Dr Jay Feldman explains that the task of categorizing the challenges and patterns of growth for small-scale companies in a methodical manner that helps entrepreneurs appears at first an impossible task. Dr Jay Feldman mentioned that smaller businesses are diverse in terms of size and expansion. They are distinguished by the autonomy of decision-making, different structures of organization, and a variety of ways of managing.
The Stages of Small Business Growth
However, when you look closer it becomes clear that they have common challenges that arise at similar times during their development. These similarities can be arranged into an understanding framework that improves knowledge of the character of the issues, their characteristics, and challenges of various businesses, from a tiny dry-cleaning business with three or more minimum wage workers to a software company that has 40 percent annual growth.
Types of Small Businesses, and Why Each One Matters
According to Dr Jay Feldman for the owners and managers of small-sized businesses, the knowledge gained from this will help in assessing the current issues, for instance, the necessity to upgrade a computer system or hire and train second-level managers in order to keep up with the growth plans.
It will help you anticipate the most important requirements at different points. E.g. the huge amount of time required by owners at the beginning of their careers. The necessity to delegate and change their management roles as companies expand and become more complicated.
The framework also serves as an opportunity to evaluate the effect of current as well as future government regulations. One example is the exemption in double taxation from dividends which can be a huge assistance to a successful stable, mature, and long-lasting firm like a funeral house but not of any benefit in any way to a brand new rapid-growing, high-tech company.
Developing a Small Business Framework
Numerous researchers over the years have created models to study companies. Each one uses the size of the company as a primary dimension, and Business Growth and development or the growth stage as a secondary dimension. While they are useful in many ways. However, these frameworks aren’t appropriate for small companies on at least three levels.
Dr Jay Feldman defines the first assumption is that Business Growth has to grow and move through the different phases of development, or else die at any point. Furthermore, these models don’t accurately capture the key early stages at the beginning of a business’s expansion. Thirdly, these frameworks measure the size of a company primarily by annual sales although certain models mention how many employees. And do not consider other aspects like value-added the number of locations. The complexity of the product line and the pace of change of the production process or products.
Stage I: Existence
At this point, the primary challenges for the business are acquiring customers and providing the service or product that they have contracted for. One of the most pressing questions is the following:
- Are we able to attract enough customers, and sell our products and services that are good enough to make an economically viable company?
- Are we able to expand beyond that one primary customer or pilot production method to a broader market?
- Have we enough cash to meet the huge demand for cash in this initial phase?
The structure is a basic one. The owner is the only person who does everything. He directly supervises subordinates who should have at least average skills. The formalization of planning and systems is insufficient or nonexistent. The business’s goal is to be active. The business’s owner is the chief of the company, and he is responsible for all of the essential tasks. And is the primary source of direction, energy, and, together with family and friends, the capital.
Stage II: Survival
By achieving this stage, it has proven that it can be a viable company, says Dr Jay Feldman. It has a sufficient number of customers and pleases the majority of them with its goods or services to retain them. The main issue changes from mere existence to the relationship between revenue and expenses.
The company could have only a small number of employees who are supervised by an executive in charge of sales. The two employees do not take important decisions on their own however, they instead carry out the clearly defined orders of the company’s owner.
The development of systems isn’t that extensive. Formal planning is, at best, cash forecasting. The main goal is survival and the business owner remains a part of the company.