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Five stages of the business lifecycle

The life of a business owner or entrepreneur can, in many ways, be likened to that of a parent. Both represent a part of who you really are, will be carefully nurtured over many years, flourish to deliver a sense of pride, and will take on a life of their own when it’s time for you to step back. The business lifecycle is important – here’s why.

Rather like being a parent, running a business sometimes results in levels of stress that you may never have thought possible.

It’s often said that we experience five different stages in life: birth, infancy, childhood, adolescence, and adulthood.

Businesses too can be clearly defined into five lifecycle changes and understanding exactly where you stand – and the transitions from one stage to another – can play an essential part in your successes and failures.

In this blog we take a look at the five stages of the business lifecycle, identifying how you can develop your organisation into an enduring, successful enterprise as years pass by.

Stage 1: Development/seed

Every business starts with an idea, a spark of inspiration. This genesis represents entry into the primary stage of the business lifecycle – a stage that exists before your business does. At this juncture, it’s important for you to invest your time in determining the viability of your business idea such as:-

  • Conduct some market research to see who is already out doing what you plan to offer
  • Seek the advice of others within your industry sector
  • Assess the financial foundations and level of startup capital you have available to pursue the venture with complete confidence.

 

Stage 2: Startup

After finalising your business idea and establishing your company as a legal entity, your business enters what many might consider to be the most exciting stage of them all: the startup stage. But with excitement comes challenges and the need to persevere when the going gets tough. As such, it is perhaps unsurprising to learn that a large proportion of startup businesses fail to survive the first few years.

Of course, mistakes will always happen but during the early days of operation being able to overcome adversity can make or break your business’ future. By ensuring you put the necessary work into refining the products and services you offer, you have the opportunity to fully meet the requirements of your target audience and drive the greatest success. Perhaps the key word to remember here is adaptability. From small changes to large, it may feel like a period of constant transition and confusion but perseverance and the willingness to change will help you find the perfect place in your market.

Stage 3: Establishment and growth

What exactly does it mean to be an established business? Well, if you’ve been steadily generating income and onboarding clients/customers for a prolonged period of time (think two-to-three years), you should count yourself among the few that have managed to reach such a stable standing. Being able to continue this success, however, and grow your operations represents an altogether tougher obstacle.

At this particular stage in your business lifecycle, you may well be seeing your time divided among more and more tasks. From working with your clients and customers to growing your team of employees, handling key financial data to sourcing new business opportunities, it’s by no means unusual to find business owners in this particular scenario working all hours and seldom – if ever – taking a holiday.

As such it pays for the establishment and growth period of your business to embrace the recruitment of specialists in key departments. Being able to delegate responsibilities to those with the expertise and experience necessary to help the business flourish will not only free up your time to focus on other key activities but also means each department works to maximum capacity.

To ensure that such development continues with the utmost success, the importance of effective communication cannot be overstated. Ensure your recruitment department takes this key element of working life into consideration to ensure optimum performance.

Stage 4: Expansion

So, you’ve established your place in the market, you’ve built up a team around you in order to become more effective in your work and there is an element of routine to operations. What now? At the fourth stage of your business’ lifecycle, you may feel the urge to capitalise on the success and stability already in place and expand the offerings – or even the reach – of your business.

Weighing up both the rewards and the risks of any expanded venture will help determine which direction the company should take. Continual evolution is essential, so embracing new technologies, new markets and new opportunities needs to be measured in terms of the risks you might face should things not turn out the way you hoped. Through careful planning, professional advice, and the full support and buy-in of the business, you can approach expansion with a greater degree of confidence.

Stage 5: Maturity and exit?

Overcoming the many hurdles inherent in growing and expanding a business can represent a life’s work. Such pressures and the time and energy needed to attain a level of success will often mean making sacrifices elsewhere; most notably in your personal life. As such, once your business has reached maturity – i.e. it’s consistently seeing profits grow year in, year out – you may well be looking at one of two options: continuing to expand, or looking for an exit strategy.

If it’s the former, you will need to reinvest your time and efforts into sourcing suitable opportunities and measuring risk as per Stage 4. In the case of an exit strategy, meanwhile, there are a number of options available. Whether it’s a full or partial sale of the business to a third party, an Initial Public Offering, a management buyout, or even simply removing yourself from day-to-day activities and remaining a silent partner or director, leaving behind the legacy of your business will help set you up for a more relaxing future.

Business strategy advice from THP

For more details on the different stages of a business lifecycle and support on how to transition from one to another, contact the experienced team at THP Chartered Accountants.

Avatar for Mark Ingle
About Mark Ingle

Owner-manager business specialist, Mark Ingle is key to building relationships with clients at the Chelmsford office. “I like to see clients enterprises grow and succeed.” Mark explains, “The team here has a lot to offer and I can see a lot of new businesses responding to that.”

Having worked for accountancy practices in London and Essex, Mark has worked with a range of companies varying in size. For Mark, THP stands out for its “local firm approach with the resources of a larger practice.”

Although a keen traveller, Mark is focused on giving his clients at THP the highest service, “Right now, I aim to help the clients we have to the best of my ability which will help me attract more of the right clients in the future.”

Mark’s specialist skills:

  • Annual and Management Accounts
  • Tax and VAT
  • Strategy and Business Planning
  • Marketing and Sales
  • Business Development
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