8 Stages of Business Growth Your Small Business Will Experience

Every successful business follows these 8 stages of business growth which form a clear road map for how you can build and grow your business.

By understanding where your business is at now, and being able to look ahead to the future, you’ll be able to seamlessly transition your business from one stage to the next.

Each of these stages of business growth happen in sequential order and I’ve outlined them as such so that you can get an idea for where your business is today and what you should do in order to progress from one stage to the next.

1. Ideation

The first of many stages of business growth, Ideation is where your business is created and brought to life.

This usually happens in one of two ways: ideas or problems.

Have you ever had a crazy idea or thought to yourself, “Wouldn’t it be cool if…”?

Having a crazy, unique or different idea is one of the most common ways to start a business. I’m sure you’ve had several ideas that could potentially become viable business opportunities.

The other common way to start a business, which is often easier, is to identify and solve a problem or need for a specific group of people.

This is called jobs-based innovation and it’s as simple as finding a group of people who have a problem for which there currently is not a good solution – then creating the solution for them.

Uber is a good example of jobs-based innovation.

People in cities had a problem of getting reliable, affordable and friendly transportation from one place to another. By creating a service that solved this problem for the specific group of people, Uber was able to build a successful business.

This also demonstrates that you don’t always need a brand-new idea in order to build a successful business, you just need the right idea with the right thinking.

Of course, you have to ensure that your idea makes sense and that you’re solving a real problem that people care about and you do this by validating your business idea.

2. Validation

The biggest mistake that entrepreneurs make is skipping the validation stage.

This is the most critical of all the stages of business growth because it guarantees the success or failure of your business.

Would you start a business and invest your time and money for several years if you knew it would never be successful?

Of course not!

Validation is where you test your business idea to make sure that people want what you’ve created and will pay you money for it.

If no one thinks your business idea is good – or if no one will pay you money – then your business is destined for failure.

If that’s the case, it’s better to know now then to waste your time, energy and money on a business that will eventually fail.

Instead, by validating your business, you can guarantee the success of your business by proving that you can find customers and get them to give you money.


Here are 3 ways you can validate your business idea:

Research the Competition

Search online and find out who your competition is. Unless you’re starting something the world has never seen before then chances are there are already several businesses who are your competition.

Don’t be discouraged if you find other businesses that are doing something similar to your business idea. Competition is a good indicator that there are customers willing to pay you money. If there weren’t, then the businesses you found wouldn’t exist!

If you can’t find any competitors or any other business that’s doing something remotely similar to your idea then try surveying potential customers.

Survey Potential Customers

Another great way to validate your business is to survey potential customers to find out if they are excited and interested by your idea.

You’ll have to first find potential customers which will help you figure out who your customers are and how to locate them. This is an extremely important process and will help you market your business later on.

Once you’ve found potential customers, ask them about your business idea and see if they find it interesting and valuable.

If they do, be sure to ask them what it would be worth to them and who else they know who might be interested.

Collect Pre-orders

Once you’ve found potential customers who are interested in your business idea, you can start collecting pre-orders.

Even if you don’t have something to sell yet, collecting pre-orders is the ultimate test of whether or not your potential customers will actually pay you for your business idea.

If they will, and you’re able to collect a handful of pre-orders, then you will have successfully validated your business idea.

Plus, you’ll have some money you can use to get your business started and deliver to your new customers!

3. Foundation

Once you’ve validated your business, and only then, you’ll be in the Foundation stage of business growth for a while.

This stage is all about the fundamentals of your business and will lay the foundation for the future growth of your business. This includes figuring out your business operations, creating processes and systematizing your business.

Building a strong foundation doesn’t happen overnight, it takes time. You will most likely be in the Foundation stage for at least a year or two.

During this stage you’re also likely to encounter many problems and challenges as your business evolves and as you gain more experience.

Treat each of these as learning experiences and use them to improve your business and build a stronger foundation.

It’s tempting to skip ahead to the other stages of business growth, but it’s important that you don’t rush the process of figuring out your business and fine-tuning it before trying to scale it up.

4. Multiplication

Be warned – the Multiplication stage is the most difficult of all the stages of business growth.

It’s in this stage that you’ll begin to scale your business and multiply your growth. As exciting as that sounds, it takes a lot of patience, hard work and trying different things.

At first, this will be a one-time effort as you try many different strategies to multiply your business and learn which ways work best for you.


Once you’ve identified 2-3 strategies that are working consistently and effectively, you can build systems to incorporate them into your business.

There are so many ways to multiply your business it can be hard to know where to start. Here are a few common ways that are highly practical and effective:

Up-selling and Cross-selling

You most likely have past or existing customers who have not purchased some of your products and services. If this is the case, you can offer these products and services to the customers and immediately increase your sales.

This is such a simple and effective way to generate new sales and reactivate past customers but many business owners completely overlook doing so.

Here are the step-by-step of how to do this quickly and easily:

  1. Make a table with all of your products and services across the top (columns)
  2. Add each of your past and existing customers as a row and put a checkmark in every column where they have purchased that product or service
  3. Contact every customer who has empty boxes under a product or service and let them know about the product or service and how it can help them

Ask For Referrals

Another simple way to multiply your business is to ask all of your past and existing customers for referrals.

Have you ever asked your customers for referrals?

Most businesses don’t do this regularly – or at all.

Call or email your customers and ask them if they’re satisfied with doing business with you. If they respond positively, ask them who else they know that has a similar need or would benefit from the value your business provides.

Of course, if they respond negatively do whatever you need to in order to satisfy the customer. Once they’re happy – ask them for a referral!

Don’t try to call or email all of your customers in one week. Instead, build this into your business as a regular process where you reach out to a handful of customers every week.

Online Advertising Using CPA

There are two great places to advertise your business online: Google Adwords and Facebook Ads.

Advertising costs money, but both of these options let you track your advertising using Cost-Per-Acquisition (CPA). This means that you can see how much it costs in advertising to get a sale and you can ensure that the advertising pays for itself.

This isn’t like traditional advertising where you spend money and hope to see business come in. With CPA tracking you can see exactly how much it costs you to get a sale.

Why is this so important?

As long as your cost for one sale is less than the profit you make on that sale, you can spend an infinite amount of money on generating new business!

This is because if you spend $15 to get a sale but you earn $20 in profit on that sale, you still earned a net profit of $5 ($20 profit – $15 advertising cost = $5 net profit).

In other words, the advertising pays for itself and you can scale it up and let it run on auto-pilot.

This isn’t fool-proof and it takes some skill, time and initial advertising spending in order to figure out how to tweak your advertising in order to lower the CPA to a point where it’s low enough, but it is time and money well spent to get there.

The higher your profit margin the easier this is to accomplish, since one sale will cover all of your advertising costs, which is why this strategy works well for high-end products and services.

5. Optimization

After the hard work you’ve put in to scale your business, the Optimization stage is one of the more rewarding stages of business growth.

Optimization is all about fine-tuning and small, careful adjustments that generate a windfall for your business.

Imagine a winding path of dominos that have been carefully placed – that’s all of your hard work from the previous stages.

Now you get the satisfaction of toppling the first domino and watching everything fall into place, generating big returns from minimal effort.

There are two primary ways that you can optimize your business:

Increase profits

Profitability is the most important aspect of your business. As your business becomes more profitable it also becomes more valuable and more sustainable.

The fastest way to increase profits is to raise your prices.

It’s probably taken you some time to get through the other stages of business growth and there’s a good chance you haven’t adjusted your pricing since the beginning.

If you’ve never raised your prices, now is a great time to do so.

And if you have raised your prices, now is an even better time to do so.

In other words, it’s always a good time to reevaluate and adjust your pricing.

Reduce costs

Reducing costs is another way to optimize your business and there are many ways that you can significantly reduce costs.

First, consider all of your fixed costs and see if you can renegotiate pricing or find alternative vendors who can offer better pricing. Reducing your fixed costs is the fastest and simplest way to accomplish this.

Automating parts of your business can also save you time and money by reducing overhead and preventing costly mistakes.

Automation is just one facet to streamlining the operations of your business as a whole, where reducing waste can reduce costs and improve the effectiveness of your business.

You can also eliminate non-valuable activities to reduce costs. This is as simple as cutting out parts of your business.

There might be parts of a service you offer that customers don’t use or products you offer that no one buys. If so, get rid of these parts of your business that aren’t adding any value but are costing you time and money.

6. Expansion

Now that you’ve optimized your business, what’s next?



It’s time to expand your horizons and look for new opportunities through Expansion.

You can expand your business by looking for new opportunities that will leverage your existing resources and add value to your business at the same time.

Here are some practical examples of how you can expand your business:

  • Identify new markets that would benefit from your products and services
  • Develop new offerings for your existing customers
  • Monetize parts of your business that you have fine-tuned over the years
  • Create a new business model for adjacent vertical markets

Expansion is the most creative of all the stages of business growth because you have complete freedom to think of new and innovative ways to add value to your business.

By taking the pieces of your business and reimagining them in different ways you can often come up with new ideas that will bring fresh perspective – and growth – to your business.

7. Profliferation

Proliferation – getting your business to spread – can be one of the most lucrative stages of business growth.

The goal at this stage is to find ways to get other people to help take your business further than you could alone.

There are 2 main way you can accomplish this:

Licensing

One of the easiest ways to spread your business is to license your intellectual property, brand or methodology to other individuals and businesses.

Licensing is straight-forward and easy to implement and can be a lucrative way to push your business further. You’ll need to package up part or all of your business and find people eager to license your offering, but that’s all there is to it.

The benefit of licensing is that the more you license your business, the more people will become familiar with your brand.

This increases the value of your business but also can attract more licensing opportunities.

Franchising

Franchising is great for businesses that operate within a certain geographical area and is similar to licensing in many ways.

When you franchise your business you create a template for the business and allow other people to run copies of your business in different areas.

This is ideal for you because your business is able to spread into areas that you wouldn’t be able to reach on your own.

Often times franchising is difficult because the business is not systematized and standardized, but if you worked hard in the Foundation and Optimization stages then you won’t have any problems.

8. Valuation

If you’ve made it this far, congratulations! Now it’s time to consider selling your business and reap your reward for getting through all of the other stages of business growth.

If you’re ready for a new adventure (or just want to relax) and have created a systematized and high-performance business, selling your business is your next step.

Before you sell your business or start finding interested parties, you’ll need to determine the value of your business.

There are many ways to determine the value of your business, like using a multiple of cash flow or taking a percentage of your revenues, but you should talk to an accountant who specializes in acquisitions and get their advice since each business is unique.

Keep in mind that since there is no hard and fast rule, how much you value your business, and what you sell it for, is subjective and negotiable.

Business valuation is more of an art than a science so don’t get stuck trying to figure out the exact value.

Completing the Stages of Business Growth

Building a successful business takes lots of time, energy and hard-work – there is no shortcut.

Remember that each of these stages of business growth build on each other and it can be detrimental to your business if you skip ahead.

Figure out which of the stages of business growth your business is at today and make a plan for what you need to do in order to move your business forward.

Leave a comment below and share what your business is and which of the stages of business growth you’re focused on.