Various models illustrate the growth of businesses. The size of a company and stages of growth are used as the standards for determining business growth. This paper will examine a growth framework based on existence, survival, success, take-off and resource maturity phases.
Existence
At this stage, the organisation is at infancy and the owner is struggling to attract clients. For a small business, the owner handles all management duties including supervision of junior staff and decision-making. Many small business start-ups fail at this stage due to various challenges. Some businesses that succumb to these challenges are sold off at net present value (Poole 2002, p. 75).
Survival
Businesses at this stage have successfully overcome the challenges of the first stage. At this stage, the business has enough capacity of customers who are satisfied. The main objectives for the business are to break even and gather enough funds for expansion. The number of employees start to increase although the decision making function is still performed by the owner.
At the end of this stage, the business may achieve growth in size and profitability. Some businesses however remain at this stage for a long period surviving on marginal returns until they cease operations based on the decisions of the owner (McKeown 2007, p. 61).
Success
Businesses at this phase have achieved growth and have collected enough funds that are capable of financing expansion. Market penetration and the volume of customers at this stage are healthy. The business can either expand or remain at this level while providing the owner with funds for diversification since the profits are above average.
An increase in size of operations and the accompanying revenues prompt the owner to hire competent managers to oversee various functions within the business (Singh 2010, p. 15). The systems are developed and financial planning and other methods are introduced to ensure smooth operations.
To ensure survival, the company should adapt to changing conditions in the industry especially competition. For instance, many automobile makers did not make it past the 1970s and 1980s since they could not adapt to changing conditions (Rao 2002, p. 214).
Take Off
The company at this stage experiences rapid growth and the main concern is financing the growth. The owners delegate most of the duties to managers to improve efficiency. The managers should be competent enough to handle environmental dynamics. The systems at this stage are under duress from growth and they are therefore improved to accommodate the extra workload. Planning and decision making are improved.
For decisions to be made by the owner, various factors have to be considered due to the increase in stakeholders and independence of the business from the owner. To graduate to the next level, the owner of the business must show maturity in management and financial planning (Churchill and Lewis 1983, p. 126).
Resource Maturity
The objectives of a company at this stage are to strengthen and manage well the financial gains achieved from the other stages. To cope up with the rapid growth, the company should also expand the management or it will succumb to the ineffectiveness arising from growth. At this stage, the business should be a separate entity from the owner. The systems should be broad and well developed. Moreover, the company should have adequate staffs who are experienced in their fields.
List of References
Churchill, N & Lewis, V 1983, The five stages of small business growth, Harvard Business Review, New York.
McKeown, L 2007, Predictable success: Getting your organization on the growth track, Green Leaf Group Press, New York.
Poole, M 2002, Handbook on organizational change and innovation, Oxford University Press, New York.
Rao, M 2002, Organization design change and development, Discovery Publishing House, London.
Singh, J 2010, Evolutionary dynamics of organizations, Oxford University Press, New York.