The growth phases of a business are broadly the same for every organisation -large or small. In every growth phase, there comes a moment when the wings you had suddenly disappear like snow in the sun. You work your ass off, but it seems to make little difference. Instead of moving forward, you sometimes feel like you are going backwards yourself. Nobody understands where you want to go anymore and everything goes by fits and starts. Energy seeps away on all sides. Recognisable? Fortunately, you are not alone.
Every entrepreneur, like it or not, has to deal with these growth phases. Each phase has its own growing pains with a crescendo of a Valley of Death (more on that later). To better understand what happens during the next growth spurt and best prepare yourself for what is to come, use the growth stage model. At each growth stage, the model provides insight into the challenges and your changing role as an entrepreneur (and in later stages, the management team as well).
In this article, we dive into the growth phases and the growth model we like and use a lot: Greiner’s growth phase model.
1. What is Greiner’s Growth Model?
One of the growth stage models we work with a lot at Scale Up Company is the Greiner growth model. Larry Greiner’s model is one of the most complete growth models. The growth model consists of five phases. The stages are mainly determined by the number of employees your company has and the complexity that increases with it in all areas. The more people, the more complex communication and information flows, processes and systems, and the more important culture, leadership, cash flow and your role as an entrepreneur.
“I wish you many staff” – Old Jewish Saying
2. The Growth Stages of the Greiner Model
The phases of Greiner’s growth model are each characterised by an essential component that is the biggest driver of organisational growth in the respective phase. The end of each phase is heralded by a ‘crisis’, which – as is the case for many – is the result of excessive focus on the growth component. The organisation is doing too much of a good thing, as it were. The growth driver of the next growth phase is the instrument to overcome the crisis.
The phases, growth drivers and crises are:-
- The startup phase: growth through creativity, followed by a leadership crisis
- The rollercoaster phase: growth through leadership, followed by an autonomy crisis
- The adolescent phase: growth through delegation, followed by a management crisis
- The scale-up phase: growth through coordination, followed by a bureaucracy crisis
- The flow phase: growth through collaboration, followed by a consultation crisis
3. Entrepreneur as Bottleneck to the Next Growth Phase
In each growth phase, you need different talents and competences as an entrepreneur. The strength of what worked for your business in one phase suddenly works a lot less in the next growth phase. What’s going on? The growth process of your business is a mirror. Everything you invest in your growing organisation, you should also put into your own development. This way, your entrepreneurship grows on par with your business.
With this self-knowledge, you notice that at the end of each growth phase, your business needs different energy. You yourself are often in the way of growth at the end of such a phase. For many entrepreneurs, it helps to seek help with this reflection and self-development needed for further growth of your business. Help comes in all shapes and sizes, it just depends on what suits your needs. Find a sounding board in other entrepreneurs, for example through the The Scale Up Network or engage a coach to assist you through the various stages and your personal development. From your own development and with the growth model under your belt, take the right action in the growth stages of your business.
4. Valley of Death
At the end of every growth spurt, as an entrepreneur you are bound to encounter it: the well-known Valley of Death. Whereas in the first valley many startups perish due to a lack of investment, in the subsequent Valleys of Death, growing complexity and associated pain points are particularly risky pitfalls for scaleup entrepreneurs.
The Valley of Death gets its name for a reason: only 4% of ALL companies survive the first valley. The percentage of survivors of subsequent valleys then decline rapidly. Only a negligible percentage of companies really manage to reach the top in the end with a €50+ million turnover.
Using the growth stage model and knowing the specific dangers of the Valley of Death your company faces, anticipate the challenges and steer your company towards the next growth spurt.
5. Business Growth Phases
We already briefly mentioned them: the growth phases. Below we dive deeper into the different phases of growth of your business.
Growth Phase 1 – The Startup Phase (fewer than 8 employees)
The fledgling and exciting beginning! In the pioneering phase, you as an entrepreneur demonstrate the viability of your startup. Everything revolves around your customers. You do (almost) everything yourself: business development, projects, administration and keeping the office clean: don’t bullshit, but clean. The handful of employees you now employ are just like you. Everyone knows everything, you switch gears quickly and the energy and creativity fly around your ears.
Growth Phase 2 – The Rollercoaster Phase (8-25 employees)
With about eight employees and more opportunities, assignments and mistakes than you can handle, this phase often gives entrepreneurs the feeling of having to build an organisation. You often do this on the side because you are busy enough with other things. But as you run from fire to fire, you can no longer escape it: the organisation requires processes and systems. An annoying side effect? Your role as creative visionary changes to that of manager. Not directly why you ever started. So this is a tricky phase for many entrepreneurs.
Growth Phase 3 – The Adolescent Phase (25-50 employees)
The road to maturity is now set, but you are not there yet. As an entrepreneur, you are handing over more and more business. There is now a real need for a leadership team and management positions are developing. Where the focus used to be on turnover and more customers and orders, the focus is now turning inwards. Positioning, people, processes and systems get all the attention and turnover gives way to profit. Even in this phase, things are chafing and rumbling. Things always seem busy, costs soar, communication becomes more complex and roles and margins are under pressure.
Growth Phase 4 – The Scale Up Phase (50-150 employees)
The next phase is all about major delegation. Management and operations split and, as an entrepreneur, you leave decisions mostly to your team. The management team is complete and processes and systems are in place but need to be constantly optimised and replicated. As an organisation, you now also enter the war on talent: attracting and developing good people is vital. As an entrepreneur, the key is now: you have to stop managing and start leading.
Growth Phase 5 – Flow Phase (more than 150 employees)
The last phase of the growth model is all about standardisation. This is the optimal phase for growth. Everything here revolves around that one question: “how do we make everything we do scalable?” All eyes of the company are on the future here. Balance is a key theme. Growth and innovation must go hand in hand, and the balance between people and process must also be closely monitored. Managers emerge as leaders in this phase and note: stay hungry.
Which Phase of the Greiner Model is Your Company In?
Probably the growth stages of the Greiner model are a feast of recognition for you as an entrepreneur, you have an unerring sense of where you and your company are and what is standing in the way of the next spurt.
Besides knowing the dangers and your personal development, focusing on the right part of the Four Decisions Framework (People, Strategy, Execution, Cash) is essential at every stage. This framework is part of the scaling up method.
Wondering which part of Scaling Up needs your attention for further growth?
>Read more about the topic at scaleupcompany.co.za