3 Stages of Business Growth Every Founder Should Know

Most entrepreneurs think building a business is a linear journey, but that’s rarely the case. The path from startup to established business is marked by distinct phases, each with its own challenges. Studies show that understanding these growth phases can dramatically increase your chances of success because knowing where you are helps you focus on what matters most at that moment.

After years of bootstrapping Marketcircle and making plenty of mistakes along the way, I’ve been zoning in on a framework for understanding this entrepreneurial journey. My framework wasn’t developed in isolation — I’ve been inspired by reading other entrepreneurs’ experiences and business theories that have resonated with me.

Drawing from this combination of personal experience and collected wisdom, I see three critical stages every small business goes through: the leap, the growth and the scale.

Related: 3 Phases of a Business and How to Thrive in Each

The leap stage: Take the first jump

The leap is exactly what it sounds like — you make that decision and actually start a business. Whether it’s a side gig or you’re jumping in with both feet, you’re leaping into the small business world. It’s that initial spark, that moment when you say, “I’m going to do this.”

This stage could involve starting part-time while maintaining your regular job, or diving in headfirst. Either way, you’re taking action and beginning the journey.

Think of this stage as jumping off a cliff: it requires courage, conviction and risk tolerance. Without that first leap, nothing else happens. This is where many entrepreneurs get stuck because they have great ideas but never actually take action.

2. The growth stage: Build a foundation

The growth stage is when you’re figuring out how to sell, get customers, deliver your service and typically do most of it yourself. You’ve leaped into the business, and now you’re establishing your systems.

This is often where you might get a little help, perhaps through hiring an assistant or a bookkeeper. As I discovered early in my journey, accounting was one area I absolutely could not stand. I’d look at that stuff and just feel drained. So I found an experienced accountant who took this off my plate, saving me not just time but mental energy.

The thing is, in this growth stage, you’re trying to establish repeatable systems for sales and delivery. You’re still the primary engine driving everything, but you’re building the processes that will eventually allow you to scale.

The growth stage isn’t about adding lots of people – it’s about getting your business fundamentals right and generating consistent revenue.

Related: 3 Steps You Can’t Miss When Growing Your Business

The scale stage: Build the team

The scaling stage is when you start adding people to do key parts of your business. This is where things get both interesting and challenging.

In my experience at Marketcircle, we hit several plateaus during scaling. The first major one was around five people. Before that, we were all working together. But once we hit five, we weren’t all doing the same things anymore, raising the question: how do you make sure everything stays aligned?

As we continued to grow, we encountered additional plateaus around 10-12 people, then at 20-25, and again around 50. Each plateau required us to change how we operated, implementing different checks and balances. People often stumble at these plateaus – we certainly did.

At Daylite, our CRM and project management tool for small businesses, we’ve built features that help businesses at each of these stages – from solo entrepreneurs managing their initial customer relationships to growing teams that need more sophisticated workflow coordination.

When to move between stages

How do you know when it’s time to move from one stage to the next? A hundred percent, it comes down to having enough capital.

If you have money in the bank – either from raising funds or from generating profits – you can move to the scaling stage sooner. If you don’t, you need to make the business profitable enough first.

One metric some businesses use: for every additional $200,000 in revenue generated, you might allocate a portion to hire someone at $75,000. No doubt, there are additional expenses on top of their salary (benefits, equipment, training and overhead), but benchmarks like this help you create a sustainable path to scaling rather than outpacing your resources.

Beyond money, you also need confidence in what you’re executing at each stage. But fundamentally, you need to maintain two things consistently: the ability to make sales and keep customers happy. If either falters, you have deeper problems to solve before advancing.

Related: The 3 Greatest Lessons I’ve Learned After 25 Years in Business

Moving forward, even through plateaus

The entrepreneurial journey isn’t linear – it’s a series of surges and plateaus. Understanding which stage you’re in helps you focus on the right things at the right time.

One of the biggest challenges I’ve faced in the scaling stage is finding the right people. I tend to think people are resourceful and resourceful like me, but that’s not always the case. If they don’t follow through or go in a direction that isn’t congruent with our plans, it creates problems that can take years to fix.

Remember, there’s no perfect template for moving between stages. Sometimes you leap straight into scaling if you have enough capital. More often, you grow gradually before scaling. The key is knowing where you are and what that stage requires of you as a leader.

Which stage your business occupies right now – and what that means for your next strategic moves — is a valuable question worth reflecting on as you plan your entrepreneurial journey forward.