In this article, we discuss the four stages of development that entrepreneurial businesses goes through, and each of the crisis points that indicate the need for the entrepreneur to evaluate what the organization needs in order to shift to the next stage.

1. © 2016 Caliber Leadership Systems 4 Stages of Growth in the Entrepreneurial Business 1
I
n our work with entrepreneurs over the
years, we have identified four distinct
Stages of Growth that entrepreneurial
businesses can normally grow through in
their lifespan. The stages go from the
inception of the idea — perhaps working in a
home office or a garage — to global Fortune
500 companies, with many other sizes of
businesses in between. The stages coincide
with the growth of the business, the number
of people employed, and the capabilities of
the entrepreneur as leader of the business.
Not all entrepreneurial companies move
through all the stages. They might not want
or have the capacity to do so. However, when
the entrepreneur’s vision is to build a sizable
enterprise through rapid growth, the stages
present themselves in a predictable way,
including a crisis of growth marking the need
for change. This crisis point indicates when it
is time to step back and evaluate the current
needs of the business and its people.
We have worked in very large companies
where entrepreneurs have done a good job of
preserving the entrepreneurial spirit within
the culture. We have also worked with many
organizations where the business had stalled
because the entrepreneur tried to fix the
issues on their own without getting the help
they needed. Crisis of growth are
symptomatic of the need for the
entrepreneur to attend to the business and
its leadership differently. Recognizing the
symptoms of a crisis of growth allows the
entrepreneur to prepare for the shift to the
next stage, and to avert the negative fallout
that occurs when they don’t.
Written by Anne Dranitsaris. Ph.D., Caliber Leadership Systems
An entrepreneurial business starts
with an entrepreneur who
perceives an opportunity, starts to
pursue it, assembles the required
resources, implements a practical
plan, assumes the risks and the
rewards, and leads the business to
its desired future state.

2. © 2016 Caliber Leadership Systems 4 Stages of Growth in the Entrepreneurial Business 2
The following briefly describes the four stages
of development that entrepreneurial businesses
goes through, and each of the crisis points that
indicate the need for the entrepreneur to
evaluate what the organization needs in order to
shift to the next stage.
Stage 1: Infancy
This stage is dominated by the entrepreneur,
where the emphasis is on creating their product
and developing their market. During Infancy,
entrepreneurs are primarily concerned with
securing financing, establishing relationships
with vendors and clients, preparing a physical
location for business operations, and other
aspects of business start-up that are integral to
establishing and maintaining a viable firm.
Entrepreneurs are usually technically or
entrepreneurially oriented, and are excited by the
opportunity to do what they love to do.
However, they often disdain hierarchies and
other management activities.
The culture during infancy tends to be familial
and informal, with the entrepreneur at the hub of
all activities. Entrepreneurs build culture as the
ideal place they would like to work in.
Employees who come on board during infancy
are often given the freedom to self-manage as
the entrepreneur has little time or inclination to
manage or train them. There is a feeling of
youthfulness, that anything is possible. There
aren't many staff, so informal communication
works fine. There is an all-consuming state of
complete engagement with creating the
business that gives people a sense of belonging
to something important and meaningful.
The first crisis occurs when the entrepreneur is
no longer able to manage the growth of their
business, manage the performance and
development of employees, and meet the need
for business systems on their own. This crisis is
characterized by the entrepreneur’s no longer
feeling “high” on their business. The informal
culture and way of doing things no longer works.
Everything feels chaotic, with new business
coming in and staff doing the best they can to
keep up. Mistakes are made by inexperienced or
untrained staff. Entrepreneurs find themselves
burdened with unwanted management
responsibilities and dealing with employee
issues that are never really completely resolved.
Employee morale deteriorates as a result.
The entrepreneur can find themselves doing
their employee’s work; ignoring their poor
performance, complaining and bad attitudes in
the hopes they will go away. Any systems
solutions are not given the time they need to
make the necessary changes, and everything is
being done too quickly to have a significant
impact. During Infancy there is generally a lack
of policies and processes in place. Hiring is
done on the fly with no standardized process so
success is hit and miss. There is a lot of
reactive, emotional decision making (hiring
people you like, giving an employee a raise
because they are upset and you don’t want to
lose them, or deciding problems are the result of
one person’s performance and firing them in the
hopes the problem goes away.) Turnover due to
wrong hires can be both high, expensive and
time consuming.
Crisis of Growth & Stuck Point
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3. © 2016 Caliber Leadership Systems 4 Stages of Growth in the Entrepreneurial Business 3
Stage 2: Adolescence
The Adolescence stage begins when the
entrepreneur realizes that they have to take
responsibility for the needs of their business and
employees. This can be disheartening to some
entrepreneurs whose needs are not satisfied in
this way. They realize that someone has to lead
the organization
out of chaos and
solve the
management
problems
confronting the
organization. As a
result, they hire a
manager or
management team
who can pull the
organization
together, thus creating a two-tiered leadership
model. They still try to keep the hierarchy flat
with authority, with planning and decision
making remaining at the top.
The entrepreneur delegates the management of
business to the manager(s), which allows their
time to be freed up, once again, to continue
growing the business. The culture stabilizes and
morale improves due to the focus on building
the business model and infrastructure with the
introduction of systems and policies. There is
more objectivity in the hiring process, and
employees are provided with training to do their
jobs. Systems for communicating and reporting
are put in place, and a greater feeling of
cohesion emerges from these efforts. Because
of the growth orientation, the feeling of
excitement and opportunity returns.
During Adolescence, entrepreneurs focus again
on growing the business because they believe
the managers they put in place can take care of
things in their absence. Due to the inexperience
of the managers, this usually results in chaos.
With the entrepreneur away, managers do the
best they can. However, with the continued
growth of the business, there is a greater gap
between the entrepreneur and the managers.
Management spends most of their time reacting
and fighting fires, making decisions without
consulting the entrepreneur or other members
of the management team. Because there is a
fear of losing employees, managers become
permissive, saying yes to requests and demands
without thinking about the consequences.
Inconsistencies are everywhere, including how
different departments are managed. The
processes and systems are followed in some
areas but not in others, leading to silos and
power struggles amongst the management
team. Because decision making is still
centralized at the top, trying to get approval
from a manager is frustrating, which causes
employees to feel stifled and disempowered.
During Adolescence,
there is little to no
workforce planning
done, so when the
business hits this crisis
of growth, there are too
many people starting at
once without proper
onboarding. Workers are
promoted to supervisors
or managers without
training and support.
Salaries are all over the place — based on when
the person was hired, and how much the
business needed them. Some employees make
as much money as managers do, and there is a
lot of complaining going on. The entrepreneur
gets complaints from managers and employees
alike, and begins to feel like the “bad guy”
instead of the “hero” in their own business.
Crisis of Growth & Stuck Point

4. © 2016 Caliber Leadership Systems 4 Stages of Growth in the Entrepreneurial Business 4
Stage 3: Adulthood
Adulthood begins when the entrepreneur
realizes the business needs an experienced
leadership team and a defined hierarchy to
decentralize power and authority. They also
need to redefine the organizational structure,
and create a business identity. Instead of the
business being composed of a group of
individuals doing the best they can, it becomes a
group of individuals making up a cohesive
whole. The entrepreneur and leadership team
goes through a period of defining roles,
responsibilities, and decision making authority.
They also focus on the alignment of all activities
in the organization by clearly defining their
vision, mission and strategic goals. This allows
managers to align the performance of their
direct reports and to manage to expectations.
With authority distributed throughout hierarchy,
employees function more autonomously, feeling
empowered and motivated.
The process of redefining roles also includes
that of the entrepreneur. Giving them a role they
love to do and thrive at is critical. For the
organization to continue to grow, they need to
be free to react quickly to opportunities for new
products or in new markets, without being
involved in the day-to-day business
management. Entrepreneurs do well when they
lead the direction of the business with a
cohesive leadership team to execute on their
strategy, and by not allowing the business
structure to confine them.
Entrepreneurs, in general, enjoy putting solutions
in place but don’t give organizational changes
enough time to successfully make the transition
to the next stage. While they may have initiated
the process for getting the business to
Adulthood, they make the mistake of getting
back to growing the business before everything
is securely in place. While putting an
experienced leadership team in place seems like
the solution to this stage of growth, it needs to
be managed, and the entrepreneur needs to
make sure they continue to lead their team. As
little attention is paid to the natural stages of
team development, the leadership team
becomes stuck in “Storming”, with individual
members trying to drive their own agenda and,
at times, challenging the entrepreneur publically
and disrespectfully.
In addition, with the new power structure in
place and the decentralization of authority,
leaders can feel a loss of control and security as
the business continues to grow. It is difficult for
leaders who were previously successful at being
directive to give up responsibility. Moreover,
lower level managers are not accustomed to
making decisions for themselves. As a result,
the business can flounder, with employees
feeling insecure about who to follow and trust.
This often sparks a return to centralized
methods, which is now inappropriate and
creates resentment and hostility among those
who had been given freedom.
The crisis is made worse when members of the
leadership team wants the entrepreneur to
figure out how to solve management problems
or act as a referee to leaders who are engaging
in power struggles or lacking in people
leadership skills.
Crisis of Growth & Stuck Point
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5. © 2016 Caliber Leadership Systems 4 Stages of Growth in the Entrepreneurial Business 5
Stage 4: Maturity
The Maturity Stage of an entrepreneurial
business may be slow to come because
entrepreneurs love the excitement that growth
and innovation brings, as well as thriving on
chaos. This stage is characterized by the use of
formal systems for achieving greater stability
within the business. Success factors are
identified, managed and reached. The leadership
team acts as the "watch dog,” ensuring that the
vision, strategic priorities and objectives are
achieved. With systems of accountability in
place, they maintain a close eye on costs and
efficiencies.
During this Stage, energy put into the employee
experience and culture increases engagement.
Employees are in roles that meet their needs
and match their strengths and interests. This
results in low employee turnover with a
committed workforce and top talent attracted to
the business because of the company’s
reputation.
Within the business, any autonomous business
units have been re-organized into product
groups or service practices. There is a
centralization of the finance group and all
decisions are made and managed based on
their return on investment (ROI) and not just
profits. Clear expectations have led to increased
productivity and financial results. Leaders
spending more time leading and less time doing.
While most entrepreneurs set out to have an
innovative, democratic and resilient
organization, during Maturity, bureaucracy takes
over as the organization becomes too formal
and rigid. Innovation becomes submerged under
increasing amounts of red tape, and growth is
stifled. The systems, rather than the
entrepreneur, are running the show. The
business is attracting employees seeking
security rather than an exciting and growth
oriented enterprise. Employees leave, looking for
a company that is more like the one they used to
work for. Employee engagement decreases as
everyone strives to maintain the status quo and
not rock the boat.
This signals the need for reinvention rather than
reverting back to a former stage. A new culture
and structure must be introduced that
decreases bureaucracy and increases
innovation and engagement.
Whatever the Stage of Growth your organization
is at, it is critical that you identify it and take
steps to move out of crisis. Resisting making
the investment in the needs of your business
and people can create significant blocks to your
business success, regardless of the size. Our
experience helping entrepreneurs navigate the
Stages helps create greater alignment of people
to goals and business outcomes, allowing both
the organization and the entrepreneur to thrive.
Watch for upcoming
information
Read next month’s newsletter
with Solutions for the 4 Crisis
of Growth in Entrepreneurial
Organizations.
Crisis of Growth & Stuck Point

6. © 2016 Caliber Leadership Systems 4 Stages of Growth in the Entrepreneurial Business 6
There is no “one-size-fits-all” when it
comes to entrepreneurs because
everyone is capable of taking risks,
growing the business from scratch, and
having the ability to tolerate uncertainty.
But while everyone can be an
entrepreneur, there are unique challenges
and pitfalls that each of the
Entrepreneurial Styles faces because of
the way their brain is organized. Knowing
your Entrepreneurial Style provides you
with insight into how you can achieve
success despite these blind spots.
Want to know your
Entrepreneurial
Style?
Click Here to Take the Quiz
Caliber Leadership Systems: Entrepreneurs Working Uniquely With Entrepreneurs
Each entrepreneurial business is as unique as the person who created it. For this reason, we don’t
take a one-size-fits-all approach. Instead we help entrepreneurs build a sustainable organization
over time by finding out who they are: their personality, needs, vision and values. We determine
what they want to change and what needs to stay the same, while at the same time, helping them
work through business and behavioral dysfunctions that are getting in the way of growth.
Our approach is based on more than 20+ years of experience as entrepreneurs, working with
entrepreneurs. We have extensive experience in business and leadership development, as well as
in helping take entrepreneurial organizations through the unique difficulties experienced during all
stages of growth.
To help your entrepreneurial business grow, you need specialists who understand your distinct
needs and challenges. This is where Caliber stands out from other consulting firms, providing
entrepreneurs of all styles with what they need to work through the challenges that growth and
change bring about.
For information on how we can help you get your entrepreneurial business to the next level,
contact us for a complimentary consultation.
hhilliard@caliberleadership.com
adranitsaris@caliberleadership.com
Visit us at www.caliberleadership.com or call us at 416.406.3939