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The Main Stages of Business Life Cycle

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Unfortunately, companies don’t grow in a straight line from new venture to the big company. As companies grow and get bigger the challenges they face change too. As a result, the way the company operates and is managed has to fundamentally change during the lifespan of the business.

In other words, as a company gets bigger the nature of what it has to do to be successful changes and often these changes are dramatic. This is why most companies don’t grow beyond a certain size: they simply don’t make a transition necessary to get to the next level.

The secret of long grows and success lies in your ability to adapt to the changing needs of your firm as it grows. This is the most crucial skill for whatever stage of the life cycle you’re now.

The Four Stages of Business Growth

Economists and entrepreneurs name numerous stages of life cycle. Some specialists list only 3 stages and the others can name you up to 9 stages of the business cycle. Fortunately, these changes and challenges happen regardless the sequence and naming of business grow stages.

What forms these business cycle stages are similar patterns of needs and issues faced by all growing companies. In addition, all stages have similar key developmental tasks that must be performed in order to make a transition.

Startup Stage

Key Objective: Find a viable business model and funding.

Some distinguish one more stage called “Seed & Development Stage”. But we’ll include it into the Startup stage because not every business owner looks for funding before starting a agency. Many entrepreneurs we’ve worked with used bootstrapping approach in order to start the business without third-party investors.

In the meantime, every new venture starts with a vision: a great new product or service. On this stage, you should define who your customers are and why they going to buy it. Use Business Model Canvas to refine your idea. To turn that vision into reality you have to replace that assumption with facts.

Most new companies focus solely on the development of the product and selling it before they understand the market. This is fatal mistake. 90% of startups fail just because they don’t have customers and a proven business model.
Find a big enough problem, search for potential customers (this list of events may help),  then develop and test your solution (maybe start from MVP) until you have a perfect fit between the product and market. You’ll also need to create a repeatable sales process that’s tested by successfully selling the product to a set of initial customers.

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Growth & Development Stage

Key Objective: Attract customers and drive sales.

Growing the company is all about creating customer demand and driving that demand into sales. This requires the company to begin scaling its sales and marketing efforts as well as its ability to deliver the product or service.

Over the growth of business, your company will still remain in a vulnerable position. You may have a handful of early customers but broader market acceptance is still unapproved. Your cash flow is still weak, you will feel frequent shortage in funding required to market your product.

The challenges of growing a company are fundamentally different from those on the Startup Stage.

  • First, you need to establish a balance between marketing spendings and sales incomes. Keep track of such metrics as Client Lifetime Value, Churn Rate, and Client Acquisition Cost.
  • Secondly, your company can quickly overwhelm by its own growth and stumble. Adding lots of sales revenue is great, but you have to also be able to manage the organizational issues, that come up as a company begins to grow.

Lastly, you have to build infrastructure necessary to support a growing customer base. You’ll need to develop a day-to-day operational system and some sort of CRM system to keep track of client base grows.

Expansion & Prosperity Stage

Key Objective: Scale company preserving the profitability and quality.

This stage is also called Maturity cycle. The reason why it is called “cycle” instead of “stage”  

is because entrepreneurs during this stage usually iterate core business processes that have been established during the Growth & Development Stage.

Unfortunately, even if you cope with all problem of the previous stage you’ll come to the point where it’s extremely difficult to continuously add more revenue, customers, and employees, without experiencing severe problems. That is where most entrepreneurs stop growing their company and start to iterate previous operational cycle.

Ways to Prolong Period of Prosperity

When you begin to experience the increasing organizational problems, you need to recognize: they are warning signs that it’s time for the transition to expansion stage.

On the surface, the difference between small and big company is the amount of revenue and market share. But it’s not that simple. As a result of your early growth, the organization is much more complex now. The demand for the quality of your services is dramatically increasing as client see you now in a new way.

Now, when the company becomes much larger you need to create a new organizational structure, add customer support team, improve products, add new feature according to the market demand. The strong management team will need to be built.

On top of it, you should establish a clear hiring system that will ensure the development of your people. This should become your number one priority: to focus on personal development of your people. Don’t rely only on the management system, unless you want to lose those who are actually working.

Recession or Exit Stage

Key Objective: Sustain grows by adapting to new market conditions.

Only if organization will make this critical transition it will be able to succeed on a really big scale. Gaps in the company’s functional expertise will need to be filled. Basic operational system will need to become more robust. A variety of management systems will need to be coordinate activity, provide direction, and make better decisions while achieving business goals.

If you experience overall demand decline all over the industry or your in-particular domain, then you should consider exiting the market or making adjustments to your product. Make revisions, change features, create new design, or even retool your service into another one.

Bottom Line

Building a startup and growing it through different business stages is not an easy job to do. Moreover, what’s the point of going through all that stages if finally, we all fail? But the right question here is if how do we keep business from going through prosperity stages at a rapid pace. The answer lies in continuous redesign and repurposes of the product you have.

Here we’re to back you up through the business stages and deliver software product that fits the market condition and keeps the prosperity stage longer.

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