The Five Stages of Small Business Growth                    Neil C. Churchill & Virginia L. Lewis Harvard Business Review May-June 1983. p30-50.

Introduction Main Assumption Stucture of the Framework Small Businesses (SB) experience common problems, arising at similar stages. Stucture of the Framework Five stages Characteristics at each stage Size, Diversity, Complexity Management Factors Managerial style, organizational structure, extent of formal system, major strategic goals, Onwer’s involvement. Size Dispersion complexity Stages 2/4/2018

Advantages of a Small Business Framework Aids in understanding SB challenges Helps in anticipating key requirements at various points e.g. need for delegation whenn SB becomes larger Helps anticipate future SB challenges Helps evaluating the impact of present and proposed policies and regulations on SB Helps diagnosing problems and matching solutions for SBs Legend Owner Business 2/4/2018

Stage I – Existence Strategy Management Style Extent of formal systems Direct supervision Extent of formal systems Minimal to non existent Owner does everything Key Problems Getting customers Delivering products If they cannot deliver, they quit ! If SB remains in business It gets to Stage II - Survival Business and Owner 2/4/2018

Stage II – Survival Strategy Management Style Extent of formal systems Supervised supervision (e.g. manager, task leader) Extent of formal systems Minimal Owner does everything Key Problems Generate enough cash to break even Business and Owner 2/4/2018

Stage III – Success Strategy Management Style Extent of formal systems Maintaining profitable statu quo or, Getting resources to grow Management Style Functional Functional managers take over duties of owner Extent of formal systems Basic: financial, marketing, production Developing to meet forthcoming needs Key Problems Expend or keep company stable and profitable Business and Owner 2/4/2018

Stage IV – Take-off Strategy Management Style Extent of formal systems Growth (rapidly) Management Style Divisional Extent of formal systems Maturing Key Problems/Issues How to grow rapidly and to finance growth Can the owner delegate Business and Owner 2/4/2018

Stage V - Resource Maturity Strategy Return on investment e.g. eliminate inefficiencies Management Style Line and staff Extent of formal systems Extensive Key Concerns Consolidate and control the finance Retain advantages of small size Expand the managerial force May enter ossification Lack of innovation, avoidance of risks Business and Owner 2/4/2018

Key Changing Management Factors Related to Small Businesses Factors which change in importance as the business grows Financial resources Cash and borrowing capacity Personnal resources Number, depth, quality Systems resources Sophistication of information, planning and control Business resources Customer relations, market share, supplier relations, manufacturing and distribution processes, technology, reputation. 2/4/2018

Key Changing Management Factors Related to the Owner Owner’s goals Owner’s operational abilities Marketing, inventing, producing. Owner’s managerial abilities and willingness to delegate responsibility Owner’s strategic abilities Ability to look forward 2/4/2018

Management Factors and Stages Stage I Stage II Stage III Stage IV Stage V Cash Critical Important Moderately Irrelevant Systems and Controls Owner’s ability to do Owner’s ability to delegate 2/4/2018

Summary Challenge of Small Businesses (SB) The problems faced and the skill necessary to deal with them change as SB grows Owner must anticipate and manage these issues A SB development stage determines the management factors that must be adressed Knowing its development stage and plans: Enables more informed decisions Helpls to prepare for later challenges. 2/4/2018