The Chamberlain & Lewis Five Stages Of Small Business Growth Model

Neil Churchill and Virginia Lewis have developed the five stages of small business growth model to discuss the issues involved and moving between the stages. The five stages are as listed below:

1. Existence
2. Survival
3. Success
4. Take-off
5. Resource Maturity

Stage One Existence

In this first stage, the business has to show that it has the ability to get customers to buy their products and delivers on the promises so well that customers pay and become repeat customers. At this point customers either move onto the next stage or fail and close their business once they use up their start up funds.

Stage Two Survival

At this point we see that the business model works, but is the company able to generate profits and fund their future growth plans? A lot of businesses get stuck in this stage, they started their business but didn't take it to the next level. They didn't measure their progress to see if they are even making any money. Many companies lose their motivation at this point and aren't ready to protect the company during tough times or push the business into stage three.

Stage Three Success

At this point the company has proven itself and they either look to expand or ensure it's ready for the future. They might stay in their comfort zone and the owner might decrease their involvement. Some might grow as big as they can for their location and decide to open in a new region.

Stage Four Take-off

This stage usually sees rapid growth which brings the challenge that cash required to fund growth is not available and they need to delegate responsibilities to a management team to support the bigger business. In order to fund growth companies will borrow from retained earnings, owners will make less cash withdrawals, incur debt or bring in venture capital. Any failure here will bring them back to stage three.

Stage Five Resource Maturity

Ok at this point the company is a big business and needs to do some streamlining and eliminate inefficiencies that may have appeared during growth. The company might get tied down by its size and lose its entrepreneurial sense and creativity.

Critical Factors For The Owner In The Growth Model

• Personal goals for themselves and the business
• The owner's abilities to do the important tasks themselves - critical in the early stages.
• The owner's ability to manage people successfully and delegate work.
• The owners ability to look at the business from a strategic perspective and see the strengths, weaknesses, opportunities and threats and take the appropriate action.

I think this is a good link to have in my toolkit just to look back at from time to time and see where my business is on the growth model.

http://businesscoaching.typepad.com/the_business_coaching_blo/2008/07/small-business-growth-problems-issues.html