There are generally five stages a business goes through before it becomes a company that has the material and managerial resources to take-off, become very successful, and yet remain stable enough to not disintegrate under its own complex operations. Not all companies go through these stages; some remain relatively small yet successful. But if a company wants to continually grow and develop, it must continuously change its nature and operations and adapt.
At its start, a business is just trying to attract enough customers to see if it is viable. There is minimal to no management as the owner often takes care of all the sourcing, limited administration, and selling. At this stage, the business is very much a hands-on project by the owner. Because there are so few with systems and processes, the owner’s own private money and that of the company are often intertwined.
At this point, the business has enough business and regular income coming to make it a viable business. As it is, it should be able to continue but will not grow unless operational changes are made or implemented. It is likely at this stage that a business may have a few employees, but as the company is still small, each employee is expected to be in direct communication with the owner. That means that process and administration are still very fluid and probably undocumented. As the employees are in frequent contact with the owner, they can exchange requirements, and the owner will often advise in a hands-on way how they would like the business to run.
Companies that reach stage 3 are profitable, stable, and have staff that is distinctly specified to particular jobs and activities. There’s also more significant documentation of processes, and there may be a fully-fledged HR department, or the company might outsource HR duties like payroll. At this level, the owner has hired some staff members, and there is some managerial structure. Also, as the company has developed more processes and administration, the owner’s and company’s funds are now separate.
Companies that reach stage 4 are profitable, stable, organized, and departmentalized. There are hierarchical management and supervisory staff of excellent caliber, which means that the company now has decision-making staff across different departments. The owner is now quite removed from any day to day technical issue. If they are involved, they are very much focused on the direction of the company or part of strategizing expansion or business development. Alternatively, at this point, there is strong enough managerial capability on the company that the owner can, in effect, withdraw from any real duties apart from some overseeing and monitoring.
A company that is at the stage 5 level is almost a well-known brand, if not globally, at least within its field. It is profitable and stable, with high-quality management running throughout its divisions and departments. There are only two things that can threaten the existence of this company. The first is a poor management culture eroding operation standards. The second is innovation or technology that renders their product, industry, or service obsolete, with the company not being able to adjust or adapt in time.
Many companies never reach stage 5; the owners are either unable to meet the challenges to be overcome or are not inclined to grow their business beyond the lower stages. That does not mean that they are not successful in what they are doing; it is more a testament of what it takes to grow a business into a highly functioning, highly complex organization that impacts society to a great extent.