Small Business Growth: What Stage Is Your Business In?

SAP Concur Team |

What is your business’s approach to growth? Are you taking it steady and growing it organically? Or do you have ambitious plans about where you want to go?

Your answer is likely to be a reflection of two factors. The first is where you are on the Ansoff Matrix, a framework developed in the 1950s by Igor Ansoff to help businesses devise strategies for growth. The second is the stage in which your business is currently.

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How much risk are you willing to take?

The Ansoff Matrix outlines four approaches to business growth. All are valid but they involve greater or lesser degrees of investment and levels of risk. In ascending order of the investment required and the risk at stake, they are:

  • Market penetration: selling existing products into existing markets
  • Market development: selling existing products into new markets
  • Product development: selling new products into existing markets
  • Diversification: selling new products into new markets

Each approach requires you to have a clear strategy if your business is going to achieve them, but only you and your leadership team will know which is the right one for you.

 

Which stage is your business in?

Search the internet and you’ll find numerous approaches to defining the stages of a business’s growth. We like the seven stage approach.

Stage 1 sees you just starting out. You are taking on your first employees, but some functions (not least finance) are still outsourced. Key concerns at this stage are likely to be around whether you are working in the most efficient way you can, and whether you’re abreast of all legal and government requirements.

Stage 2 is expansion. You’re starting to take on more responsibility – more staff, bigger premises. This is the stage where you’re looking at opportunities to move into different areas. Key concerns at this stage are likely to involve financial governance. Are your finances set up effectively and responsibly?

Stage 3 involves putting more structures in place. Your team is now big enough for you to have employees in defined roles in specific departments such as HR and finance. At this stage, the dangers are around capturing and controlling spend as your headcount increases. Cashflow needs to be monitored more carefully than ever.

Stage 4 is about gaining control and visibility so you’re well placed to expand. At this stage, you want insight into your numbers so you can see where you want and need to invest to take advantage of new market opportunities.

Stage 5 sees you wanting to scale and seeking outside investment to do it. But when you bring in outside investment, the focus for finance changes. Investors will want to see return on investment so you’re concentrating more on profit and less on revenue.

Stage 6 sees you going public and issuing shares in the business. The structures in your business are more important than ever at this stage. Have you got the right skills in your management team? What reporting structures will be required now you will be open to much more public scrutiny?

Stage 7 is about international growth. This is often a step change for a business. Ensuring maximum efficiency is essential as you ramp up in scale. At the same time as you expand, you need to ask yourself how your strategy needs to change and how you can protect your business against the risk of failure.

 

Failing to plan is planning to fail

However your business is growing, you’re undoubtedly better off doing it with a plan. Two of the biggest reasons for business failure are poor business planning and poor financial planning.

Once you have your plans in place, the first step to achieving them is to make sure you’re equipped for the task. Manual processes that are inefficient and time-consuming now will only get worse as you grow. It's a downward spiral – the more time you spend grappling with cumbersome systems, the less time you have to focus on growth.

But with the right systems in place, finance leaders get the efficiency and visibility they need to save money and scale. Get the report to learn how automated invoicing can help.