Once the decision of building a business is set, you enter the business life cycle. This cycle will bring you from the idea stage of building a startup, to the company advanced growth stages. Looking at each of the business life cycle stages, multiple unique obstacles will be discovered for each stage that you will have to deal with and overcome. You must be flexible in your thinking and to adjust your strategy as the business growth progresses. Indeed, different approached are required for market penetration in order to achieve growth or maintain an existing market share. That is, as your business grows and evolves, so do your business goals, objectives, priorities, and strategies – so the ability to identify and know at what stage you are in within the business cycle is essential and significant for the future.
Phase 1: Seed round and development
This is the very beginning pf the business lie cycle, before the startup has officially been established. You have the idea and you are ready to move forward with it. But first, you must evaluate how probable it is for your startup to be sustainable.
At this phase you need to gather feedbacks and opinions regarding the potential of your business idea from as many resources as possible: friends, family, colleagues, business associates, or industry experts you have access to. Eventually, the success of your business will be attributed to many factors- including your capabilities, the willingness of the market you plan to enter and of course, the financial basis of the business (how do you finance the launch of your company?).
In some ways, this is the mental arithmetic phase. It’s where you take a step back and consider the viability of your business, as well as asking yourself if you have what it takes for it to succeed.
At this phase, it is recommended to build a professional business plan
Phase 2: the startup
After you well-planned your business idea and made sure it is ready to go, it is time to make it official and launch your startup. Many believe that this is the riskiest stage during a startup life cycle. In fact, many believe that mistakes occurring at this stage, have a long-term impact on the company, and are the main reason that 25% of startups do not reach year 5.
The adaptability is key, and a significant part of your time at this stage will be invested in design and product/service fine-tuning that are based on the primary feedback of your primary customers. It can come to the point where you make as many changes in your offer, that you start to get baffled. This is merely white noise, and our main advice here is to continue to work beyond the lack of knowledge. Don’t worry, the picture will become clearer again.
Phase 3: growth and establishment
If you’re at this point, your business should already have an income source and regularly attract new customers. The cash flow should start improving since the recurring income helps cover the current expenses, and you should slowly and regularly see your profits improving.
The biggest challenge for entrepreneurs at this stage is dividing the time between completely new requirements that oblige your attention- managing income growth, customer management and success, dealing with competition, adapting the growing labor force, etc.
Hiring smart and skilled personnel is essential to unleashing the company’s potential at this stage, and therefore, every good founder will spend a lot of time in being directly involved in the recruitment process.
It is vital that you begin to establish your role as CEO at this stage. Although you are still often at the forefront, you must be aware to the way your expanding and skilled team is going to take over the responsibilities that were previously yours. Your role now, is to start creating order and cohesion as you recruit teams according to a clear and defined targets.
Phase 4: Expansion / Growth
At this stage you might feel there is a routine in managing your business. The different teams are handling aspects you no longer have time to manage (and also shouldn’t), and now your business has well established itself in the market. This is where you can start to think about utilizing a certain level of stability by expanding your horizons with an expanded supply and entering new areas.
Often times, businesses at this stage see rapid growth in both revenue and cash flow, but be aware of complacency. In business, if you don’t move forward- you move backwards, and without the desire to grow, apathy may develop and catch you unprepared.
Of course, there are two sides to the coin, where the other entails the risk of expanding in over-negligence. Although it is hard to understand what will be the results of your expansion, you can give yourself the best possible chance of continued succeed through accurate planning. Check your resources and be realistic about the effort and the potentials costs and returns, and always keep an eye and make sure the growth does not affect the quality of your current service that you provide to existing customers.
Remember, while having an established business model is a clear advantage, it is not a guarantee that it will work in other markets or that new ideas will bring it to success. The business “cemetery” is full of organizations that overdid it and failed. Your mission is to take upon yourself new challenges while striving to expands, but measure the risk and make the best of your ability to protect the company from every scenario.
Phase 5: maturity and potential exit
After you successfully navigated the expansion phase of your business life cycle, your company should realize stable profits from year to year. While certain companies continue to grow at a reasonable pace, others struggle to enjoy the same growth rates.
It can be said that the entrepreneur has two options: push for further growth and expansion, or leave the business. If you decide to expand further, you will need to ask yourself the same questions you asked during the expansion stage:
Can the business grow further?
- Are there enough opportunities for expansion and growth?
- Is your business financially stable enough to cover an unsuccessful growth experience?
Are you the right leader to meet the task of expanding your business?
In fact, many companies at this stage switch leadership positions and hire an experienced CEO who is more suitable to navigating the new challenges ahead of the company. As opposed to this, many businesses at this stage prefer to sell, either partial or full sell. Clearly, as the sell also depends on the type of company (private or public), the negotiation part is a journey by itself.
Navigating in the business life cycle
Not all businesses will experience the full business life cycle and its accompanied phases, or necessarily in the same chronological order. For instance, certain businesses may see enormous growth immediately after launching the startup, and the founders can decide to instantaneously cash out, and jump straight to the exit part. However, most companies have some similarities to the steps we outlined above, and awareness may help you predict the future to come and prepare yourself and your team in the best possible way to maximize your chances of success. Making the right decisions at any stage is however a completely different thing, and it will require the usual combination of instinct and practical business acumen.