184: Five Stages of Business and the Decisions to Make as You Grow

Welcome to the Time to Level Up Podcast. I'm your host, Andrea Liebross. Each week, I focus on the systems, strategy, and big thinking you need to CEO your business and life to the next level. Are you ready? Let's go.

Hello, my friends and welcome back to the podcast. I am thrilled you're here. I do want you to know before we really get into what we're talking about today, that we are in the middle of getting ready to relaunch Time to Level Up Podcast with a new name that more aligns with the She Thinks Big book.

As part of that relaunch plan, you are going to get to do lots of fun things and participate in it. Starting in about a week, if you're listening to this when it's released, you will see more details coming out around that.

Okay, so last episode, we talked about the different stages mentally of what you are in your business as your business evolves. Today I wanted to continue on that and talk about what I call the five stages of business.

Now, if you Google the stages of any business, this theory of there being five stages comes up often and so I do like it and I decided that for our purposes and how I want to talk to you about this, I think it works really well.

This also comes off of the scale with the simplicity and confidence workshop that I did a couple of months ago, which is actually now available to purchase. You can purchase that workshop just as a standalone thing. I will put the link in the show notes for that.

But in that workshop, we talked a little bit about the difference between growth and scale. Scaling a business is like, it's big, man. It is big. But before you get to that place, analysts and researchers have identified some patterns that happen in the growth phase of small businesses.

If you can anticipate what the next stage is for you, you're going to get a clearer idea of the kinds of questions you need to be asking yourself. Sometimes my clients say to me, "Andrea, what questions should I be asking of myself, of my team, of you?" I think these really are the five stages of business growth.

Okay. Are you ready? We're going to dig in. Get your pen out. Get your brain on for five things. So, stage one. Stage one is when you establish your existence. What does that really mean? You have a product or a service. You are establishing your first clients or customers. This phase of the business is pretty straightforward.

It's not super complicated, but yet, it's crucial because here are the three questions that you need to be asking yourself: “Can I find enough clients or customers? Can I deliver our service or product well enough to be a profitable business?” Okay, that's one question, but it's two. “Are we able to find enough customers? Can we provide our service or deliver our products enough to enough people to be a profitable business?”

Now, the second question. So now we've got a base of customers, can we expand to a broader sales base? Maybe you've only been selling to your family and friends. Can you expand beyond that? That's the second question.

Then the third question is, “Do we have enough capital? Do we have enough money and cash resources to support this phase? When someone says to me, “I'm not making enough money yet,” that might be true, but I'm curious, is the money you're making going back into your business?

Because really this level of business, this established existence requires you to be a little more flexible and a little more nimble in really how you're using your time, your money, and your brain power.

In most businesses in this phase, it's like the owner is doing a lot. The owner is doing a lot. They may start to hire out some contractors, but the owner's still supervising them. Formal systems and sophisticated processes, they're probably not there yet. We're just trying to stay alive.

Sometimes, what happens in this stage is someone realizes that what they thought was going to be the main product or service actually isn't, and there might be a better product or service that more people want.

This happens a lot. I just had it happen to a client who made her initial offer and crafted it based on what she thought her clientele would want, and she's finding that they actually want not just quick services, but they want ongoing services.

That's number one, establish your existence. Do you have enough customers? Are you able to provide a service to make it profitable? Can you expand upon just the first initial clients or customers? Do you have enough capital or resources to support this?

All right, number two, stage two. Now you're kind of in the survive-to-thrive stage. If you're in this stage, you have proven that you have a profitable product and an established customer base. Now you've got a shift to retaining those customers and addressing the relationship between your revenue and your expenses.

A lot of people on this stage come to me and they want to be in I've Really Got This where we get deep down into revenue and expenses and the relationship between them. If you are a business owner in this survive-to-thrive stage, you're going to ask yourself these kinds of questions.

In the short term, can we generate enough revenue to cover ourselves as things start to fall apart? What does this mean? The way you've got here is not the way you're going to keep going.

However you're doing things now and whatever you're putting money towards now, or in the established stage, when you get to survive-and-thrive, you're going to have to kind of up the ante because you're probably going to have to do things differently. You're going to have to hire more people and they're probably going to have to be more experts in their fields.

Which kind of goes to the second question. Are we able to at least generate enough revenue to remain in operation and still support growth to the point that gives us a return on our time and energy investment?

I pulled these questions, by the way, there's an HBR, Harvard Business Review article, there's a Lucidchart article, I'm pulling this from a multiple of different resources and I'll put the link to that resource in the show notes as well.

All right, so survive to thrive. This is really like the owner and has now as a small team. Really though, the team is just a bunch of executors. They're doers. They're not necessarily autonomous decision-makers. This business still is really defined by the owner. There are some systems, but they're minimal.

Now you're still a little vulnerable at this stage. You might stay at this stage for a really long time because you've got to make it through the survival stage to move on to the next one. Because here you're still involved in the business. You don't have autonomous decision-makers. You're trying to see if you can generate revenue to remain in operation and support growth.

But also that gives you a return on your time and energy. Now you're really paying yourself. People in I’ve Really Got This are really paying themselves. If that's you, you're in stage two.

Stage three, building on success. By the time you get to this stage, you have a proven viable business model. You're consistently gaining new business, you're retaining your existing business, and you have systems.

The business owner's concern at this stage is really whether or not to expand or keep the company sustainable and profitable while the owner scales back on what they're doing.

So think about this. Are you wanting to continue to grow? Which means you're probably still going to have to be a little bit in the weeds, or do you want to just keep the status quo, keep it sustainable and profitable, and step away a little bit?

At this stage, you're not as vulnerable as you were in the two earlier stages, but you do have some important decisions to make, such as, would scaling right now give us higher or lower margins?

For example, if you have a service-based industry where you're going into people's homes or businesses, for example, and you are installing things, up until this point you've been self-managing all of that.

But if you're going to scale, you might have to pass off the management of all the delivery of the product or installation of service to someone else. This may have increased labor costs in the example we're talking about so you're going to have a lower margin. Does it make sense for you to scale in that respect?

Next question, if you were to scale, could you continue to deliver a quality product or service? Does increased production or increased clientele equate to the same level of quality or service that you've built this business on?

Now this also happens when the principal owner of the business realizes that they can't be the provider or deliverer of the service. And they've got to have other people on their team that can deliver the service as well. If you were an interior designer, this may mean that you're hiring other interior designers who work under you, but who also have client interaction.

At this stage too, you might be asking yourself, “Hmm, should I take a step back and spend more time with my family? Is this really what I want to be doing for the rest of my life? Maybe I should start something different. Maybe I should sell the business.”

But if you decide to stick through it, you're going to get to stage four, which is really the expansion phase. If you're going for the growth, then the expansion phase is going to bring another priority to the table, which is financing.

If you're really going to expand, then you're probably going to have to delegate more. You're going to have to have more cash. You're going to have to have more of those resources: time, money, people, and brain power.

If we're going to expand, and now we're going to have a team of five interior designers, is there enough cash to support that? Do you need a loan? Are you okay to be in debt for a little while?

If you're at this stage, you have a fully developed business, you have different people doing different things, different clear roles, you're not doing everything, no way Jose, but now you're like, “Hmm, I am not sure if I want to keep doing this and expanding. Should I scale back and become a sustainable smaller-scale company or maybe even sell it?” that expansion phase sometimes is a stopping point.

If it's not, then you get to stage five and if there, you've reached maturity, you did it, you've done strategic planning, you've managed your team and your talent, you've separated your ownership from the company financially and operationally, legally, you’re probably a different type of business, sometimes what happens here is that you start to become a little bit bored when you finally made it and you don't bring new ideas to the table anymore.

If you're going to keep going as a mature business, you do need to be adaptive. You do need to bring new things to the table. You have to anticipate market changes.

Here are the five stages to review. Number one, establish existence. This is really the first phase. It involves delivering the initial product, securing your customers, and being consistent in what you're doing.

Then you move to stage two, survive to thrive. In this phase, your business has established that it has a viable product and it's focusing on retaining the customer base, building consistency, and building a team. Establish existence, that's really the people in my world that are in I've Got This, the survive-to-thrive, they're in, I've Really Got This, then you get to stage three, building on success.

Businesses at this stage really are facing a new line of decision-making. They have to decide to continue to scale up or just stay at the sustainable level. But if they stay at the sustainable level, they're probably going to be a little less hands-on because they're going to have made these new hires who are going to run the business. If they want to keep scaling, they still have made new hires, but they're probably going to have to be in it a little longer.

These are people who are in Runway to Freedom because they're deciding whether or not they want to continue to scale up or how they're going to sustain this business. Then you get to stage four, which is identifying expansion, Runway to Freedom people are also in this stage.

They're figuring out, “How do I expand this? How do I create more volume?” Then the stage five people are the ones that have reached maturity. Now I'm probably not coaching them at that point. I hope I'm not. They're probably not in any of my groups, but sometimes I do VIP days with those people, just one-on-one VIP days.

Do yourself a favor, identify what stage you're at, decide if you like the stage you're at, or if you want to move forward to the next stage, and answer some of the questions associated with your stage and preview the questions associated with the stages to come.

Okay, my friends, I hope you found that helpful, the five stages of business. I think it's super helpful to think about it. I want you to really assess where you're at. If you need help assessing, reach out. Message me. Let's set up a consult call. You have nothing to lose. These consult calls, there's no cost. It's you and I. If anything, you walk away with a great strategy. So why not?

Okay, until next time. Now is the time to level up. If you haven't gotten yourself a copy of She Thinks Big, big thinking, my friends, totally goes with these stages. At each stage, you need to do that in order to move ahead. See you next time.

Hey, listening to podcasts is great. But you also have to do something to kick your business up a notch. You need to take some action, right? So go to andreaslinks.com and take the quiz. I guarantee you'll walk away knowing exactly what your next best step is to level up.