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Understanding the Churchill and Lewis Business Growth Model

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Small businesses vary widely in terms of business growth and their overall size, which is why it is very difficult to determine growth patterns and problems in a way that would be convenient for business owners to understand. The Churchill and Lewis model was designed for small businesses for the purpose of predicting future problems and finding solutions in a more efficient way. In this blog, we will discuss the five stages of business growth and why it is important to be familiar with them.

Importance of the Business Growth Model

If you happen to be a business owner, you need to understand the business growth model. This is because there are certain problems that even the best entrepreneurs fail to foresee and eventually fail to address them. The model will help you analyze and evaluate your options based on a global perspective.

Stage 1: Existence

Existence is the first stage in which the business has to prove that its products and services are in demand. At this point, it is crucial for businesses to ensure that customers get their products or services on time.

Moreover, the business usually faces the most problems at this stage. For instance, it might be difficult to find customers and buyers, or it might be difficult to obtain products. The following are some of the key questions that business owners must address:

  • Can we become a viable business by providing excellent services, delivering products on time, and getting enough customers?
  • Can we expand and broaden our scope of selling?
  • Do we have enough resources to cover up the expenses of the business?

Companies that fall under this stage typically range from new restaurants or retail outlets to high-tech multinationals that still need to work on streamlining their processes and improve product quality. There are several companies that are never able to gain the recognition that they envision; hence, they quit. On the other hand, the companies that remain move onto stage 2.

Stage 2: Survival

This is the second stage of the business growth model. At this stage, the business has established a presence in the market and is working efficiently with a reasonable profit margin. Plus, it also proves that there are sufficient customers who are content with the products and services of the business. The key issues at this point are the management of revenues and expenses.

Thus, businesses need to look for new customers as well as keep track of their Return on Investment (ROI). It is important to ensure that the strategies and processes are aligned with the growth of ROI. The following are the two main questions that need to be addressed in the second stage:

  • Is there enough revenue to reach the breakeven point and to cover up the cost of repairs and maintenance of certain assets?  
  • Is it possible to generate enough income to stay in business in the long term in terms of economic and market conditions?

After this stage, the business can considerably grow in size and generate higher profits. Eventually, the business growth moves on to the third stage.

Stage 3: Success

Once the systems and processes are in place, the business becomes successful. The main decision to be taken at this point is whether to remain stable and continue making profits or to exploit the situation and expand the company. The company must now professionalize and hire more people so that the work can be distributed accordingly between managers and other employees. This ensures that there is enough time for the owners to confront other issues of the business, such as growth strategies and other important decisions.

If the owner wants to continue the business, the control mechanisms and the key processes should be taken into account to accumulate maximum profits. Perhaps after reaping full benefits, an exit strategy can be considered. During this stage, the business can also fall back into the survival stage.

Conversely, owners can also consider completely investing in the business and considering other horizons. You will need to make use of all of the company resources and possibly gather external resources as well to ensure growth and expansion. Other market areas will need to be researched and tested to consider other possibilities to dive into. The company needs to earn maximum profits at this stage to fund further growth. However, if the plans don’t work out, the business can go back to the survival stage or even be sold to another entity.  

Stage 4: Expansion (Take-Off)

At this stage, the business must make quick decisions and addresses the key issues regarding growth and the financing of said growth. This is because the volume of customers will also substantially increase, and the company will require additional funds for that. This also means that there will be more employees who will, of course, have to be paid to work.

Plus, there will also be additional resources that need to be taken care of, too. If this stage is not handled with skill and expertise, the business could collapse due to poor management of expense and revenue.

Stage 5: Maturity

A business reaches the maturity stage when it is ready to diversify in terms of products and services. The operations of a company are now at a much slower pace than before; however, this does not mean that the company will be unable to respond to market changes or fluctuations. The main aim of the business is to identify other market areas and expand the customer base to go beyond the original business model. This will keep the company going, and all of the processes will become more streamlined.

Conclusion

Sometimes it might feel like the business is going through all of these stages and one time or another. It is essential to keep an eye out to see where exactly your business stands and what options you have. The key to the success of any business is customer retention because they are the ones availing your services or buying your products.

References

https://www.yola.com/blog/small-business-growth-in-five-stages/

https://hbr.org/1983/05/the-five-stages-of-small-business-growth

https://www.researchgate.net/publication/228315536_The_Five_Stages_of_Small_Business_Growth

https://fabianpost.com/small-business-growth-model/

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