From Startup to Scale-Up: Unlocking the Secrets of Business Growth Phases

 
Growing a business is no easy task. The journey is marked by distinct “growth phases”, each bringing its own set of challenges and demands. At times, it feels like your efforts are not making a difference, with progress seeming slow despite working really hard. If this sounds familiar, you’re not alone. Every business faces growth phases, each marked by unique growing pains and a proverbial “Valley of Death.” Understanding these phases and preparing for what lies ahead will help you navigate your growth journey most effectively.

 

Introducing Greiner’s Growth Model

At Scale Up Company, we often use Larry Greiner’s growth model to help entrepreneurs and leadership teams understand and manage the complexities of business growth. Greiner’s model, known for its analytical approach, outlines five distinct growth phases. Each phase is defined by the number of employees and the resulting increase of complexity in communication, processes, and systems. Let’s explore these phases and see how they impact your roles.

 

The 5 Growth Phases and Their Challenges

1. The Pioneer Phase (<8 employees)

In this initial phase, your business is all about proving viability—to the market, to yourself, and to investors. As an entrepreneur, you’re a superhero and a Swiss Army knife. The same applies to your early team. Everyone wears multiple hats and is deeply involved in every aspect of the business. Customers feel connected and valued, making this phase feel very personal and rewarding. The tipping point comes around eight employees, where the challenge is transitioning from everyone doing everything to forming a cohesive and more focused team.

2. The Rollercoaster Phase (8-25 employees)

As your company grows, you keep saying yes to every opportunity, now with a team! Business development happens in every direction, with specialists joining the generalists. However, you’re still everywhere, often managing by crisis. There’s more work, more mistakes, and everyone works incredibly hard—yet it’s also a lot of fun! The challenge is not just product-market-fit, but finding the best competitive advantage and developing a growth strategy. The need for structure becomes clear, but implementing it while maintaining the dynamic culture is tough.

3. The Management Phase (25-50 employees)

Your company is trying to grow up and is struggling with it. The focus shifts to internal matters like processes, people, and tech/information infrastructure. Systems are both wanted and hated, as they are necessary for growth but feel restrictive. The organization demands focus and strong leadership, with roles and margins under pressure. This phase is all about clearing the “sandbox”, making tough choices about your most promising products, core customers, target geographies, in order to solidify your proposition. The challenge here is to facilitate growth with leadership, systems, processes, information, and culture.

4. The Scale-Up Phase (50-150 employees)

By now, your organization needs to mature at the departmental level. Processes must be constantly improved, implemented, updated, and duplicated. Distributed intelligence and effective communication across the company are key. There’s a constant hunger for talent and leaders in the business need to live up to their ever increasing tasks. You need both strong leadership and entrepreneurial vision to keep everything scalable while managing growth and complexity. Creating a strong company culture will keep everyone aligned.

5. The Flow Phase (>150 employees)

In this final phase, managers must evolve into true leaders. It’s a balancing act between scaling what works and innovating to meet future needs. Balancing people and processes is crucial, ensuring that growth and efficiency go hand in hand. Staying hungry and maintaining the winning spirit is vital for continued success. The challenge is to balance maintaining a scalable operation with fostering innovation and keeping the team motivated and aligned with the company’s goals.

 

The Leadership Team: Critical Roles and Adaptation

In each growth phase, your role as founder or leadership team member changes considerably. The skills and strategies that worked in one phase will most likely not work in the next. Most team members have never gone through later growth phases before.

This constant need for adaptation can be exhausting and make leadership feel like a bottleneck. Investing in personal and professional development is as crucial as investing in the business. Seeking external support, whether through peer networks or professional coaches, can provide you with the reflection and guidance needed to navigate these transitions effectively.

 

Confronting the “Valleys of Death”

Each growth phase ends with a “Valley of Death,” where businesses struggle. Often they oscillate around these “glass ceilings” with some form of growth and decline, not able to break through. Many businesses get stuck at these barriers, running out of cash or losing key talent as they can’t solve the “puzzle” they find themselves in. That is why only a small percentage of companies manage realize their full potential and achieve substantial success.

Supporting businesses on their scaleup journey we realized another important insight: unresolved challenges of previous phases stay with you until they are mastered, adding to the already rising complexity of later stages.

 

Preparing for Your Next Growth Phase

Discovering your company’s current growth phase can be a game-changer. Recognizing the specific challenges and crises you face allows you to adjust your strategy with precision. In our experience, the four critical dimensions of strategy People, Strategy, Execution, and Cash need to be realigned for each of these growth phases. Turning obstacles into stepping stones for explosive growth you’ll navigate these phases with confidence and clarity.

 

In which growth phase is your business?

As you think about your growth journey, figure out which phase you’re in and what you need to move your business forward. Embrace the changing demands in leadership styles and get the support you need to handle these transitions. By understanding and preparing for these growth phases, you can turn challenges into opportunities and drive your company toward success.

Want to know which part of your growth journey to focus on next? Explore these ideas further at scaleupcompany.co.za and get ready to take your business to new heights.

The author:

Nicholas Thiede is the founder of Scaleup Company South Africa, where he supports growing companies to navigate the challenges of business growth. The approach is based on the scaling up methodology by Verne Harnish and has been applied by >100 000 businesses globally to scale their businesses in a systematic way.