When you start a business (any business within any industry) you go through a very predictable process. Within that process there are several steps along the way. Understanding what you and your business requires at each of these steps is the secret to achieving your objectives.

Most people, especially those who have never started or grown a business, say business growth resembles a “hockey stick” and looks something like this:

They are not wrong, but business growth is very rarely this smooth. There are normally many more ups and downs along the way.

In reality, business growth really looks much more like this, at best:

You will notice the ups and downs in this chart that resemble stair steps much more than a hockey stick. You will also notice some clear inflection points. Each one of these ups and downs represents a few very clear phases of business.

Here’s how we would label each of these phases of business:

Within each phase of business, there are different demands on the Leadership, Product/Service, and Finance functions of a business.

Side note: If your business growth has stalled or you are feeling stuck with your business, it is most likely because you need to fix something before you can move to the next phase.

Now that we have a more accurate understanding of the real world business phases, let’s dive into each phase and explore the demands that are common at each phase. Specifically, let’s look at the demands placed on the Finance and Accounting functions of your business at each phase.

Startup

At the Startup phase, your business needs all the cash it can to generate revenues. You are likely still working out exactly what you are selling and how you are selling it. You are also getting a more accurate understanding of how much you can charge for your product/service and what it actually costs you to deliver.

Business in the Startup phase need money. Money to get things started and money from customers to validate demand for your product or service.

On the Finance and Accounting front, there are a number of things that you need to be able to deliver at this phase of business. Whether you have investor funding or you are self funding your business, you will need financial statement projections. You will need to keep track of your expenses and keep costs under control to fine tune your operation.

You will need the ability to benchmark and compare your financial projections to actual performance. This requires that you have a good financial team and the systems in place to do this.

Solving this correctly will make raising money from investors. It will also make the decision on where to spend money to grow much easier. This is because you can clearly point a profitable product and a clear path to increasing sales and revenues.

This brings us to the next phase.

Growth

In the growth phase of business, you are building upon the initial successes and wins from the startup phase. You should have a solid handle on how much your client base is willing to pay for your product or service.

As you grow your business, you will be hiring employees to help you grow revenues. The complexity of your business begins to increase as your employees take on more of the work. Your leadership skills will be tested and built at this phase. It also becomes increasingly important to build the processes and systems your team needs to succeed.

As such, your business is still working out growing pains. You might be having challenges making payroll and juggling bills. Don’t worry, this is very common at this stage. It’s almost a right of passage for business owners.

The Finance and Accounting needs at this phase are more about managing cash flow. That is, making sure you have enough money coming in to keep the business going. Now that you have a little business history, other doors will open for you. You will be able to start looking at vendor credit accounts, bank loans, and other working capital options.

From here, you will need to start working on more formal accounting processes to be ready for the next phase. This includes tracking more details. Things like: sources of revenues, work in process, and starting to look at cost controls.

At the end of the growth phase, you should have a solid handle on what it will take to grow. You will also have the systems you need to make data driven decisions.

The next step is where things really start to get fun!

Scale

In the Scale phase, you are building upon the work you have done to get this far. Revenues are growing. You are taking on more clients and work than you ever thought possible. Expenses are also starting to grow.

Now with the systems and team in place to grow quickly, you can make very informed decisions. This new clarity will allow you to drive growth much quicker than previously.

On the Finance and Accounting side of things, you are going to be increasing your financial capacity. You will gain access to more working capital, in the form of bank loans or new investment. You will also be much more strategic in your decision making with financial projections for each options.

At the tail end of this scale process, you will begin to stabilize your business. This will ultimately lead to a decreasing demand on your time and attention. It will also involve refinancing any higher cost working capital to reflect a more stable option.

From here, you are ready to start working on your personal legacy and exit or sale of the business.

BONUS: Legacy

At the Legacy phase, you have built your business to the maximum you care to. Now is the time to focus on removing yourself from the operation. This can be in the form of a sale. Or, if you are not ready to sell, it can involve hiring or reassigning others to cover your operational duties.

No matter what you want your exit to look like, it is vitally important to ensure that you understand how to maximize the value of your business at this stage.

On the Finance and Accounting front, this involves having the right team on your side to help you focus on the financial aspects that actually drive value.

In conclusion, understanding where you are in this growth curve will help you gather the right team to support you along the way.