Inside the 7 Stages of Small Business Growth

Ask someone to define a small business, and you’ll likely get a few different answers. A one-man web developer making $100,000/year calls himself a small business. Yet so does a 9-man team bringing in $1 million in annual revenue.

But, and this is pretty obvious, the kind of challenges a solopreneur faces versus that of a small team can be significantly different.

Inspired by this chart from Infusionsoft, which ultimately helped our team better understand how to position our Virtual CFO services, the below article walks through 7 different stages of small business growth.

Are the delineations perfect? No, absolutely not.

But by separating a company’s growth into the following chunks, we can begin to understand the unique challenges and opportunities of each individual growth stage.

SOLOPRENEUR: The One-Man Agency

This stage of growth is exactly what it sounds like. Maybe it’s a stay-at-home dad building web apps, or a full-time employee starting a nights-and-weekends side project where he offers social media management to law firms.

For many of us operating a service-based business, it’s the very beginning.

At this point, you’re doing everything from client relations, to design, to marketing, to finance. You’re bringing in anywhere from $0 — $100K in business each year.

The biggest challenges at this point are time management and bringing in enough cash to sustain your operations.

The measure of success at this stage is whether or not you have time to enjoy the rewards of the business you’re building and how well you can maintain your personal life — relationships, family time, etc.

Focus on effective time management strategies to succeed and to grow beyond this point.

PARTNERSHIP: The Team Player

The one-man show is no longer cutting it, and maybe you need to expand services offered in order to grow.

So you bring in a partner.

Together, you should be bringing in anywhere from $100K-$300K annually in business and have 2 to 3 employees. At this stage, choosing a partner who can strategically help you grow is vital. You’ll want a partner that can complement the services you already offer, and someone whose strengths play to your weaknesses, and vice versa.

STEADY OPERATION: The Established Agency

At this point, you’ve grown to anywhere between 4–10 employees, and you’re bringing in a steady $300K to $1 million in yearly revenue. Marketing is key at this stage, but not just any marketing — highly targeted and effective marketing. A business at this stage can’t afford to be spending revenue on marketing that doesn’t bring in additional business.

And while focusing on growing the revenue through marketing, taking care of your existing customer base is also very important at this point. Focus on ramping up your customer service. Making your regulars feel like VIPs encourages loyalty and does wonders to retain new clients.

LOCAL SUCCESS STORY: The Next Tech Success Story

You’re now the stuff of local legend. Somehow, you’ve managed to take a small, one-person operation that started in your home office or garage and have grown it to include 11–25 employees. You’re bringing in a healthy $1 million to $5 million in annual revenue.

The most important step at this point is to set the vision.

Keeping the company’s future in mind, you now have to step into the scary territory of letting others manage different aspects of the business. Hiring the right people who believe in the vision is key to doing this successfully. This ensures that even though it will be physically impossible for the key shareholders to have a say in every single decision, the decisions that are made will be in line with what they would want.

As you continue to grow and to set the vision of how far you can take your company, you’ll become an inspiration and example to those just starting out. Giving back in that way pays off tremendously in term of establishing yourself as a pillar of the industry.

MANAGED ORGANIZATION: The Established Agency

At this point, the founders have been successful in establishing the vision for their company and communicating to the organization’s various managers. The business now has 26–100 employees and brings in yearly revenue of $5 million to $20 million.

At this stage, it’s extremely important that the company’s vision is maintained despite the growing complexity of management layers. The best way to ensure that is to instill a strong company culture. If a set of core values are established and shared by employees, no matter their rank, there will be an environment of mutual respect in which your vision can be maintained and even grow.

MATURE COMPANY: More Than 100 Employees

At this point, your company has become a major industry player. You’re bringing in anywhere from $20 million to $40 million in annual revenue, and you have 100–200 employees.

This stage is all about shrewd, strategic planning and measuring the effectiveness of those strategies. If the results aren’t there, re-evaluate the strategies to keep moving forward. You don’t want your growth to become stagnant.

That kind of focused strategy combined with a strong company culture will ensure that you make it into the next stage as a major corporate player.

CORPORATE PLAYER: Becoming an Industry Standard

At this point, you are an industry standard.

You are a pacesetter for innovation and growth. Your company has 201–500 employees and brings in a staggering $40 million to $100 million, and the company may or may not be under your direct control.

At this stage, picking the right leadership is vital. The right leader will ensure that your vision is maintained regardless of whatever controlling stake you have in the company at this point. By choosing leaders who are ethical and committed to preserving the company culture, you can trust that your business is in good hands.

Success has many different definitions, but hopefully the above growth stages can help inspire you on your journey to entrepreneurial success.

Jody Grunden is a nice guy who likes hockey, golf, and his family. He also meets with businesses on a weekly basis as a Founder and Managing Partner over at Summit CPA Group, a Virtual CFO firm that helps growing companies manage (and improve) their finances.