Business Growth – Types, Importance and Five Stages of Growing a Business

Growth in all aspects of life is beautiful, compulsory, and incredibly vital. However, in commerce, growth can make or break a successful business. 

Unfortunately, while it may seem like a prominent part of the business life cycle, many entrepreneurs do not possess the acumen or the know-how to grow their business efficiently. 

According to SmartBooks, only half of small business owners anticipate growth, ultimately contributing to only approximately one-third of all businesses lasting more than ten years. Start-ups across all industries halt when faced with scaling and its impending changes.    

The development of a company is directly correlated to its ability to approach growth strategically. But how exactly do start-ups and other entrepreneurial outfits excel at business expansion?  

Essentially, there are four types of business development growth, and five stages in the start-up life cycle process. With a proper business development strategy executed flawlessly, any company will seamlessly transition through the phases of business growth. As Wealth and Business Mentor Ron Malhotra stated,

“Entrepreneurship, when done well, creates a high probability of becoming wealthy before retirement.”

–Ron Malhotra

What is Business Growth?

Growth of any kind is advantageous for any business. A company that is expanding will usually look to increase its sales and strengthen its market position. Unfortunately, growth isn’t a concept that is easily defined.  

A growing business can expand in singular or multiple ways. There is no single metric or determining factor used to measure company growth. Instead, several factors and data points can be highlighted to show the growth of a company. These can include revenue, sales, company value, profits, number of employees and number of customers. 

It is typical for companies to grow in some of these metrics, but not register growth in others. It is also possible for one metric to increase, while another plummets. 

Types of Business Growth 

While there have been many attempts to draft a business development strategy that serves as a one-size-fits-all for growing a business, most have failed, as some methods fail to consider smaller enterprises and the unique challenges they face. However, the following four stages of start-up development have successfully proven to lead businesses through the start-up life cycle. These will help guide entrepreneurs through company growth, by identifying where they are, and identifying which business development strategy works best.

Organic business growth

In its simplest form, organic growth is when a company utilises existing tools to create growth internally. Organic growth is usually achieved by enhancing sales internally, and increasing output. It must be noted that organic growth does not consider growth garnered through acquisitions, mergers or profits. 

Past research shows that fewer than 30 percent of businesses systematically scan for and evaluate new growth opportunities. In the process of cost-cutting and overcoming short-term pressures, this leads to executives greatly underestimating the value of organic growth.

Organic growth wholly centres around expansions and sales through the organisation’s resources. In contrast to inorganic growth, which is solely attributed to external forces, organic growth can be achieved through various factors. These include business development strategies, typically through relocation and reallocation of resources, new product offerings, and optimisation. New product offerings are a core tenet of organic growth. It fosters vertical scaling by providing a current customer base with a new product.  

To stay up to date with consistent growth, businesses will utilise earnings growth at set time intervals, to track organic growth. The most commonly used time range performance metrics to track organic rates, are quarterly or annually. 

Organic growth is crucial, as it allows investors to have a transparent purview of the current or potential value. It also shows investors that the company has prime consistent earning capabilities. 

Strategic business growth

Strategic growth is next in line for businesses that have reached organic business growth, and are now forced to expand into additional markets.

A strategic growth approach may reach untapped markets by creating new products, or implementing new and improved advertising campaigns. Updated marketing strategies, streamlined for new target demographics, will ensure companies make a long-lasting impact on new prospective customers.

Also Read: 10 Tips for Business Success in 2021

Strategic business growth is catapulted by money generated from organic growth. Though organic growth poses long-term benefits, businesses should not expect to experience watershed acceleration. However, they should stick to the strategy, which will guarantee a gradual and consistent increase in sales.  

Merger, partnership, or acquisition 

For some businesses, it is beneficial to create a partnership, merge with another entity or acquire another business. A company undertaking any one part of this trifecta, will open itself up to opportunities for market expansion and other unique benefits.

An exceptionally executed acquisition, merger, or partnership can aid a business to expand service offerings, enter a new market, manufacture more products, and most notably, piggyback off the existing customer loyalty cultivated by another brand. An increase in production capacity can make introducing and developing new products or services in a new market much smoother. 

Merging, acquiring, or partnering, though considered the riskiest type of growth due to its many moving parts, is also viewed as one of the business development strategies with the most potential for success. 

Internal business growth

The primary goal of internal growth is to leverage the power of existing resources to  initiate growth in your business. While internal growth may share similarities to organic growth, it varies because it does not provide output solutions. 

Ironically, internal business growth is considered the most challenging way to jumpstart business growth. Rather than seeking growth from external sources such as production, this stage of business development strategy analyses current resources and determines how they can best be used.

Internal growth can include a company implementing automated workforce management systems, or even lean systems. Additionally, this phase of business growth is often deemed the hardest because it curtails a complete shift in how the business is conducted internally. Rather than simply creating or expanding a product line or entering new markets, a company must do a full 360 internally. Undoubtedly, this much change is no easy undertaking, and is quite daunting for employees and leaders alike. 

However, internal business growth serves a great use when it falls between strategic and organic growth. Internal business growth is a terrific way to maximise resources without a hefty capital outlay. Furthermore, this business development strategy can allow a business to maintain production, by exploiting fewer resources, essentially recouping any costs spent maximising processes. Internal business growth has also proven to be a convenient approach to business growth strategy during lowered outward growth.

Importance of Business Growth 

All businesses must aim for business growth. However, what will determine the necessary type of expansion will be the development stage a company is at.

A company in the start-up stage usually requires business expansion to cement its market position. They use this to rapidly develop in size, to generate adequate income to cover all expenditures and guarantee a profit.

On the other hand, a more seasoned organisation does not require rapid or aggressive business expansion. However, steady growth in mature organisations goes a long way in maintaining market position, and provides a defence against future risk. 

But perhaps the most significant benefit of company growth, is that it significantly contributes to the longevity of a business. Business development growth contributes to the life span and success, by helping ensure the company acquires assets, fund investments, and attracts and retains new talent. Business expansion also drives profit and performance. 

Business growth is also crucial to helping organisations respond to market demand, capitalise on growing brands, and increase their market share. Moreover, the business expansion provides you the opportunity to differentiate yourself from peers, and stave off competitors while spurring innovation. Company growth can also boost the credibility of your business, allowing you to broaden your supply base, while also increasing stability and resilience in the market against fluctuations. However, for business growth to be successful and sustainable, the growth has to occur for the right reasons and at the right time.  

What Are the 5 Stages of Business Growth?

As equally as significant are the five stages of growth of a start-up life cycle. These are: 

1. Development

The very first stage is development. You have an idea for a product or service, and it’s time to get it out of your head. This part of the business growth stage is where the ‘seed’ is initially planted. At this stage, you analyse the market, identify gaps and trends, figure out the problem you are trying to solve and ascertain if your business prospects are feasible. Ask yourself: Who is my market? Where is my market located? Is my market ready for my business? How will my business be structured? 

Does my proposed solution solve it effectively? If you have a definitive answer to these questions and are confident in your abilities, it’s time to start pressure testing your idea.

2. Start-up

You have completed the ideation and have decided to go ahead with your business. Now, you will be formulating strategies and ways to sell your services or products. You will now make initial communication with your market to better understand their needs. This will allow you to tweak your business to suit your demand. Patience is your best friend at this stage. While you are focused on becoming profitable as quickly as possible, keep an open mind and be prepared to quickly adapt to the changing needs of the market and clientele.  

Also Read: Common Mistakes Young Entrepreneurs and Small Business Owners Make

3. Growth

When you arrive at this stage of company growth, your business will have cemented a more solid position in the market. Rising sales characterise this stage, which means your company is turning a profit and providing ample cash flow to cover ongoing expenses. Also, at this growth stage, you will be experiencing a growth in customer base and a revolving door of recurring patrons, as you have maintained a reputation for quality and reliability. You will also have a stable talent cohort at this stage, due to your ability to remunerate talent adequately. However, the challenging part of this phase will be your ability to effectively manage the rapid demands from start-up to growth and manage the business’s roles and needs. It is best to delegate by establishing clear roles and responsibilities at this stage.

4. Maturity

A welcome reprieve from the bustle of the previous two stages, the maturity stage is very stable. At this growth stage, your business will be actively generating reliable profits. At this point, your sales will reach their pinnacle and then plateau. No doubt, at this growth stage of the start-up life cycle, you will experience the most security. This will prompt you to prolong your business’s maturity to extend this period of security. However, while you may feel comfortable, this is not the time to grow complacent. Instead, it would be best if you put a finger on the pulse of your industry to look for signs your business may need to be adjusted.

5. Decline or renewal

From maturity, your company will go one of two ways. It may decline, where sales growth will be negative, and profits will nosedive. This can occur because the market is oversaturated with your product/service, resulting in a decline in demand for your business offerings. However, this does not have to be the end of your business. 

By employing strategic tactics such as reinvesting in your business, introducing new products and services, or adopting new marketing strategies, your company may well be on its way to renewal. At the renewal stage, sales will gradually pick up. However, it must be noted that this may be costly in both capital and time. Therefore, entrepreneurs at this stage must be prepared for extensive planning to guarantee that the renewal is worthwhile and sustainable. Maturity is the signifier of growth, which in business is never complete—a tremendous resource for these stages is this video from wealth and motivational maverick Ron Malhotra.

Stagnancy has no place in business. Growth and change are necessary and are factors that will see your business stand the test of time. Don’t be afraid to change and grow, instead embrace it. Just as Ron Malhotra expressed, “Be aggressive in your personal growth,” it is highly recommended to take this stance towards company growth as well.