The business life cycle begins the moment you decide to start your business. It can be equated to a tree’s life cycle. From the moment a seedling sprouts and matures, it requires different amounts of resources for each different stage of growth. Similarly, each phase of a business’s lifecycle has its unique challenges, priorities and focus points.
For example, you will not use the same communication strategy when launching a new product as when growing your market share. Your understanding of these particular stages will determine the success and failure of your business. It will assist you in preparing for any challenges and obstacles that will come your way. The following list will help you get through the necessary stages.
1. Seed and Development
It is the first stage of a business life cycle. It is where you assess the viability of your brilliant idea. Before deciding whether your idea is worth pursuing or not, you need to conduct market research and seek feedback from friends, colleagues and family. Intuition at this stage can be equally important. Many entrepreneurs have relied on their gut feeling and proceeded to make significant breakthroughs. It is an old-age practice that many decision makers rely upon. Steve Jobs relied on intuition to launch the iPad even when the market had no demand for such a product. Despite a lot of criticism, his company went on to achieve great success.
However, not everyone can become Steve Jobs. Exclusively relying on intuition can be dangerous. There needs to be a perfect balance between instincts and reliable data metrics. As an entrepreneur, you should harness the power of data analytics to confirm that your ideas are not just mere hunches. Google and twitter analytical tools are instruments that you can use to give you empirical grounds to explore your business idea further. When you become sure that your plan is feasible and that you have what it takes to succeed, you can move on to stage two.
Most people believe that this particular stage in the business life cycle poses the greatest risk to the business. The mistakes made here are bound to affect the business even in its later stages of development. 25% of startup companies do not make it past five years because of the mistakes they make in this juncture. The most important element for every business at this point is adaptability. You are likely to spend most of your time making changes to your products and services depending on the initial feedback you will get from your customers.
How quickly you can adapt to fit market demands will determine whether you succeed or not. As a new player in the market, agility and flexibility might be the only competitive edge you have against dominant players who may be struggling to remain innovative with their meticulous processes and routines. You must be quicker and more creative. Don’t cower from reinventing the rules of the game if you need to.
3. Growth and Establishment
Your business should be generating consistent income and acquiring new customers at this stage. The recurring revenue should help fund ongoing activities and enable your company to expand to new opportunities. Your primary focus at this point should be maintaining this growth trajectory. Your business needs to keep growing to stay alive. Customer acquisition, therefore, becomes necessary. You should invest in data management to guide your customer acquisition process. Data analysis will help you distinguish between high-value customers and low-value customers and consequently enable you to acquire customers selectively.
You are likely to face challenges in deciding which demands to pay attention to at this stage. These may include accommodating new employees, managing expanding income, handling competition, etc. You should use this time to invest in hiring new people to take over certain responsibilities that have since been under your tight control. It is your role to establish order and cohesion among this group of individuals.
At this stage of the business life cycle, a sense of routine has set in, and the industry has already felt your presence. Revenue and cash flow have also increased rapidly. However, it not the time to get comfortable. Remember you need to keep moving forward to survive. You should take advantage of the level of stability of the business to expand into new territories and increase your market share. Of course, expanding has its share of challenges.
Even as you look to expand you should take care not to bite on more than you can chew. Very many businesses have failed because they took on more than they can handle. Weigh the effort and cost against the potential returns and decide whether it is worth the risk. You should always consider the impact the expansion is likely to have on the quality of goods or services offered to the customer. Be realistic even as you take on new challenges.
After successful expansion, your business is enjoying relatively stable profits every year. There are only two viable options to consider at this final stage of the business life cycle: Continue expanding or sell the company. If you pick the former, you need to determine whether there are opportunities for further expansion and whether you are the right person to take on this responsibility. Most companies usually experience a change in leadership at this stage.
There are, of course, those who foolishly decide to remain complacent and avoid making any changes to their business model hoping to retain their dominant position. These companies either decline or die out altogether. In a world where new business models and new competitors spring up like mushrooms, complacency is a luxury you cannot afford!
Some companies may not go through all the stages of a business life cycle, and those that do may not necessarily follow the above chronological order. However, the stages that each company goes through in its growth will more or less resemble the stages discussed above. To be better prepared for any eventuality, therefore, you should endeavor to familiarize yourself with the challenges associated with each stage of the business life cycle. Having the right information will assist you in making better business decisions.
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