Why do some companies grow and are successful over many years, while other companies struggle to “move-beyond” their initial growth stage and early successes? 

It is recognised that small to medium-sized businesses grow in a systematic way and experience similar challenges in similar stages of their development. The growth stages of small and medium-sized businesses are:

  • Stage 1: Existence (struggles to win customers)
  • Stage 2: Survival (an operating business at breakeven)
  • Stage 3: Early Success (operating business with modest profits)
  • Stage 4: Rapid Growth (revenue and business growth)
  • Stage 5: Maturity (consolidating the business and the financial gains)
  • Stage 6: Decline (revenue falling and financial losses)
 
 
business growth stages.png
 
 

The transition from Stage 3 to Stage 4 is described as breaking through the “Growth Wall”.[1]

The fundamental decision facing the business owner at Stage 3 is whether to exploit the business accomplishments and expand or to keep the business at its current size. If the decision is made to grow the business, the next challenging question is how does the business owner plan for growth?

In order to answer this question, we need to understand the differences between small businesses and entrepreneurial businesses. 

Differences between Small Businesses and Entrepreneurial Businesses

The typical characteristics of small businesses that find it difficult to move beyond their early growth stages (i.e. existence, survival and early success) are independently owned and operated; not dominant in their field, and do not engage in any new marketing or innovative practices.

Whereas, entrepreneurial businesses that have progressed to rapid growth stage are exploiting business opportunities (introducing new goods and services; introducing new methods of production; and/or opening new markets); creating a new business model; and focusing on business growth.

These differences help us to understand why entrepreneurial businesses have broken through the growth wall.

Rapid Business Growth

For small and medium-sized businesses that are struggling to break through their growth wall, rapid business growth can be achieved by launching new products and services, moving into new markets, winning new customers and/or combining existing
resources in new ways.

The following diagram highlights some of the different approaches between small businesses during their start-up stages and the entrepreneurial businesses that have broken through their growth wall [2]

 
 
Start up growth and rapid growth stages.png
 
 

The essence of “entrepreneurial business growth” is found in the strategies that link the business with the marketplace.

The business owner and their management team need to develop and execute effective strategies which address the critical market issues, product and service delivery issues, management issues, and financing issues.

Planning for Entrepreneurial Business Growth

Planning for entrepreneurial business growth addresses three fundamental questions:

  1. What business opportunities should we explore and capture?
  2. How much should we invest in each business opportunity?
  3. What are the critical issues we need to address to ensure the success of the existing business and the success of the business opportunities?


Entrepreneurial business strategies enable the business owner to develop the strategies that enable new business growth.

Such an entrepreneurial business strategy will include:

  • studying the environment to identify unmet marketplace needs;
  • screening and shaping business opportunities, such as:
  • evaluating the window of opportunity;
  • developing product/service to respond to needs and marketplace trends;
  • marshalling the resources to capture the business opportunity; and
  • managing the implementation.

This will enable you to exploit your innovation and extend your time monopoly.

Business planning is a critical success factor for the entrepreneurial business strategy.

 
 
entrepreneurial business plan.png

Reference: Timmons[3]

 
 

The benefits of business planning include focusing the organisation on a single outcome that enhances clarity; enabling the organisation to develop the appropriate business model; analysing the cash flow requirements during the rapid growth stage and addressing the risk and uncertainty issues.

 The amount of planning depends on the type of venture:

  • Large-scale – will require detailed planning; verses
  • Small-scale – undertake a quick screen, and then implement.

The entrepreneurial process needs to be managed, i.e. doing things right – where execution is the key to success.

Protecting Existing Business

The business owner and management team also need to protect their existing business as they explore and capture their new business opportunities.

“Organic growth” strategies are equally important to the new business growth strategies and require careful management attention.

These organic growth strategies include:

  • Customer retention - identifying and quantifying customer defections, and fixing their true root causes.
  • Product and/or service extension - understanding your “core customers” cost and service gaps better than your competitors and improving products and services.
  • Reducing costs - get the most out of your systems by decreasing costs and risks.

[1] Osborne, R.L., Second Phase Entrepreneurship: Breaking Through the Growth Wall, Business Horizons, Jan-Feb 1994

[2] ibid

[3] Timmons, J.A., (1999), The Entrepreneurial Process. In New Venture Creation: Entrepreneurship for the 21st Century. 5th edition 1999, McGraw Hill, pp27-51