5 STAGES OF BUSINESS LIFE CYCLE & HOW TO PREPARE FOR EACH

Successfully navigating the growth stages of a business requires strategic thinking, agility, and resilience. You planted the seed of a business idea and grew it into a fast-growing company. Now it’s time to expand into new markets and grasp opportunities you never could have before.

• One of the most highly regarded models of human development is that of Erik Erikson, a psychoanalyst and developmental psychologist.
• You might need to change your business strategy or raise more cash if your expenses are higher than anticipated.
• The term “seed funding” refers to sowing a seed to help grow the company.
• Every firm goes through these phases, but the exact duration of the stage cannot be determined.
• Entrepreneurs are focused on being able to actually provide and deliver the product, grow their customer base, and have enough cash flow to keep up with demand.
• Other riskier ways to grow include the integration of outside ventures through licensing, mergers and acquisitions, joint ventures, and strategic alliances.
• On the other hand, serial entrepreneurs look to grow their brand and likely sell it at its peak for maximum profit.

Some business owners prefer to sell the company rather than reinvest in renewal. In that case, you will need to evaluate your company’s worth and prepare the required financial statements and documentation. Finding buyers and negotiating the terms of the sale can be an extended process. If you take too long to decide whether to sell or reinvent your business, you may not get to decide at all. Sales and profits may dwindle to the point where you can’t find any buyers.

Expansion stage

One of the most highly regarded models of human development is that of Erik Erikson, a psychoanalyst and developmental psychologist. When it comes to early stage business funding, there are five distinct stages. One important aspect of Stage 4 is taking action in order to avoid bankruptcy or relegation stages of a business life cycle in order to the lower rungs of the business ladder. The first stage is the ideation or inspiration stage where an entrepreneur has an idea for a business. They might have seen an opportunity that they want to take advantage of or they might have come up with a new solution to a problem that people are facing.

• There are a few ways to categorize the life cycle of the start-up/launch phase, as explained below.
• Their owners don’t acknowledge where they are in the business life spectrum or make a decision to change.
• This includes a high level of project feasibility research by prospective investors.
• This is when a company experiences a downturn in performance and requires strategic efforts to revive its operations and get back on track.
• The terms “business life cycles” and “stages of business growth” are sometimes used interchangeably.

It’s still a lot of work to maintain your business once it’s become self-sustaining or even profitable. Make sure you’re maintaining or growing your revenue stream by keeping up with any new developments in the industry or changing customer preferences. The idea is that with climbing revenue as proof of concept, marketing will increase reach and bring in more business. Of the five business cycle phases, the first four relate to starting, growing, and sustaining a business.

You must be focused on the right things to be successful

This is when businesses do a lot of consolidations and mergers with other firms. In order to survive this stage, you must hire good leaders who can help you establish a growth strategy and manage it successfully. Look for people who have a strong track record for guiding other businesses, and whose visions align well with yours. A joint venture is the creation of a new business in which two different enterprises share the expenses and profit to achieve certain goals of a project. This approach reduces the risk of investing directly in capital equipment, and it also allows them to share each other’s knowledge and expertise. You can see this done with small businesses that collaborate to save money and help each other out.

• The maturity stage signifies a company’s establishment in the market with a stable customer base.
• If your business has adapted well, you should be experiencing slight but persistent growth each year.
• Series B funds are used to increase market presence and coverage through supply chains and marketing spending and to improve and expand the workforce.
• The idea of a cycle in a business context is borrowed from biology.
• Turn your focus inward as you build teams and hire higher-level people to run operations.
• In its efforts to be a global company, Red Bull sponsors many events.

The population develops a positive attitude towards investment and employment and production starts increasing. Business aims, strategies and objectives are not set in stone – they change as your business and surrounding market change. Being aware of what stage of a business life cycle you’re at helps with anticipating what’s coming around the bend.

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Each business life cycle stage comes with unique managerial requirements. It is important to identify at which stage of a business life cycle your enterprise is, because that will define the direction of your operations and your company’s strategic planning. You might refer to this stage as seeding and development, or perhaps as the launch phase of the business.

A born global company is one that has as its goal to serve the world with its products. Companies that have new products that have never been created before—today mostly technological and medical products—usually benefit from this kind of strategy. Other entertainment and consumer products can be thought of as global as well, especially when it’s a new product category. This is the most stable stage, as you have some brand recognition and an established customer base. You’re doing well in terms of both sales and profits, and your senior employees have some tenure, so they can handle day-to-day operations. As a business owner, you have more time to focus on improving performance and planning for the future.

At this stage, profits, cash flows, and sales of a business start declining as a company begins to lose its competitive advantage. As companies experience booming sales growth, business risks https://personal-accounting.org/cash-book-meaning-types-and-example/ decrease, while their ability to raise debt increases. During the growth phase, companies start seeing a profit and positive cash flow, which evidences their ability to repay debt.

And when a business does fail, it doesn’t usually happen right away. When it comes to huge companies like Blockbuster Video, you have a lot of information available. In fact, you have detailed reports published by financial institutions. Founded in 1985, the company had a short startup period before it saw significant growth, then massive growth. However, around this same time, Netflix and similar companies came into the picture, forcing Blockbuster into a decline.

Whichever phase you’re in, it’s important to remember that you will also need the right tools to be successful. Software can also help you develop a small business marketing plan, or set some marketing KPIs (key performance indicators) to help guide your marketing team. Here’s a brief overview of what the four stages of the business life cycle look like, and how that impacts you as a business owner. At this stage, as industries change or business owners fail to keep their offerings relevant, decline is imminent. Sales wane, and a rebirth or death of the business can be expected.