From Startup to Scale-Up: the 5 growth phases
Growing a business is not easy. The journey is marked by various "growth phases," each with its own challenges and demands. Sometimes, it feels like your efforts aren't making a difference, and progress seems slow despite hard work. If this sounds familiar, you're not alone. Every business goes through growth phases, each with unique challenges and a so-called "valley of death." Understanding these phases and preparing for what's ahead helps you navigate your growth journey in the most efficient way.
Introduction to Greiner's Growth Model
At ScaleUp 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 different growth phases. Each phase is defined by the number of employees and the resulting increase in the complexity of communication, processes, and systems. Let's explore these phases and see how they impact your roles.
The 5 Growth Phases and Their Challenges
Nr 1: The Pioneer Phase (<8 employees)
In this initial phase, it's all about proving the viability of your business—to the market, yourself, and investors. As an entrepreneur, you're a superhero and a multitasker. The same goes for your early team. Everyone has many different tasks and is deeply involved in all aspects of the business. Customers feel connected and valued, making this phase very personal and rewarding. The transition comes around eight employees, where the challenge is to move from everyone doing everything to forming a cohesive, more focused team.
Nr 2: The Rollercoaster Phase (8-25 employees)
As your business grows, you say yes to every opportunity—now with a team! Business development happens in all directions, with specialists joining the generalists. But you're still everywhere, often managing through crises. There’s more work, more mistakes, and everyone is working incredibly hard—but it’s also a lot of fun! The challenge isn’t just product-market fit, but also finding the best competitive advantage and developing a growth strategy. The need for structure becomes clear, but implementing it while preserving the dynamic culture is difficult.
Nr 3: The Management Phase (25-50 employees)
Your business is trying to grow up and struggling with it. The focus shifts to internal issues like processes, people, and technological/information infrastructure. Systems are both desired and hated because they are necessary for growth but feel restrictive. The organization requires focus and strong leadership, with roles and margins under pressure. This phase is about clearing the "sandbox" and making tough choices about your most promising products and core customers to strengthen your proposition. The challenge here is to ease growth with leadership, systems, processes, information, and culture.
Nr 4: The Scale-Up Phase (50-150 employees)
Now, your organization needs to mature at the departmental level. Processes must be constantly improved, implemented, updated, and duplicated. Distributed intelligence and efficient communication across the company are key. There’s a constant hunger for talent, and leaders within the company need to rise to their ever-increasing responsibilities. You need both strong leadership and entrepreneurial thinking to keep everything scalable while managing growth and complexity. Building a strong company culture will keep everyone aligned.
Nr 5: The Flow Phase (>150 employees)
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In this final phase, leaders need to evolve into true managers. It’s a balancing act between scaling what works and innovating to meet future needs. Balancing people and processes is crucial, so growth and efficiency go hand in hand. It’s important to stay hungry and maintain the winning spirit for continued success. The challenge is balancing maintaining scalable operations 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 a founder or member of the leadership team changes significantly. The skills and strategies that worked in one phase are unlikely to work in the next. Most team members have never experienced the later growth phases before.
This constant need for adaptation can be exhausting and can make leadership feel like a bottleneck. Investing in personal and professional development is just as important 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 Valley of Death"
Each growth phase ends with a "Valley of Death," where companies struggle. Often, they oscillate around these "glass ceilings" with some growth and setbacks, without being able to break through. Many businesses get stuck at these barriers, run out of money, or lose key employees as they fail to solve the "puzzle" they find themselves in. That's why only a small percentage of businesses manage to realize their full potential and achieve significant success.
When we support companies on their scaling journey, we've realized an important insight: unresolved challenges from earlier phases stay with you until they are mastered, adding to the already increasing complexity in later phases.
Preparing for Your Next Growth Phase
Identifying your company’s current growth phase can be a game-changer. Recognizing the specific challenges and crises you're facing 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 adjusted for each of these growth phases. By turning obstacles into springboards for explosive growth, you’ll navigate these phases with confidence and clarity.
Which Growth Phase Is Your Business In?
As you reflect on your growth journey, find out which phase you’re in and what you need to move your business forward. Embrace the changing demands of 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 business towards success.
Are you ready to unlock your company’s true growth potential? Take our free scale-up test and discover where your greatest opportunities for growth lie. In just a few minutes, you'll gain valuable insights into which aspects of the Scaling Up methodology deserve your immediate attention. Whether it's People, Strategy, Execution, or Cash, this quick assessment will point you in the right direction for maximum impact.