Many companies flat-line after a growth spurt, as the organization, faces new issues to handle the increased customers and orders and complexity.
To explain why this happens, I have included part of an article that appeared on the Growth Institute Blog– “4 Stages of Growth.”
Most businesses stay at Stage 1 or get stuck at Stage 2– less than 10% make the leap into Stage 3 [where the owner has sustainable financial value and freedom].
This is a good outline to see where you should focus your attention and invest your time and money:
4 Stages of Growth, by Daniel Marcos [Growth Institute Blog]
The four stages are a roadmap that guides how your focus, priorities, and key decisions will change as your company grows. The roadmap will prepare you for the barriers you will face and the new skills you need to develop to overcome them.
Here is an overview of the four stages of scaling up:
- Startup: 1-5 employees
- Grow up: 6-15 employees
- Scale-up: 16-250 employees
- Dominate your industry: 250+ employees
The Dynamic Growth Model
For a company to scale to $5, 10, or even 100 million in revenue, you need to understand what to expect at the four stages of scaling up, and how to shift gears from one stage to the next.
Shifting through these four stages is what we call the dynamic growth model. Let’s now look into each stage of the dynamic growth model so you understand the priorities and barriers of each stage, plus the key decisions you need to make to go to the next stage. [To read about all the stages see the full blog here].
Stage 2: Grow up:
At this stage, you have grown to 6-15 employees. You have fixed expenses such as salaries and rent. This is a discovery stage where an entrepreneur ages the most. It’s the most painful stage because you begin to face a lot of cash flow problems and leadership problems.
Focus: 100% of sales.
Priority: Hire the right team.
In Stage 1, you don’t really choose your employees because you are not able to offer an attractive salary or attract people with a good brand. So at Stage 2, your employees actually choose you.
By the time you reach Stage 2, you need to switch gears. Now, you are choosing your employees. You have to be more selective of who you hire, and have clarity of their role.
In Stage 1, the entrepreneur wears multiple hats — from administration to technical work, accounting and more. At Stage 2, you have to become a leader.
Ability: Delegate, predict, repetitiveness
As a leader, you now need to know how to delegate, set up systems and procedures, and leading your team to help you grow the company.
Decisions: Cash and team.
As mentioned earlier, this is the stage you begin to face cash flow procedures now that you have fixed expenses. Thus, your key decisions will revolve around managing cash flow and hiring the right people who can grow your business.
Note how Daniel points “it’s the most painful stage” and yet so many businesses get stuck here– causing that hamster-wheel feeling for owners who are frustrated that growth hasn’t led to a better team, a well-oiled machine, higher profits or less stress and time off.
You can stay at Stage 2 with a smaller team, but evolve to a professionally run and super-profitable business– it’s all about the focus and decisions [people + process].