamline any processes and make sure that business operations are standardized so that employees have an understanding on what their jobs entail. However the owner is still responsible for the hiring, supervision and other financial obligations. (Fairfax County n.d.) Harvard Business School refers to this stage as the “survival stage” which the business owner still makes major decision, and the business may grow in profitability if cash forecasting is accurate. (Hiersekorn 2013) Still a large number of businesses can fail at this stage if products or services are not delivered in time. (Churchill May-June 1983)
Stage three is referred to the ‘management stage’ i.e., the owner can relinquish some of the day to day activities of the business so that the owner can focus in on what products and services are meeting profitability goals and which are not. The owner can now add managers or an additional layer of supervision. (McCubbrey 2009) At this juncture, the organization should be planning for expansion if there is enough capital to do so. Look to expanding in new markets i.e., may other towns, cities, states or into other countries if necessary. Possible mergers with other companies can arise as well. (Fairfax County n.d.) One key point to remember if the business is expanding and is a successful enterprise is at the end of stage 3, the company should be an asset. (Hiersekorn 2013) The Harvard Business School states that this stage is called “Success” and this stage is broken into two sub-sections under this heading. Success is the ability of the company to expand or keeping the company “stable and profitable, providing a base for alternative owner activities.” (Churchill May-June 1983) The two sub stages are “Success-Disengagement” whereas the company has good market penetration and stays in this stage indefinitely. The second sub stage is the “Success-Growth,” where the owner consolidates capital and will look for more growth. (Churchill May-June 1983)
The final and fourth stage is adding more layers of management and processes. The business adapts human resource policies, budgets and control protocols. (McCubbrey 2009) Again, the company can sustain dominance in the field of business it conducts, sustain its growth and create new products or services to their customers. (Fairfax County n.d.) However, this is a time where a business can see any type of declining sales as well and could well lead to problems in its operations. An owner at this point can choose to retire or sell the business, merge this business with another competing business. (Hiersekorn 2013)
This is where Harvard Business School deviates with most written articles about phase four. Harvard’s phase four is called “take-off.” This is the phase where the owner could delegate responsibilities to others to improve the company overall. (Churchill May-June 1983) Is there enough capital (cash) to continue operations? Does the business have a strategic plan? Does it issue stock in the company? Or will the company be sold at a profit? (Churchill May-June 1983)
Finally, the fifth stage as discussed in the Harvard Business School journal is “Resource Maturity.” The company is adequately staffed, systems are developed and the owner and business are separate entities. (Churchill May-June 1983) The company is working at its own pace and is hiring individuals to sell products and has a customer service department which services customers’ questions and concerns. The business has “arrived” and is working autonomously.
Churchill, Neil C., Lewis, Virginia L. “The Five Stages of Small Business Growth.” Harvard Business School, May-June 1983: 1-12
Fairfax County, Virginia. Four Phases of Business. http://www.fairfaxcounty.gov/dpsm/osb/four_phases.htm (accessed January 23, 2013).
Hiersekorn, David. The Four Stages of Business Growth. November 28, 2013. http://privatecounsel.com/the-four-stages-of-business-growth/ (accessed January 23, 2014).
McCubbrey, D.J. “Business Fundamentals.” In Business Fundamentals, by D. J. McCubbrey, 79. The Global Text Project, 2009.