by Dr Greg Chapman, MBA
All businesses go through predictable changes throughout their lifecycle. From being a solo-preneur to having 20 or more people in the business. At each stage there is a step change in the way the business needs to be managed, and until these changes are made, growth will be difficult. Many businesses have stopped growing and have deliberately shrunk because the owners did not know how to make these changes and how to handle the resulting stress. Unable to cope, they have retreated to the comfort zone that existed in the time when their business was smaller and easier to manage.
Often growth is accidental, not planned, and the owner starts employing many others to get the work done without having in place the structure to manage them. They continue to manage their business in the same way they always have, but find that the old ways don’t work in the larger organisation, and may even be counterproductive. It is like driving from your home to participate in Formula 1 racing, but continuing to drive your old sedan on the racing track, rather than changing the vehicle for the new conditions.
When considering the Lifecycle of a business the following milestone stages can be identified.
The first stage in a business’ growth is when a one person business starts regularly paying for assistance in routine parts of their business. That is they are using routine external support. At this stage, the support is part-time. This usually occurs at the Adolescence stage of the business, when survival is not considered to be an issue. Before then, the owner is trying to save money by doing everything themselves and don’t believe they have the cash flow to pay for outside assistance.
The second stage in the growth of a business is the first employee. This usually occurs during late Adolescence or early Growing Pains. At this point they are likely to be very busy and they can no longer avoid having full time assistance. During this stage they may in fact, increase their staff to four or five people. Having hired the first employee, the second and third are not so hard.
The third stage also occurs in Growing Pains. This is the point at which they may hire a salesperson to assist bringing in extra business to support the additional staff. A salesperson unlike other members of staff has a very different role and is more like the owner than anyone else in the business. They must be entrepreneurial and require different skills to manage.
The fourth stage, also in Growing Pains, is the appointment of a supervisor. For the first time, the owner does not directly control the work of their employees. There is an intermediary. During this stage, there may be other supervisors appointed, and the business can grow to 15 to 20 people.
The fifth stage is the exit stage from small business to medium sized business. This will be the Second Wind stage of the business where it is completely re-invented. Managers are appointed for the first time. This might start with a full time accountant. The issues become organizational and the owner finds their primary role is not as manager, or even entrepreneur, it is as a leader. Few small businesses make it past this point.
The risk for small business is when they wander from one stage to the next by accident. Without understanding the implications of their growth, they will struggle. However, when a business grows by design it is possible to avoid many of the growing pains.