Every business, regardless of its size, generally goes through five stages of business growth — development, startup, growth, maturity, and renewal or decline. Each stage in a company’s lifecycle brings its own unique challenges and opportunities, and each is considered a healthy part of the business cycle.
By learning about each of the growth stages, you can identify where your small business currently is in the cycle and develop the right business growth strategy. Read on for a closer look at the five key stages of the business lifecycle and the steps you can take to increase your odds of success along the way.
1. Development
The first stage of small business growth actually begins before you start your business. In the development phase, you’ll be identifying an unmet need in a specific market and doing all the research necessary to get your business off on the right foot.
How to Support a Business in This Phase
It’s all about laying the groundwork here. You’ll want to create a detailed business plan that identifies exactly who your business will serve, the products or services your business will provide, the marketing tools and strategies you’ll use, your budget for the first year, and how you will fund your business.
If you don’t feel confident yet as a business owner, it may be beneficial to take business courses or workshops to ensure you’re ready to launch.
You’ll also want to consider whether you’ll want to hire help. Having part-time, full-time, or even freelance employees will add to your startup costs but can help you get your business up and running faster.
When to Go to the Next Phase
Once you have a plan in place for your business and the funds you need to launch, it’s time to move to the next phase.
How to Get to the Next Phase
This may be the time to quit your regular job so you can fully focus on your new endeavor. Alternately, you might decide to continue working at least part time while you launch. You can always quit once you’re making enough to replace your full-time salary.
2. Startup
Though often considered the riskiest stage of business growth, the startup phase can also be one of the most exciting. This is when your idea is put out into the world and you start selling.
During the startup stage, there’s lots to be done: You’ll need a website, office space, and employees, as well as a product or service to sell.
How to Support a Business in This Phase
Hopefully the budgeting and finance work you did in the development phase ensures you have enough capital to cover your startup costs, but if you find yourself coming up short, you may want to weigh the pros and cons of a small business loan. Some lenders charge high interest to loan to startups, so determine whether that’s a good tradeoff for getting the capital you need.
This is also a period of trying things out. You can test your product and target market, as well as different marketing channels. If something doesn’t work, you can tweak it and try again.
You may also want to spend time hiring people who can best help your company grow. Identify the skills each role needs and then carefully choose the best candidate.
Recommended: Steps to Writing a Business Plan
When to Go to the Next Phase
As one of the early stages of business growth, you may be in the startup phase for a while. You’ll know it’s time to move on when your business starts to settle and profits become steady.
How to Get to the Next Phase
Once you’re no longer struggling financially and can confidently project sales for the future, it’s time to get ready to grow your business.
3. Growth
After being in business for a few years, your market share and customer base is now experiencing rapid growth. This presents a variety of opportunities to expand your business. This could mean adding another location to the mix, hiring more staff, or expanding your product line.
How to Support a Business in This Phase
It’s important to keep an eye on the future while also maintaining day-to-day operations. You’ll want to set short- and long-term goals that make the most sense for your business and use your resources effectively. You’ll also need to make sure you have enough working capital to both meet your current financial obligations and also invest in new opportunities as they present themselves.
When to Go to the Next Phase
Once you’ve achieved your short- and long-term goals for growing your business, or feel you’ve grown as much as the market will allow, you may be ready to enter one of the stages of small business growth for the established, successful company.
How to Get to the Next Phase
When your focus pulls back from aggressively growing your business, it’s time to move into the maturity phase.
4. Maturity
One of the last of the stages of business growth is maturity. This happens when your business is stable and profits are steady. You can rely on revenues growing moderately year to year, and you confidently make business decisions.
How to Support a Business in This Phase
In this phase, you’ll want to keep on doing what works. At the same time, you want to be careful not to succumb to the biggest risk of the maturity phase — becoming stagnant.
Even as a mature business, you don’t necessarily want to sit still. It can be wise to continue looking for opportunities to expand your customer base or develop new products or services that tap a new market.
When to Go to the Next Phase
For some business owners, the maturity stage may bring thoughts of selling, merging, or buying another company. As you question “what’s next for my business?” you may be ready to enter the next phase.
How to Get to the Next Phase
Something has changed in your business, whether it’s a lack of desire to continue it or the fact that your product may be less relevant (think: camera film in a digital world). It’s time to consider the best next steps for your business.
5. Renewal or Decline
Now is the time for the hard questions: Do you need to close down your business? Is it time to sell? Should you consider a merger or acquisition? Can you come up with innovative ideas that will inject new life into your business?
How to Support a Business in This Phase
The answer lies with your personal and professional goals. If you feel ready to retire and focus on other areas of your life, you may decide to sell the business or close it down. If you’re not ready to step away from the business, on the other hand, you might decide to invest money in developing or acquiring new products or connecting with a different target market.
Pros and Cons of the 5 Stages of Growth as a Model
| Stage | Pros | Cons |
|---|---|---|
| Development | Opportunity to explore exciting ideas | Takes dedication |
| No risk since you haven’t yet launched | Can be difficult to get funding when all you have is a business idea | |
| Startup | You get to bring your vision to life and test your products/services | May need to bring in an investor |
| Opportunity to adapt as needed | Startup costs may exceed budget | |
| Growth | Revenues can skyrocket | Growth may require capital |
| You can hire staff to better serve customers | Requires careful strategy | |
| Maturity | Things are stable and running the business is easier | Easy to become stagnant |
| Reaching this stage means you have succeeded | Must keep an eye on the competition | |
| Renewal or Decline | Great chance to reinvent your brand | May require capital to renew brand/products |
| Opportunity to do what you want (sell, exit) | Best option may be to close your business |
Identifying Which Stage Your Business Is In
Throughout the life of your business, you will likely be in one of these stages of business growth. Identifying which one your business is currently in can help you assess and solve current challenges, as well as strategize for how you will move to the next business stage.
The Takeaway
While every business is unique, all businesses tend to experience common problems and opportunities that arise at similar stages in their development. Knowing where your company is in the business cycle can help you assess and solve current challenges, develop growth strategies, and plan for the future.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
FAQ
Do you have to go through all five stages of business growth?
Generally, every business will go through each of the five stages of business growth, though how long a business spends in each may vary.
What are the different stages of business growth?
The five stages of business growth are: development, startup, growth, maturity, and renewal or decline.
Is starting up a stage of business growth?
Yes. The startup phase is the second stage of business growth. It occurs after you’ve developed your business idea and before you’ve reached the growth stage.
Photo credit: iStock/LaylaBird
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