3 Stages of a Business Lifecycle

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The different stages that a company goes through are integral to its success. Therefore, companies need to have strategies to help them grow and scale as quickly as possible. With this in mind, we want to share with you what these different phases are to know what stage your company is at and how best to move forward.

All business owners need to be aware of where their business stands on the business lifecycle because it affects everything from goals, expansion, operations, and even marketing. Remember, the goal here is not only to grow the business, but to scale it for maximum profitability. And here, we present the three stages of a business lifecycle.

1. Developing and Launching the Business

business lifecycle

In this stage of the business lifecycle, entrepreneurs sit down and carefully write down a business plan. Your operations will solely depend on your initial business plan. Regardless of the business type, planning is crucial when it comes to establishing a brand. Without a business plan, you can get sidetracked along the way and may need to recalibrate on other methods to get the company up and running again.

In the business development stage, you need to go back and review your plans constantly. Then, assess your business plans if they meet your goals and needs. This way, entrepreneurs will be able to check if the company growth process looks promising. Otherwise, entrepreneurs may need to put together another set of plans that are geared for strategic growth and scaling.

A traditional business plan comprises these parts:

  • Executive summary. This should be a summary of what your organization hopes to accomplish. This part contains your mission statement and brief descriptions of your products or services. 
  • Company description. Write down a description of your company, goals, and your target market.
  • Market analysis. This part shows your company’s strengths and how these strengths can compete in the market. This may contain your industry’s overall market share, trends, and possible revenue. 
  • Competitive analysis. Stack up your business strengths and weaknesses with your competitors’ strengths and weaknesses to show how you can dominate them. 
  • Management. This part contains how your organization is structured when it comes to roles, skills, and responsibilities.
  • Product or service description. Write a detailed description of all your products and services. List down the suppliers, costs, and possible profits from your products and services. 
  • Marketing strategy. Show how you can promote your products or services to expand your business. This should include the various marketing plans and costs.
  • Sales strategy. This part entails how you will sell your wares. On top of your marketing strategies, write down your sales strategy, such as the number of sales representatives you plan to hire, your sales target, sales tools to use, etc. 
  • Funding. This is where you mention how much capital investment you’ll need to get the ball rolling. 
  • Financial projections. The final part will contain your monetary goals with a set timeline. It will also show your financial expectations according to your market analysis.

Entrepreneurs rely on the business idea or concept in the business development stage and how it can possibly corner the market. You may ask yourself these questions during this process: 

  • Is there a need for your products or services in the market? 
  • Will you find target customers to make your wares profitable in the market?
  • Are you able to expand your target market if the business grows and you offer more products or services?
  • Will you be able to get enough capital to establish the initial business stage?
  • What should be your business structure?

The Challenge:

The seed or development stage might be one of the most challenging phases of the business lifecycle when establishing a startup business. It might be a struggle looking for cash or capital resources for a venture with no proven track record and zero customer base. Plus, the challenge is how you can make the market and your target customers accept and see the benefits of your offers.

Launching the Business

The primary purpose of this phase is to gather as much negative and positive feedback from your target customers about your products or services. This way, you’ll know how to improve your products or services to attract more customers. 

The startup stage will also involve tweaking minor or even major components of your products or services. And this should be dependent on your first customers’ feedback. As open-minded entrepreneurs, you must be ready to accept that your initial idea might not be perfect. And that’s okay. This is what the startup stage is for. 

Here are a few tips in acing this phase:

  • Don’t spread your cash resources too thin. You will undeniably need the extra cash for any additional iterations.
  • Try to conduct testing first by sending out surveys and online focus groups before actually putting up your offers for sale. 
  • Hire experts who can conduct product testing, marketing, researching customers, conducting surveys, and managing customer support.
  • Establish your presence in the market by releasing a few advertisements here and there. You want to start the launch with a bang. 
  • Get your team pumped up for the big day. This will gravely impact how they also work hard to put your offers front and center. 
  • Determine the marketing channels you need to use to promote your products or services. This is highly vital for this stage as well as the next few stages. 
  • Create a schedule and make sure to adhere to it. This phase can be a bit confusing as a lot may arise. That’s why it’s essential to create a schedule and stick to it.

The Challenge:

The biggest challenge in the first stage is spending your cash resources wisely. Establishing a clientele base, advertising, and monitoring the process might mean expending more of your cash flow. You, as the founder, might start experimenting with multiple areas in the business as well.

2. Growing the Business

Estimated Revenue: Six to seven figures

Estimated Team Size: Five to 20

The next stage of the business lifecycle is the establishment or growth stage. Your business will be growing with more customers and sales at this point. Your cash flow runs a bit better compared to the earlier stages. 

While some people use growing and scaling interchangeably, these are two different methods. The nuance in growing and scaling is the ratio between your revenue and expenses. 

When your business is in a growth mode, expect the revenue to rise as well as the expenses. On the other hand, when a business is in a scale mode, the revenue rises, while the expenses don’t. 

For example, a company in growth mode may have $10 million in revenue and $8 million in expenses. This leaves them with a $2 million profit. A company in scale mode, however, may have $10 million in revenue and only $4 million in expenses, which leaves them with $6 million in profit. Check out the full article between growth versus scale here.

The challenge here won’t only boil down to how you’ll budget your financial resources but also how to handle rising issues from various business aspects. For instance, with more customers and sales, you’ll also need to address other concerns about money, production, your staff, and customer demands. 

At this point, you must hire the most skillful people to carry out every business operation seamlessly. You want to keep the profits coming and maybe even get involved in the recruitment process. On top of that, you’ll have to face these possible issues:

  • More customer complaints
  • High customer demands
  • Streamlining production, distribution, marketing, etc.
  • Increasing competitors in your niche
  • Ways to increase profit margins
  • Demotivated staff, employee turnover, etc.
  • Production costs
  • More expensive advertising costs

Business owners at this phase would probably think about business expansion. Since you’re getting a slow and steady stream of income, you’d want to know how to increase your profit volume. But, before you dip your toes into unknown waters, make sure to ask yourself these three questions:

Is a business expansion profitable right now?

Let’s say, for example; you’re running an apparel store selling t-shirts. An expansion will involve selling globally if you have a local market. Or it could also mean to venture into a print-on-demand business. Calibrate the positive and negative aspects of expanding your offers at this stage. 

If you’re selling bulk orders, that would mean higher labor costs. If you’re venturing into a print-on-demand t-shirt business online, that means you’d have a lower margin because most orders are individually placed. This means you have no control over shipping and delivery costs worldwide.

Can I maintain product or service quality?

Before thinking of scaling your business, always prioritize the quality of your product or service. If you offer subpar products and services, this is when your brand will possibly go downhill. 

For instance, if you’re thinking of gaining more profits for your apparel store, you’ll probably start thinking about buying t-shirts in bulk. Unfortunately, that will lead you to find more inexpensive materials, which sometimes don’t relate to quality. 

Buying the same quality materials at higher costs might give you lower profit margins due to more shipping and production costs. On the flip side, buying materials in bulk will provide you with higher profit margins while compromising the quality. Use your fair judgement as a business owner to decide on these things that ensure customer satisfaction.

Should I venture into other business niches?

This business stage might compel you to venture into other, more profitable businesses. But, on the other hand, you might feel a bit confident to open a new business due to your current experience from developing to starting and establishing. 

Focus on where your passion is and re-think why you established the business in the first place. For example, are you driving the brand to dominate the market? Or is your current company a profitable entity to another business venture you’d like to pursue?

The Challenge:

As mentioned, the most challenging part of the growth and establishment stage is dividing your time to handle major concerns about increasing customers and profits. You’ll have to wear multiple hats to attend to various business aspects. Also, hiring competent workers will pose another challenge in this stage.

3. Scaling the Business

business lifecycle

Estimated Revenue: Eight to nine figures

Estimated Team Size: More than 20

The expansion or scaling stage is when companies move mountains and reach new heights in terms of sales. At this stage of the business lifecycle, the entrepreneur might have competent team members who handle every business aspect as they might not have enough time to manage and monitor the little things.

This stage also means you’ve started gaining more return on investment. And while you may be thinking of expanding the horizon, there are factors to consider as well. For example, business owners at the established stage might either feel bored with the routine or have a dire need of new business ventures. 

Here are some things you, as the entrepreneur, might be facing at this stage:

  • Increasing your market share
  • Adding more stock
  • Producing new products and services
  • Acquiring smaller competitors
  • Dominating the increasing competition
  • New similar business ideas

Remember that expanding your business horizons entails more planning, research, and effort on your part. For example, you’d have to write down a new set of business plans if you’re launching new products or services soon. Or you might need to hire more managers and business professionals for more revenue opportunities. 

Two of the most significant factors you must consider are:

  • Responsibilities. Expect to have more job responsibilities for yourself as well as your employers. You must be able to assess if every vital task can be delegated. Otherwise, you’ll need to board more people.

Budget. Expansion means you’ll be facing high demands from various departments in your company. Gauge whether you have the budget to cater to these demands and make business operations still run smoothly.

The Challenge:

When thinking of expanding to new horizons, the challenge is the ample time and effort needed in planning and researching. As the founder, you’ll also need to coach, develop, direct, approve, and think of more strategies to leverage this momentum. Although you have a healthy cash flow at this stage, you might run short if not appropriately budgeted. In turn, you might have to make rash decisions or bad investments that may lead to debt or frustration.

The Next Decision: Continue to Scale or Exit?

When the business has reached a stable level and is generating enough revenue to cover its expenses, you might find monotony in your routine. A mature company can still experience sporadic growth spurts, but they are more infrequent than in earlier phases.

So the next decision is: Will you continue to scale or exit?

After scaling your business, you must deal with more crucial factors. Entrepreneurs will be faced more complex challenges such as:

  • Dealing with large, established competitors
  • Managing a larger and more diverse workforce
  • Introducing new products or services to an entrenched customer base that have been set in their ways for years.

Entrepreneurs must be comfortable delegating responsibilities at this stage while still maintaining close control of essential operations such as finances and marketing. In addition, they must possess broad skill sets that can apply across industries, so they’re not limited by sector constraints. This helps them keep up with changing market demands, both within their company and externally from customers looking for different things over time.

As the founder, you might not be satisfied with where the business is at. And this could be due to many reasons such as a changing economy, consumer trends, or a change of passion. This might be time to deliberate whether or not to continue the business or completely exit and move onto another industry.

Conclusion

Every business lifecycle is different, and entrepreneurs must gauge where their company is at regularly. These business scaling stages will undoubtedly guide you in thinking of ways to catapult the business further. However, while these challenges serve as a guide, your business methods vary from others. Therefore, ensure that you always have an informed decision about your company, staff, and external factors like trends, competitors, and the economy. This way, you’ll be armed with robust tactics to get the business up on its feet — in case unexpected things happen.

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