August 22, 2014

The Seven Stages of Small Business Success

small business successWith 28 million small businesses in the U.S., it’s hard to be a member of planet earth and not have a personal connection to small business. Small businesses play a critical role in the economy, making them a hot topic of discussion.

What’s the problem if everyone is talking about small business?

The problem is this: Small business means different things to different people.

Small businesses come in many shapes and sizes. If you’re a solopreneur, you have different needs and challenges than a business with 10 employees. And you have widely different needs and challenges from a 100 person company.

What I’ve discovered in working with thousands of small businesses for the last decade is that there are seven stages of small business success. It’s important to remember you can have success at any of the seven stages. The goal of the seven stages is to help you articulate which stage your small business is in and the success factor you need to focus on. Having this focus helps you make intentional decisions about where you want to be in the future.

7 Stages of Small Business Success

Solopreneur

Of the 28 million small businesses in the U.S., 22 million of them are solopreneurs. In this stage, businesses have one employee and bring in $100,000 or less in annual sales. The success factor for the solopreneur is time. Ask any small business owner and you’ll hear that there isn’t enough time in the day.

Handling every part of the business, from finances to sales and marketing to everything in between, is a dizzying cycle that can ensnare even the best multitaskers. A shortage of time butting up against the ever growing to-do list can detonate the solopreneur’s chance of success.

The key to thriving in this stage is to establish a meticulous time management system. Devote the largest pieces of your time to what actually makes the business grow. Don’t forget to carve out time to take care of yourself, to be with your family and to remember why you actually became an entrepreneur in the first place.

You’ll stretch yourself thin, but you’ll at least stay sane while in this stage.

Partnership

Partnerships comprise 1.7 million businesses across America and make somewhere between $100,000 and $300,000 annually in sales. The solopreneur grows beyond him or herself to two or three employees in this stage, which usually means bringing on a partner. There’s great value in strategic partnerships and they can really ramp up your business’ growth.

But, there’s a flip side to everything. The wrong partner can stunt your company’s growth and cripple its path to success. Start by evaluating your own weaknesses. If you lack financial know-how, find a partner who is passionate about projections and balance sheets. If your instincts are to act as a manager, a visionary entrepreneur that dreams big might be what you need. There’s not always a perfect yin to your yang, but look at each potential partner as an entire package.

Having partners in place allows you time to harness the main success factor at this stage– sales. It’s a bit uncomfortable for many entrepreneurial types to sell, but you have to get new customers to survive. You have to figure out how to talk about your product in a way that speaks to the benefits your customers need.

There’s no one in the world who’s more passionate than you about your product or service. So get over your fears and start selling.

Steady Operation

As your business steadies, you will reach this stage in which 1.9 million businesses also reside. A steady operation has four to 10 employees and annual sales of $300,000 to $1 million. Once your business has the sales operation running, you’ll need to get focused on marketing and service. It’s essential to get a plan in place to make marketing systematic and profitable for the business.

As a small business, you can’t afford to have marketing efforts not generating revenue. Learn to make smart marketing decisions that help you grow sales and keep customers.

Customer service is also something to focus heavily on at this stage. Invest in the people and systems that make your customers feel like VIPs and you’ll end up with a boost in repeat sales, referrals and a higher customer retention rate.

Local Success Story

There are 900,000 businesses nationwide that are local success stories and have between 11 to 25 employees. As your business grows from $1 million in annual sales up to the $5 million mark, the big picture must be at the forefront of your mind.

The success factor at this stage is setting the vision. You face the reality that you won’t always have a hand in hiring and you have to trust the people in charge of these decisions. It’s intimidating for an entrepreneur to relinquish the control he/she had over every detail of the business. But setting your vision and making it known to your team will go a long way. A clear vision will attract the right people to your business.

As your business expands into this phase, you will begin to be viewed as a success story in your local community. The growth of your company will be an inspiration to other small businesses in your area.

Your example of setting the vision and letting go will be an important model that others will follow.

Managed Organization

In this stage, your business has expanded to between 26 and 100 employees and annual sales from $5 million to $20 million. There are 200,000 businesses like this across America and the success factor of hiring in line with your vision will set companies in this stage apart.

Most CEOs feel that when they get to this level, all the focus needs to be on shareholders. If this is true, then you must turn your attention to employees and the company culture. Happy employees make happy customers who make happy shareholders.

Culture is what holds managed organizations together. Culture attracts the right people, ejects the wrong ones and ultimately guides a company’s path to success. Actively including every employee, regardless of rank and title, in the direction of your company will make your entire workforce feel invested in the business.

This can be a difficult stage as you add more layers of management. The wrong leaders will dilute and weaken your culture. Be sure to establish core values and a mission that can be shared among staff and valued from top to bottom. Employees will feel mutual respect and a culture they can’t resist.

This, combined with the processes you’ve already put in place will move your company forward like a machine.

Mature Company

You’ve reached a place of substantial success to the tune of annual sales between $20 million and $40 million. You now have 100 to 200 employees and you’re in the same stage as 60,000 other businesses. You’ve become a stronghold in your industry. It’s time to unleash the success factor of strategic planning and mix in concrete performance measuring tactics. Without solid planning, your company will become stagnant and that’s when it becomes vulnerable.

Revisit your strategic direction and gauge its effectiveness often. If you notice a dip in progress, it may be time to reevaluate your strategy. The pulse of a mature company should be checked regularly.

A healthy culture combined with a strong strategic planning process will allow you to move into the rare space of corporate player.

Corporate Player

As the business escalates to annual sales between $40 million and $100 million and anywhere from 201 to 500 employees, entrepreneurs must make the terrifying decision to surrender even more control. There are 30,000 companies in the nation at this stage and the leaders of these companies have to make some tough choices. The vision is still yours (mostly), and the company is still yours (maybe), but the time comes to handpick a leadership team you can trust.

The success factor for this stage is leadership development and you must choose and develop leaders who share your vision and are every bit as determined to preserve your culture as you are. These leaders should be ethical beyond reproach, treat every member of your team with respect and exude their commitment to the business and its core values in their daily actions.

You want to trust the business is in good hands.

Every one of these seven stages is incredibly distinct and it is possible to achieve success in each one. Stop where you’re comfortable. Keep in mind that people are what make or break your business. Small businesses have needs of their own that cannot be sated in the same ways those of large corporations can. Small business owners must take the time to recognize which stage of success their business is situated in and act accordingly.

Success is in the eye of the beholder, but success factors can take you there.

7 Stage Photo via Shutterstock

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Clate Mask


Clate Mask Clate Mask is Co-Founder and CEO of Infusionsoft, a fast-growth software company that helps small businesses convert more leads, save time and manage more with less with its web-based software. He also is co-author of the New York Times best-seller Conquer the Chaos: How to Grow a Successful Small Business Without Going Crazy.

23 Reactions

  1. I think it’s important to note that not all SMB owners want to move their company from one level to the next. Many are perfectly happy at a certain level while many want to “graduate” to the next level. It all depends on your situation.

    • Great point, Robert. I don’t see myself venturing past the partnership level. I aim to build up a successful community of affiliates that will be my partners for selling my products, but that’s about it.

      Anything beyond that is beyond me.

      Ti

    • Robert,

      Common misconception that does not work out for too many entrepreneurs. There is a saying that if you are not growing your dying. Well people who are working for a wage and comfortable unfortunately are not running a business, they are making a wage. A business has to have some Market value and the only way to create market awareness and market Value is through growth, profitability and viable.

      Viable so as not to be cliche means, your business solves a problem that the market has, your product/service offers a solution for that problem an your business provide unique and distinguishable solution to problem that is in demand.

      To grow you need working capital. Revenue and profit can sometimes cash flow this growth on it’s own but often money is needed to cover cash flow and finance the business as it brings converts sales to cash. To do this most companies need to grow to revenues over $400,000 and have tax returns of at least 3 years…Two if they seek a small business Government secured loan. So I think those who assume that they will be happy to “not” grow” are going down the wrong path. Too much time and effort can pass by that would kill business continuity when the time comes that they need to finance an opportunity or need cash to solve a contractual, legal or force of nature mishap.

      People who own their own business should always seek to grow independent of themselves and create something that has a value even when they are removed from the equation. That is where real wealth is created, if you have something that can be shown to be of value someone else to purchase for a multiple of what your earning every year, then you have something, then you have a business.

      [Edited by Editor]

  2. Is it better to call small business as emerging business – to avoid the confusion? Thanks for sharing these stages to success and the moral of the story is: There are simply no shortcuts.

    • Hi Shaleen,

      Interesting point.

      One thing to keep in mind is that some small businesses don’t actually want to grow — the hassles of dealing with growth cause the owner to want to keep the organization to a modest size. Growth requires adding more staff, overhead and complexity. In other words, some may never want to go beyond the solopreneur stage, and if that’s what they want, then I say “to each his own.”

      I like the way Clate has laid it out. Because if you do choose to grow, you will go through those stages.

      - Anita

  3. I totally agree with the comments about choosing to stay at one level or another. The point I like to make is that ALL of the 7 Stages are success stages. My intent is not to push people to a particular stage, but to illustrate the characteristics of each stage and the critical success factor of moving to the next stage, if one chooses to do so.

    Indeed, bigger is not always better. Small is beautiful and praiseworthy.

  4. Great article Clate! Guidelines like this are never rigid and each business can have different characteristics at each level but this is really good. Many people are living their dream at different levels and they each present challenges-galore. For growth-minded entrepreneurs, the two biggest revenue hurdles appear to be getting over $100k and then getting over $1,000,000. I know I’ve had to become a different leader at the different stages of our growth since the game changes at each level. Thanks again Clate!

    • I agree, Tom. Those are two major milestones that require different skills from the entrepreneur. To me, the most fun thing about entrepreneurship is the new and different challenges that come our way as we grow our companies. As you’ve pointed out, my purpose in distinguishing between the 7 Stages is not to create rigid guidelines, nor am I prescribing or mandating a particular path. I truly believe success lies in each of the stages. My purpose is to clarify the path and highlight the skills necessary to move past each stage if, and only if, the entrepreneur chooses to do so. In other words, there’s no shame in staying at a particular stage, as long as the entrepreneur is consciously choosing to be at that stage.

  5. These levels are great and I agree that the most important. Thing is to note that if your business is run properly, it can be successful at all levels. Great article!

  6. What do you do if the small business has the inertia of growing? If you will to hold the business small, you should just reject services to new customers? What are your choices?

  7. That was a lot of fun reading about the next steps in business. I think a small business becomes an actual business when management starts making the hiring and firing decisions vs you as the owner making these decisions. In order to reach each next phase you have to give up a little of the tasks that you do. Reminds me a lot of the E-Myth!

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