Blog Retail An overview of the 4 stages of business growth and why it matters
02 April, 2024

An overview of the 4 stages of business growth and why it matters

Growth can be uncomfortable and challenging, whether you’re a teenager dealing with growing pains or a business trying to evolve from one level to the next. Moving from one milestone to the next can feel awkward, and you don’t always know which goals and strategies to focus on to get the results you want. Thankfully, businesses can study and learn from the many who have come before to lessen those growing pains. 

Product businesses typically pass through four stages of growth: Beyond Basics, Unifying Operations, Scaling Up, and Sustaining Success. By understanding each stage and where you’re at, you can effectively plan your transition from a startup to an SMB with sustainable, long-term growth. 

In this article, we’ll give a glimpse into all four stages of growth and highlight the main challenges and objectives. Looking for more information about a specific stage? We’ll be covering those in the coming weeks.

What is business growth?

Business growth can refer to several types of development, including increases in a company’s size, market share, revenue, and profitability. Successful business growth can be achieved through different strategies, such as entering new markets or increasing sales volume, but it typically passes through four phases.

As companies progress from a startup phase and move through the four stages of business growth, operations become more streamlined and stable, management becomes more effective, and it’s easier to sustain growth.

A business progressing through the stages of growth is similar to students passing through different grades. Their abilities and needs are different at each stage. For example, students in high school face different expectations than college students.

In the same way, a startup or small business and its stakeholders will have different priorities than a well-established brand with an existing customer base and more consistent revenue.

Why it’s important to know which stage of growth your business is in

Learning about the business growth stages and understanding where your business is at helps you benchmark your performance more effectively, set realistic goals, and find the right tools and strategies to take you to the next level

Progress measurement and benchmarking

Your business’s stage of growth provides you with the context to assess your business performance based on your business’s current progress. For example, a startup’s priorities might be more concerned with revenue growth rate, while an established brand might focus more on return on equity (ROE). 

Using key performance indicators (KPIs) that aren’t appropriate for your business’s stage of growth can leave you with unreasonable expectations that get in the way of progress. Instead, it’s much more helpful for your growth to set goals appropriate to your current situation and benchmark against companies that are in the same growth stage

This gives you a better understanding of your company’s strengths and weaknesses in the context of business development.

Business planning and growth strategy

Once you know your business’s growth stage, you can start mapping out your strategy for advancing to the next level. For many business owners, it’s easy to over-identify the areas where your business needs to grow. Especially in the early stages it can often seem like you need to make progress in every area for your business to take off quickly. 

However, companies don’t have unlimited time, money, or human capital. Instead, leaders need to pick and choose which areas and growth opportunities to focus on so that they don’t go in too many directions at once. 

Using the four stages of business growth helps take the guesswork out of setting goals and picking the right strategy by providing a roadmap that outlines which milestones are the most crucial for reaching the next stage of development. 

When you have a clear picture of what the next level looks like, it’s easier to prioritize your goals, define performance improvement milestones, and develop action plans that are realistic and impactful.

Data-driven spending and investment

Knowing which stage of growth you’re currently in is crucial in determining how to best invest your capital, especially when finding the right software and tools to create your tech deck for the long haul. Solutions that work for startups and young businesses may not always cut it for brands looking to scale and generate consistent revenue growth. 

Likewise, budgets of less mature businesses might be more limited, making price a more significant decision-making factor. Having all stakeholders on the same goals page helps you focus on spending on more urgently needed items while choosing support that grows with you.

By choosing platforms that work with your growth goals, you can build on that solid foundation as you grow instead of scraping your tech deck and starting over.

The 4 stages of business growth for product sellers

Product sellers typically transition through four stages from startup to sustainable SMB. Again, these stages include Beyond Basics, Unifying Operations, Scaling Up, and Sustaining Success. We’ll take a deep dive into each of these in our series, but let’s set the stage with the basics and how each stage helps growing businesses.

infographic showing the four stages of business growth

Stage 1: Beyond Basics

The first stage of business growth is Beyond Basics. This is when a business has established a customer base and is focusing on growing sales and bringing in more new customers. Companies in this stage have moved past the ad hoc methods typical of brand-new businesses and are also adding new products and hiring one to two team members to support growth.

In this stage, the basic tools and manual workflows that worked before begin to break down, such as using spreadsheets to handle inventory and manually tracking stock levels. As a result, businesses need to increase their focus on business process improvement and find the right tools to streamline operations.

Stage 2: Unifying Operations

Moving past the Beyond Basics stage, businesses naturally progress to Unifying Operations. At this point, they have already hired more employees and increased their products and channels. They also use software and processes that work well to manage the day-to-day operations of each department.

For businesses in this stage, key challenges revolve around data silos caused by department-specific software and a lack of holistic operations that often leads to overselling, inventory shortages, and higher product return rates. This lack of centralization causes inventory inefficiencies that get in the way of optimizing for efficiency, having enough cash flow, and generating further growth.

Stage 3: Scaling Up

When a business reaches the Scaling Up stage, company growth accelerates through new opportunities like partnering with big box retailers while continuing to add sales channels such as e-commerce, physical stores, resellers, and distributors.

As they continue adding new channels, managing the complexity of multiple points of sale, such as EDI, warehouse management, and POS systems, can quickly become overwhelming. If companies can’t manage new channels effectively and streamline operations, they risk making mistakes that result in negative customer experiences or losing access to some sales channels.

Stage 4: Sustaining Success

By the time a business reaches the Sustaining Success stage, it has an established market presence supported by stable and diversified sales channels. Much of the focus now lies on growth product strategies

Instead of worrying about breaking even or winning your first customers, struggles at this stage usually revolve around slower growth rates, inefficient operations, and complacency. Given that 58% of customers will leave a brand if they believe a competitor offers better customer service, maintaining a high-quality user experience is also essential. 

Over time, these issues eat into profit margins or erode competitive advantage. That’s why business owners need to find tools that allow for continuous improvement and innovation.

In each article in this series, we’ll dive deeper into each stage of growth and cover the most common obstacles, along with actionable steps you can take to advance to the next stage.

Leveraging Connected Inventory Performance to grow your business

Using the four stages of business growth helps you predict how your business will progress so you can tailor your strategy based on what your company needs most at its current stage. 

Setting inappropriate business goals based on your growth level or failing to update processes can overwhelm your company and slow down your growth, no matter what you’ve achieved so far.

As you move through the stages of business growth, new tools and techniques are needed to move to each next stage. Understanding the natural progression of a product-selling business can help you focus on the crucial areas for upcoming growth stages. 

Cin7 is the strategic choice for small-to-medium-sized businesses across all four growth stages. Cin7’s solution uses Connected Inventory Performance, an evolved form of inventory management that leverages integration and automation to drive visibility, traceability, and efficiency across your whole inventory lifecycle. 

See how Cin7 can meet you where you are and get you to the next level with a free demo today.

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