The stages of small company growth

The stages of small company growth

Every small business, freelancer, contractor or sole trader has their own challenges, capacity for growth and ways of working. They operate in different fields with varied needs and clients.

But, despite this, there are commonalities which unite even the most diverse set of operations.

These shared problems and areas of growth can be broken down into five phases: existence, survival, success, take-off, and resource maturity.

Around 20% of small businesses in the UK fail to make it through their first year in operation, meaning developing an understanding of these stages and how you can plan to address the issues associated with them will increase the chances of long-term success.

The existence or start-up phase

• Fail to plan, plan to fail: Formal planning during the start-up phase is typically minimal, but anyone looking to increase their chances of success should look to create a business plan and carry out market research.
  Such research includes surveys with potential customers, engaging with focus groups to develop deeper insight, the analysis of competitors strengths and weaknesses, and the use of publicly available data to identify market trends and growth opportunities.
  
  
• Set yourself up financially: Money is often one of the biggest headaches new companies, freelancers and contractors have to confront. Sufficient funds will be needed to sustain and grow your business, so it is important to explore funding options.
  Savings and financial support from families and friends can make a real difference at this stage.
  
  
• Prioritising tasks: Being a new business owner, sole trader or freelancer comes with a wide array of jobs to do at a time when resources are limited. Prioritising tasks to concentrate on key aspects of your business can help facilitate faster growth.
  Outsourcing activities such as admin tasks and bookkeeping can help free up time.
  
  
• Tick off your must-do list: During the existence phase, small companies should check-off vital activities including:
  ✔ Registering the business and choosing its structure
  ✔ Opening a business bank account
  ✔ Setting up accounting systems
  ✔ Creating a business plan
  ✔ Developing a marketing plan
  ✔ Ensuring they have the correct insurance policies in place 

Survival phase

• Generate cash flow: Once a small business has established itself as a viable brand, its next phase will be one of survival with the main goal being to find ways of making money consistently.
  Effective cash flow management is vital at this stage, so be sure to:
  ✔ Monitor cash flow regularly
  ✔ Invoice promptly
  ✔ Control expenses
  ✔ Negotiate payment terms
  
  
• Retain customers: To achieve sustained growth, companies will need to retain the customers they have worked so hard to gain. Customer retention leads to faster and more significant profits, and also lessens marketing and sales expenses.
  To boost customer retention, companies should focus on providing first-class services and products. Maintaining close communication with customers is also important.
  
  
• Create a sustainable business model: Having a sustainable and scalable business model is essential to navigate the survival phase and continue to grow. By continuously refining processes via customer feedback and analysis of market trends it is possible to create a business model which is both relevant and effective.

Success phase

• Keep the company stable: Once a business becomes profitable, the challenge is to maintain that growth and to manage cash flow in case of rough times.
  Putting effective systems in place and taking advantage of relevant software can boost efficiency. These can include project management tools to plan projects or customer relationships management software to look after customer interactions.
  
  
• Stay front of mind: At the success stage, the next challenge is to continue to grow. To do this, it is important to make sure you remain at the forefront of potential customers’ minds.
  Networking is a great way to do this, helping small business owners to make vital new connections and potential customers. Posting on social media and sending out targeted emails can also ensure you continue to get attention. Be sure to talk about your services in a practical, meaningful way that will resonate with your audience.

Take-off phase

• Time to expand: Whether aiming to take the next step forward or simply maintain a successful position, companies may need to look into expansion. This can include looking into new markets and developing new products or services.
  
  
• Maintain your edge: By continuing to monitor trends and market changes, companies can evolve to stay ahead of their competitors. Adapting to changes and being flexible will mean an organisation is able to constantly innovate and move to the next level.

Resource maturity phase

• Invest and adopt: The main challenge for companies entering the resource maturity phase is to manage financial gains from previous phases. By this stage, the over-riding aim is to achieve longevity.
  Maintaining a competitive edge requires further innovation and careful planning. It can include:
  ✔ Investing in research and development
  ✔ Adopting advanced technologies, such as AI
  ✔ Using data to boost the customer experience
  ✔ Expanding into new markets
  
  
• Be sustainable: As a company grows, it is necessary to develop strategies that will lead to long-term success. Setting a roadmap of clear goals and the steps needed to reach them is vital, as is reviewing these steps.
  
  
• ‘Insure’ your future is secure: It is important to make sure your now growing company is properly and fully insured. That means making sure the policies you have reflect your business. As well as common policies such as professional indemnity and public liability insurance, you should consider cover for tax liability to protect yourself against IR35 enquiries, employers’ liability, and legal protection insurance.
  It is also vital to check the details of any policies you have and to ensure your cover continues to accurately reflect your business as it changes and grows.