Decades of analysis have provided us with a wealth of information about the growth and development of businesses, and a framework that can be applied across many industries and applications. Using this framework, we can assess the goals, practices, and needs of most businesses and make intelligent predictions of future needs.
According to the Harvard Business Review, the 5 stages of business growth are:
Phase 1: Existence
At this phase, the business is primarily concerned with the day-to-day questions of survival and is focused on the ability to secure customers and deliver the product or service. Typically these businesses have minimal staff, with the founder or owner either doing or directly overseeing the most crucial tasks.
Because cashflow is so crucial in this stage, and because it is typically the owner themselves managing accounting, inventory, sales, and support, their internal systems are often based upon spreadsheets, documents, and contact lists. These systems are only adopted because they fit the business needs, technical expertise, and budget of the business at the moment; they are often not adopted for strategic or long-term goals.
Phase 2: Survival
In this phase, the business has demonstrated that it is a viable organization. It has proven that it can attract customers and sufficiently satisfy them to remain in operation. At this point, the business must turn its attention to profitability. Does the relationship between revenue and expenses ensure enough cashflow to survive a downturn, or, better yet, to facilitate growth?
At this stage, the needs of the business have outgrown the ability of the owner to personally manage and oversee every aspect of operations. There are typically a few employees within a simple structure, and managers report directly to the owner. Staff are generally in place (often a part-time bookkeeper) who perform basic functions like work orders, purchase orders, accounting, and inventory control. As the need for these systems has expanded, the business has often implemented best-in-class standalone software for these specific needs. Reporting, planning, and forecasting at this stage is typically focused on cash flow.
Phase 3: Success
In this phase, the business is stable and successful. Leadership faces a key decision of whether to leverage this stability as a platform for further growth and expansion or to use this stability in order to step away from the business and pursue other activities.
The business has grown to a phase where it requires professional management and administration, regardless of which route ownership chooses. Employees are numerous and autonomous enough that the business needs connected systems, where multiple employees can access a CRM, initiate work, sales, or purchase orders, plan production or inventory, and other necessary functions. Systems need to work together in real-time, and reporting, forecasting, and planning tools need to be accurate and sophisticated, enabling detailed analysis.
Phase 4: Expansion
Should the business decide to grow beyond stability, phase 4 becomes crucial. Whether the long-term strategy is to diversify or consolidate, it has to grow beyond the scope of the original owner or leadership, considering the needs of investors, creditors, and customers more than it ever has in the past.
At this phase, systems need to not just connect with each other, but connect people. The business now has developed a culture. Customers want service and support 24/7, marketing and sales need to be tightly integrated, and decisions need to be informed by advanced analysis and business intelligence.
Phase 5: Maturity
At this phase, the business has matured and financially and operationally separated from the original ownership. It has talented and experienced managers, detailed operational and strategic planning, and is a fully connected business.
As we can see, at every phase of growth, a business requires more capabilities from their technology and systems, and it happens all too often that business adopt a new suite of tools at every phase. Unfortunately, this approach is not only expensive in terms of the direct cost of purchasing and implementation of new software, but it has layers of hidden costs in terms of staff training time and loss of productivity at every stage, as teams adapt to new systems and processes.
Fortunately, we now have tools and technology that can grow and adapt with manufacturing companies at every stage of growth, with robust tools and advanced intelligence that will keep pace with the changing needs of a business, no matter where they are in their journey toward success. Contact our company to learn about how to choose software that will meet your needs now and into the future, facilitating growth and streamlining costs at every phase.