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Five Stages of Small Business Growth

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This framework around small business growth is based on the fact that all businesses experience common problems that arise at similar stages in their development. Familiarity with this small business …

This framework around small business growth is based on the fact that all businesses experience common problems that arise at similar stages in their development. Familiarity with this small business strategy allows the business owner to attain invaluable insights. Includes case examples.

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http://learnppt.com/business-strategy.php
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  • I've found the best way to grow a business is often just to get a little bit of help from someone who knows what they are doing, because you can then focus on your business itself. I prefer Better Business Growth, http://www.betterbusinessgrowth.com/ especially since they have an introductory offer of $1, but I am sure there are lots of other great programs out there too; the main thing is finding one you feel comfortable with, and that you know has worked for others!
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  • Nice summary and clear thinking. Thanks.
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  • 93 09/15/98 11 25
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    • 1. PowerPoint Diagram Pack Five Stages of Small Business Growth This framework around small business growth is based on the fact that all businesses experience common problems that arise at similar stages in their development. Familiarity with this concept allows the business owner to attain invaluable insights. Includes case examples.
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    • 2. Contents
      • Executive Summary 4
      • Stages of Small Business Growth 8
        • Existence
        • Survival
        • Success
        • Take Off
        • Resource Maturity
      • Critical Success Factors 14
        • Cash
        • Owner’s Abilities
        • Strategic Planning
        • Key Management Factors
      • Additional Considerations 19
      • Case Examples 22
    • 3. Each stage of growth is characterized by a different impetus to growth and threatened by a different crisis Five Stages of Small Business Growth – Overview As a company evolves through each stage, it is critical for the owner to know when to give up control and delegate responsibilities. Age of Company YOUNG MATURE Size and Complexity SMALL LARGE Source: Churchill & Lewis, The Five Stages of Small Business Growth, Harvard Business Review THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
      • Growth achieved through collaboration
      • Open to various forms of crises
      • Growth achieved through coordination
      • Open to crisis of bureaucracy
      • Growth achieved through delegation
      • Open to crisis of control
      • Growth achieved through direction
      • Open to crisis of autonomy
      • Growth achieved through creativity
      • Open to crisis of leadership
      STAGE V Resource Maturity STAGE IV Take Off STAGE III Success STAGE II Survival STAGE I Existence
    • 4. Each stage also requires a different management style, a different strategic focus, and has a different state of systems and processes Five Stages of Small Business Growth – Defining Characteristics As each stage requires a different management style, it is common for the management team to also change as the company grows from small to enterprise. MANAGEMENT STYLE STRATEGIC FOCUS STATE OF SYSTEMS AND PROCESS Source: Steinmetz, Critical Stages of Small Business Growth, Business Horizons THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
      • Maturing —consider implementing full ERP system
      • Developing —systems becoming more refined
      • Basic —repeatable processes begin taking shape, but are not scalable
      • Minimal —systems and processes highly dependent on Excel
      • Minimal to nonexistent —most processes are ad hoc and not repeated
      • Return on investment
      • Growth
      • Maintaining profitable status quo—OR obtaining resources for growth
      • Survival — strong focus on cash flow
      • Existence —may experiment with several value propositions and business models
      • Line and staff
      • Divisional
      • Functional
      • Supervised supervision —owners becomes more of an administrator
      • Direct supervision —the owner manages everyone and everything
      STAGE V Resource Maturity STAGE IV Take Off STAGE III Success STAGE II Survival STAGE I Existence
    • 5. The focus of businesses in Stage II, Survival, is to optimize cash flow Stage II – Survival
      • OVERVIEW
      • Reaching this stage demonstrates that the business is a workable business entity
      • Its value proposition and business model have been tested—it has customers and satisfies them sufficiently with its products or services to retain them
      • The key problem will shift from mere existence to the relationship between revenues and expenses—i.e. cash flow
      • Some businesses can stuck in this stage—they earn marginal returns on invested time and capital; eventually, they go out of business when the owner gives up, or retires, or sells it (usually at a slight loss)
      • KEY QUESTIONS & CHALLENGES
      • In the short run, can we generate enough cash to break even and to cover the repair or replacement of our capital assets as needed?
      • Minimally, can we generate enough cash flow to stay in business and to finance growth to a size that is sufficiently large, given our industry and market niche, to an economic return on our assets and labor?
      • EXAMPLES
      • “ mom and pop” stores (example of businesses stuck in this stage)
      THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ STAGE V Resource Maturity STAGE IV Take Off STAGE III Success STAGE II Survival STAGE I Existence Owner is still synonymous with the business BUSINESS & OWNER Systems development is minimal—formal planning consists of cash forecasting, at best STATE OF SYSTEMS & PROCESSES ORGANIZATIONAL STATE Survival—optimize cash flow STRATEGIC FOCUS Supervised supervision—limited number of employees supervised by a sales manager or general foreman MANAGEMENT STYLE Owner Business
    • 6. In Stage III, Success, small business owners have an important decision—to risk it all in hopes of great success or to maintain and sustain Stage III – Success
      • OVERVIEW
      • At this stage, the owner is running a successful business and has options for growth
      • Option A) the owner can expand the business
        • Owner takes the cash and the established borrowing power of the company and risks it all to finance the continued growth of the company
        • A key activity is to develop managers to meet the needs of the growing business
      • Option B) the owner can maintain the business’s success and existing operations, so he can disengage and re-focus his energies on alternate activities (e.g. start a new company, run for political office, pursue a hobby, retire early, etc.)
        • The company can stay at this stage indefinitely, providing environmental change does not destroy its market niche or ineffective management reduces its competitive abilities
      • KEY QUESTIONS & CHALLENGES
      • Do I choose Option A) continue to invest and grow the company or Option B) maintain the business and begin to disengage?
      • EXAMPLES
      • The virtual, minimal effort companies advocated by Tim Ferriss in the Four Hour Work Week (example of companies that choose option B in this stage)
      THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ STAGE V Resource Maturity STAGE IV Take Off STAGE III Success STAGE II Survival STAGE I Existence Option A) Option B) BUSINESS & OWNER Systems installed bearing forthcoming needs, operational planning in the form of budgets, strategic planning is extensive STATE OF SYSTEMS & PROCESSES ORGANIZATIONAL STATE Option A) – maintaining profitable status quo Option B) – Get resources for growth STRATEGIC FOCUS Functional—functional managers take over certain duties performed by the owner MANAGEMENT STYLE Owner Business
    • 7. Cash is a critical input to success in the beginning stages, as well during the Take Off phase to fuel acquisitions and marketing spend Critical Success Factors – Cash There is little criticality of cash in Stage III, because the company has a profitable and sustainable business model (for its current scale). Size and Complexity RELEVANT OR NATURAL BY-PRODUCT CRITICAL TO SUCCESS Cash Source: Churchill & Lewis, The Five Stages of Small Business Growth, Harvard Business Review THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ STAGE V Resource Maturity STAGE IV Take Off STAGE III Success STAGE II Survival STAGE I Existence
    • 8. As the owner grows its business, there is a clear trade-off in critical between the owner’s ability to execute versus his ability to delegate Critical Success Factors – Owner’s Abilities The owner needs to recognize the need to delegate and relinquish responsibilities to ensure the company’s continued growth. Size and Complexity RELEVANT OR NATURAL BY-PRODUCT CRITICAL TO SUCCESS Owner’s ability to execute Owner’s ability to delegate Source: Churchill & Lewis, The Five Stages of Small Business Growth, Harvard Business Review THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ STAGE V Resource Maturity STAGE IV Take Off STAGE III Success STAGE II Survival STAGE I Existence
    • 9. Additionally, we have identified 8 key management factors—4 company factors and 4 owner factors Key Management Factors Critical Success Factors – Key Management Factors Financial Resources— including and borrowing power Personnel Resources— relating to numbers, depth, and quality of people, particularly at the management and staff levels Systems Resources— in terms of the degree of sophistication of both information, planning, and control systems Business Resources— including customer relations, market share, supplier relations, manufacturing and distribution processes, technology, and reputation Owner’s Goals— for himself and for the business Owner’s Operational Abilities— in doing important jobs, such as marketing, innovation, producing, and managing distribution Owner’s Managerial Ability— including willingness to delegate responsibility and to manage the activities of others Owner’s Strategic Abilities— for looking beyond the present and matching the strengths and weaknesses of the company with his goals COMPANY FACTORS OWNER FACTORS 1 2 3 4 5 6 7 8 THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
    • 10. Though it is a long and difficult process to reach Stage 5, there are numerous lucrative exit opportunities along the way Evolution of Small Companies To avoid bankruptcy, companies need to maintain their entrepreneurial culture by continuing to innovate and staying relevant. Enter Stage II Enter Stage III Enter Stage IV Enter Stage V Sell Assets Go Bankrupt Business is open! Sell at a loss Go Bankrupt Stuck in Stage II Stuck in Stage III Go Bankrupt Sell at a profit ($) Drop back to Stage III Go Bankrupt Sell at a profit ($$) Drop back to Stage II Operate Drop back to Stage IV Go Bankrupt Sell or merge($$$) Growth Growth Growth Growth Growth May be triggered from large market change – e.g. disruptive technology THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ STAGE V Resource Maturity STAGE IV Take Off STAGE III Success STAGE II Survival STAGE I Existence
    • 11. END OF PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
    • 12. Browse our catalog of PowerPoint Diagram Packs http://learnppt.com/powerpoint Join our mailing list and receive the Basic Toolkit for free ! http://learnppt.com/mailinglist Read our eBook – How to Become a PowerPoint Guru http://learnppt.com/

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