Five Stages of a Business - Get a Head Start with a Franchise System

Posted by Jim Otto


Every business can be identified in the following stages.  Some actually move from one to the next, while others may stay at the same stage during their entire existence.  Businesses in stage one are the most difficult.  During this stage every system, product, etc. needs to be developed from the ground up.  Most don't survive this stage to move on to stage two.  That is one reason that franchising is so attractive to so many.  When one invests in a franchise system, they are getting a business model that already survived stage one and two - and the franchise owner just needs to concentrate on following the system and doing it well! 

Stage 1 - Business Existence: The business starts out with very few systems in place, with the owner usually overseeing all aspects. Primary concerns entail attracting customers and being able to produce and deliver the services/products needed. Other concerns might entail how to encourage growth, and finding enough funds to maintain the needs of the business (repairs, paying staff, creating product, etc.). There's a lot of risk associated with this stage, as the demands on time and energy may cause the owner to sell-out and pursue a different path. The business may also prove to not be able to attract customers, or sustain the financial requirements the business needs to continue.

Stage 2 - Business Survival: The business not only has attracted enough customers to be profitable, but also has the products and services in place to encourage the customers to return. However, owner concerns during this stage might pertain to the ability to sustain profitability and encourage growth, all while maintaining repairs and delivering enough services to engage customers. Sometimes, a business may stay in the "business survival" stage for a while, and go out of business when the owner retires, or decides to do something else.

Stage 3 - Business Success: With the business being successful, the owner will have the option of continuing to build on success, or keep the business stable and financially profitable. Some owners may want to use the business as a means of support while they pursue other activities, which means either a partial or full disengagement from the business. However, it should also be noted that during this stage of the business, more employees and management are usually brought on board to assist with the operation of the company.

Stage 4: Business Take-off: During this phase, the business is trying to figure out how to grow rapidly while finding ways to finance the desired growth. Business Owners will also look at delegating tasks in order to help manage the growth and complexities of the expanding business. Sometimes, a business during this step may grow too quickly and run out of money, or the owner fails to distribute responsibilities to others - which may contribute to owner burnout.

Stage 5: Maturing of Business Resources: The business has grown to the point of being adequately staffed with experienced employees and management, and should have systems in place that have been refined and are efficient. In this stage, the business also should have financial resources and experienced management ready to help continue the growth of the business. However, it's important for the business to try and maintain its entrepreneurial spirit, and continue with that same ability they had when smaller in meeting the needs of their customers. If the business opts to avoid risks and innovation, and becomes so big that customer service and internal culture dramatically changes, it may allow a competitor to gain a foothold.

Franchise opportunities are in an abundance.  Smarter business owners do careful due diligence when evaluating them.  We have written several other blogs on these topics: What to look for, what are the advantages of a franchise and so many more.  If you are looking for faster business growth in your future business plan, it might pay well to check out franchise opportunities.

For further reading, check out our other resources on Franchise Success!

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