The 6 Stages of a Startup: Where Are You?

Like any other growing thing, businesses have lifecycles. Start-ups, in particular, follow a specific set of stages as they develop. Though the time spent in each stage will be different for every growing company, there are six main phases. Why does it matter what start-up stage your company is presently in? “Knowing where you are in your journey will help you manage your time and resources efficiently,” writes Rahul Varshneya in “4 Definitive Ways to Grow Your Startup.” With a sense of what’s to come, you can effectively plan for success in later phases. Here’s a look at the six stages of a start-up and what you can expect from each one.

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Stage 1: Concept and Research

It seems everybody has (what they consider) a million-dollar idea, but making an idea into reality is very rare. Rarer still is the “great idea” that not only gets off the ground, but finds its perfect audience. A huge factor in a start-up’s success comes before the company itself ever launches. Before you do anything else, carefully research your target audience and your offering’s potential product-market fit Do people really need your product or service? What problem does your offering solve? Is your idea already out there, being sold by an existing company? Answering these questions entails a lot of research into your potential competition and industry, but it also takes talking to hypothetical customers about how your offering might help them. Research in hand, create a business plan and mission statement. Set goals for your development over the coming years.

Stage 2: Commitment

Here’s where you move from a concept to a company, putting your research into practice. Create a prototype, develop a process, and start building a team. Secure funding. Continue to refine your business model. Work towards a minimum viable product, begin initial marketing to drum up some word of mouth, then launch.

Stage 3: Traction

Traction, or validation, is typically the first year of a start-up. This is the stage where you begin to get the word out about your product and gain your first customers. Here you find out whether or not your company is truly viable. “Before their companies start to grow, most entrepreneurs mistake traction for growth. Both come at different stages in the lifecycle of the startup and play very different roles,” says Varshneya. At this stage, focus on growing your customer base and actually attaining the product-market fit you researched earlier.

Stage 4: Refinement

In the refinement stage, typically year 2, you are receiving—and soliciting—feedback from early adopters, then using that feedback to continue refining your product or service. How can you improve your offering? What about your customer experience? Concentrate on expanding the aspects of your product that are most beneficial to customers. Your early interactions with customers go a long way toward establishing your credibility and building customer trust. Show that you are taking customers’ concerns into account as you continue to develop your offering. Refinement also means refining your process, making it more efficient. How can you streamline your process? Are there parts of the workflow you can cut out altogether? Is product performance matching your projections, and if not, where is it getting derailed? Test your strategies and track conversion rates, social media analytics, and any other data you can to inform your decisions.

Stage 5: Scaling

The next stage is scaling, or growing—further growing your customer base, your offerings, and your company itself. In this stage, which can start at year 2 to 3 and last for years, you iterate on what’s working and put processes into place to iterate faster. Continue optimizing your marketing strategies to efficiently pull in customers and increase your conversion rates. Build out your staff and infrastructure to support your growing workload. For the smoothest scaling up, build scaling mechanisms into your business plan from the beginning. How and when will you hire more employees? How will you expand your marketing? What about growing your physical premises and technological infrastructure? Keep in mind, however, that you’ll need to stay agile as you grow—the process can be unpredictable. Like refinement, scaling requires considerable awareness about your process. As a founder, this likely means limiting or delegating any non-essential tasks you are performing. “While scaling up, there may be many tasks on a daily or weekly basis that hold you back or slow you down,” advises Varshneya. “While scaling up, you want to channel all your focus on just one thing—growth.”

Stage 6: Becoming Established

Congratulations—your company is no longer a start-up, but an established enterprise. In this stage (likely year 3 or after), you may see considerable growth, although not at the dramatic rate you did while scaling up. Focus on increasing customer retention and loyalty, testing and refining your marketing strategies, and further developing your strengths.

What You Need to Know

Which stage of start-up growth best describes your business’s current incarnation? Wherever you are on the start-up timeline, keep these tips in mind as you work toward the next.

  • Be patient. Regardless of where your start-up falls in the stages of development,  it can be difficult to fully embrace that stage without wanting to jump ahead. Resist the temptation to cut corners. Each stage needs to play out fully…which may take years.
  • Remember that every company is unique. Comparing your progress to other start-ups’ trajectories can be productive—to a point—if you are learning from their mistakes and triumphs. But take care that this comparison is inspiring you, rather than dragging you down.
  • Keep your customers at the center of everything you do. Your customers’ needs and experience are all-important; after all, without customers, your company can’t survive.

Chelsea Segal

Chelsea Segal

Chelsea Segal is the CEO of Targetwise. TARGETWISE empowers agencies, brands + marketers with results-oriented solutions that grow, nurture + maintain a social ecosphere.

Neutralizing all digital channels, we accelerate performance by applying data driven optimizationin real-time across a superior blend of mobile, video,display and email inventory. Converting the right people at the right time, we drive brand solutions, while securing optimal impact, engagement + results.
Chelsea Segal