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

2. 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
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3. 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
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4. 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
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5. 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
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6. 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
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7. 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
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8. 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
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9. 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.
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10. 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
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11. 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
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12. 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.
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