Crucial Factors in the Five...

Another one straight out of the Harvard Business Review, this time from well before I was born!

The authors of this article assert that there are five stages of growth in a business, and that they are non-linear in nature. Not all companies will go through all stages, and the stages don't progress in the same order for every company. Here they are:

1. Existence - getting customers, meeting their needs. These two things mean that a company exists.
2. Survival - Switching focus from existence to the relationship between revenues and expenses. Here is where you worry not only about whether you can make money or not, but whether you make more than you spend!
3. Success - This isn't the end of the road, by any means. By the time you're here, you've created a viable business that brings in sufficient profit. You have two things that you can do:
1. Use the success of the company to finance the owner's lifestyle/other activities, or
2. Use the success of the company to finance further growth.
4. Take-off - After making the decision for more growth, your primary concerns are managing the growth and financing the growth.
5. Resource Maturity - The authors say that this is the point at which you have "arrived" in your business. Less than one percent make it here, but that is by choice for most. Here, you must take hold of the business after its high growth stage, and implement systems to help control the company.

1. Company Specific
1. Financial Resources (cash and borrowing power)
2. Personnel Resources (how many people, how awesome are they, what level are they)
3. Systems Resources (Business Process Automation, planning/control systems, info systems)
4. Business Resources (customer relations, manufacturing/distribution processes, reputation, etc)
2. Owner Specific
1. Owner's personal goals and business goals
2. Owner's operation abilities
3. Owner's managerial abilities, and willingness to delegate
4. Owner's strategic abilities

The interesting thing about these "key factors" is that they are ALL important, but that in each stage some are more important than others. According to the authors, here is what you should focus on in each stage:

1. Existence
1. Business resources - what little you do have needs to be quality.
2. Owner's operation abilities - your ability to do what the business does.
3. Cash - For without it, nothing survives.
4. Matching personal and business goals - if your business goals and your personal goals are dissonant, get out now.
2. Survival - at this stage, doing what your business does, and keeping an eye on revenue & expenses is your focus.
1. Owner's operation abilities
2. Cash
3. Success - There are two sub-stages here, disengagement and growth.
1. Disengagement
1. A little less on your ability to do, but that's still the #1 focus.
2. Of the eight factors, all are rising in importance but cash, ability to do, and business resources.
2. Growth
1. Matching business and personal goals. This is a risky and stressful time, make sure you really want it!
2. Operational abilities
3. All of the rest are important here, but not the PRIMARY focus.
4. Take-Off - It's ALL important in this stage, but here's the order of focus according to the authors.
1. Cash - if you can't finance growth, you'll fold
2. Strategic planning - You must have the road map to get there.
3. Systems and controls - Since you can't do everything personally in a high growth stage, you must have systems in place to bring you the results you're looking for.
4. Business/Personal goals
5. People - Do you have the right kind of people, in the right positions? How's your culture here?
6. Delegation - if you can't delegate, you carry the weight of the world on your shoulders. Your people are there for you, to do what you tell them to. Give them things to do, and let them!
7. Your ability to do - Since you're delegating and focusing on growth (strategery), you shouldn't be in the day-to-day of doing what your business does. It's less important, but since you're a teacher in this stage (delegate!), it's still important.
8. Business resources - these are becoming increasingly a natural byproduct of business operations. Manage your relationships, but don't give it all your attention.
5. Resource Maturity - in this stage, the systems are in place. Most things are important, but managed - not a CRUCIAL focus. The only crucial focus is:
1. Strategic planning. Many companies forget that the market moves with or without the company, you might as well move with it.

• Every business goes through these stages differently. Some stages may even be skipped or not touched.
• Use this as a guide to what you should be thinking about in the future. If you're in the Survival mode now, but you intend on getting into the Growth stage, make sure you account for the crucial factors of the growth stage.
• When considering advice from other business people, consider how their businesses evolved. The evolution of Wal-Mart was not the same as the evolution of Facebook, so Sam Walton's and Mark Zuckerberg's advice about the same business issue may vary quite a bit.