Why paying attention to the “ups” and “downs” of the business lifecyle will help you – Part 1


Businesses form, develop, mature, reinvent or die. Different stages of the business life cycle are associated with different risks and expectations and they may need different management styles and strategies to meet the needs of their customers.

Many businesses, that live long enough, typically start with an entrepreneurial seat-of-the-pants management style, and then move onto a stable administrative infrastructure and well-planned and managed development.Do you know where your business is in the business cycle?  Are there indicators that your business is moving from one phase to another; and, if so, what are these indicators? How are you adjusting to the business cycle in terms of your vision, activities, locations and resources?

Over the years, I have observed that there are typically 7 stages in the business life-cycle and I will share these with you over 3 articles.   In the first one, I’ll discuss the embryonic and start-up phases; followed by the growth and maturity stages in the 2nd article.  In the final one, we’ll look at expansion at exit phases.  I hope that you’ll join me for all 3.  

Think about the life-cycle of your business as a long journey.  Your business’ needs will change significantly at each new stage as it continually experiences and undergoes change. Over time, it will go through various stages of the business life-cycle. 

Learn what upcoming focuses, challenges and financing sources you will need to succeed.A business goes through stages of development similar to the cycle of life for the human race. Parenting strategies that work for your toddler cannot be applied to your teenager. The same goes for your small business. It will be faced with a different cycle throughout its life.

What you focus on today will change and require different approaches to be successful.While most of your basic needs – accounting, assurance, recordkeeping, tax consulting and compliance – will be consistent throughout the life of your business, the requirements and level of sophistication for them will change as your business changes.  Other types of needs:  Recruiting staff, arranging finance and capital, upgrading internet and network technologies and retirement planning – will emerge.
I invite you to review each of the business life-cycle phases to learn how you (and when you) need to adapt to meet your needs as your business evolves.

1.  Embryonic phase

The embryonic stage of your business life cycle is when your business is just a thought or an idea. This is the very conception or birth of a new business.  Most businesses at this stage will need to overcome the challenge of market acceptance and probably pursue niche opportunities.  Do not spread money and time resources too thin.
At this stage, focus is on matching a business opportunity with your skills, experience and passions. Other focal points include deciding on business ownership structure, finding professional advisors, and business planning.
Early in the business life cycle with no proven market or customers, the business may rely on cash from owners, friends and family to fund it. Other potential sources may include suppliers, customers and government grants.

2. Start-up phase

Your business is born and now exists legally.  Products or services are in production and you have your first customers.  If your business is in the start-up life cycle stage, it is likely you have over-estimated money needs and the time to market.The main challenge is not to burn through what little cash you have.

You need to learn what profitable needs your clients have and do a reality check to see if your business is on the right track.  Start-ups require establishing a customer base and market presence along with tracking and conserving cash flow. 

Funding is often sourced from the owner, friends, family, suppliers, customers, or grants.When embarking on a new business or venture, the journey ahead is filled with opportunities and obstacles. The choices you make in the start-up phase of your business can dramatically affect its future. Choosing the right business entity, accounting methods, filing business registrations, acquiring capital, complying with tax regulations and selecting the most appropriate information technology systems are all critical.

My next article in this series will look at the characteristics of businesses that have entered the growth phase, moving into maturity.  Join me in a couple of days.

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