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The Importance of understanding Business Life Cycles


Generally, businesses undergo 4 life stages. It is important to understand them if you are starting a business, or if you already have one.

Business development

The 4 stages of business development:

  • Startup

  • Growth and Establishment

  • Maturity

  • Decline or exit

Let’s explore each stage and see what they entail.


Startup

During the start-up stage, beginner business owners tend to wear many hats and perform the majority of duties by themselves. This is a particularly important self-development stage and a learning path to the identification of your business goals, processes and potential. Majority of businesses fail after 1 year, so if you made it through, buckle up as you are more than likely on to something!

In this stage it is crucial to catch the moment and understand your growth needs. Start hiring and delegating work to your employees or outsourcers. If you fail to do so, it may result in decline in business, because as an entrepreneur you need to stay focused on the bigger picture and strategy, instead of repetitive daily tasks. It is vital to be able to recognize the right time to invest in human resources, as this step can set you back or push you forward significantly.


Growth and Establishment

This is a stage when your business enters a rapid growth phase. You are booked and most likely have a waiting list of clients, your product is getting sold out quickly and the revenue is growing each month. At this point you might find yourself starting to feel a little more relaxed and secured of uncertainties. However, when you recognize that you have entered this phase, you must be even more clear on setting goals. Planning is more critical in this stage than ever, as not having strong business milestones can lead you in spreading focus and concentration on things that don’t bring you any closer to your goal. This can often lead to wrong resource allocation, unnecessary expenses and profit loss. Another point that will push you to excel in your industry is forecasting and REALISTIC projections based on research, analysis and real numbers. This can help you eliminate uncertainties and perform risk analysis efficiently. At this stage your team plays an incredibly important role in achieving the goals and moving your company forward, while you concentrate on establishing connections with other businesses, vendors, potential investors and so on.


Maturity

This is the time of financial safety and security; you are no longer afraid of other start-ups undermining your profits and no longer in critical competition with beginner entrepreneurs. Your company is steady on its feet and you feel that you reached your goals. This is the point at which you make a decision of selling your business at its peak or continue the journey on expanding, innovating and evolving your company. It is very common for business to sell at this point as they have a good likelihood of selling over asking price. If you remain at this stage without selling or expansions and progress - your business will start losing value and begin its decline as competition in your industry grows.


Decline or Exit

This stage is usually the result of poor decision making or failure to move forward with further development, which I outlined in the previous section. At this point businesses tend to sell at a low price or slowly wind down their operations. The possible phase of decline or exit is a good example of why we need to catch all the opportunities and make strategic decisions at the right time, otherwise we may find ourselves grieving about the hard work invested.


Conclusion

Overall, it is worthwhile to understand all the business stages to self-reflect and recognize long-term goals. To avoid Decline or Exit scenarios, businesses should adapt to changes quickly and follow modern technological advancements. Some of the factors that can help stay on top of it is engaging in networks applicable to your industry, research market trends and analyze your business’ needs for expansion or potential merges / acquisition. An additional option available to you is hiring an advisor, doing so can provide you with detailed and goal-oriented insights, financial advice and investor engagement. By accepting the right opportunities throughout development of your company, you will be able to predict and forecast the best time to make impactful decisions.

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