Business Life Cycle – 7 Stages and Importance
Reading Time: 6 minutes An independent business is perhaps the dream of many budding entrepreneurs around the globe. By definition, business is the activity of making money by producing or trade of products and even services. A business does not necessarily refer to a company or corporation. It need not have a formal organization or be a part of the corporate world. It can range from a street peddler to a multinational company.
However, broad the spectrum of the scope is all the business pass through more or less the same phases or stages. The prospect of starting and running one’s own business is exciting. Days have come where you can start a business as a teenager. Still, it is important to realize the life cycle of any business to manage the proper functioning.
Types of Businesses:
Sole proprietorship
A one-man business in which the business is owned and operated by an individual, who may hire employees from time to time.
Partnership
A collaboration between two people or companies to start and run a combined business, where each partner receives a certain share of the profit.
Corporation
Though a single person may incept it, the ownership of the business is shared amongst the shareholders who invest in the business. The shareholders then set up a hierarchical business enterprise consisting of various levels of employees managed by a board of directors. However, decision-making is often limited to the single creator of the business concept.
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Co-operation
Similar to the corporation, but it involves a group of people with decision-making abilities, who are members and not shareholders. Aimed at economic democracy.
Franchise
A smaller business in which the owner buys the rights to run a business from a parent corporation. Hence, franchises are part of a bigger business, but have the freedom to run their part of the business however they want, but with the permission of the parent company.
Table of Contents
Stage 1: Planning and mapping
Foresight is an important trait in businessmen. The business market is usually an unstable tide, hence being able to plan well in advance about anything and everything, along with the provision of making last-minute alterations is what can keep a business running despite the ups and downs of sales and profit.
Hence, the first step is to study and analyze the scale and scope of the business. Things to consider:
- The scope and coverage of your business- in terms of the product or service offered.
- The monetary investment you will be capable of arranging.
- The work-force required to carry out the required production, execution, or sale
- The quantity or quality of the business, that is, which of the above-mentioned category will your business fit into.
- Management strategies and work execution
The planning and procuring for a business involves getting the required investment, obtaining legal rights to run the business, recruiting the team of employees, and finding an appropriate set-up to run the business. Another important thing is to map all the possible future scenarios and come up with solutions prior to handle a crisis or loss.
Stage 2: Launch
The first few months or years are the toughest period for a start-up. Despite deliberate planning, a business can flop if the launch and the subsequent preliminary functioning is not right. One should be prepared and actively deal with the diversities that occur when starting a new business.
During the launch phase, the sales are low, and the business may even face losses before the scene can get better. Hence, stocking up enough supplies to get through the launch phase, until the business is somewhat established, is extremely crucial.
Stage 3: Growth
Procuring customers and clients and stepping up the job count is an important part of the growth phase. The lifecycle of most of the business spans the growth phase over the years. In fact, there is never a stagnancy in business; it has the scope to keep growing, provided the necessary materials are available. The growth stage sees the business bloom in terms of profit, job scope, client profile, and public reach. In fact, a successful business is one that statistically shows a 121% profit from what it gained in the launch stage.
Stage 4: Survival and sustenance
Many businesses grow at a rapid rate, seeing tremendous profit and success for a while, but their decline is equally quick. Sustenance is important for a good business. Maintaining the profit percentage, clients count, and job scope, if not an increase, is necessary to run a long-term business.
The problem with frequent fluctuation is that the monetary graph is too steep to make an actual significant gain at the end of the day. All the profit obtained during the peak time is used up in covering the loss during the low phase.
Hence, maintaining a stable business is much better than a hundred jobs at once and then no jobs for a period.
This can be achieved by:
- Supervising the management of business
- Frequent analysis of the functioning and the income table
- Making timely revisions in sales, production, and marketing methodologies.
- Evaluating employees performance on a regular basis
- Being aware of the changes in the market and the evolution of business supporting technologies, government schemes, and public notions.
“Being aware”- of your business’s performance, of the market situation, of the scenario ahead of you, “being aware” is most essential for running a stable business.
Stage 5: Expansion
Over a period of years, when your business has been very well established and has been making decent or even tremendous profit, with no significant decline in sales, production, or income, it can be an opportunity to think of expanding the forum. This stage is completely optional, though. However, most entrepreneurs are groomed that way, to always try to improve and expand! Hence, it is important to identify the right time to start the phase of expansion. Too early and you might incur loose, too late, and you may not have enough resources to do so. Therefore, the right time is when
- Your business is doing pretty well
- You have cleanly charted out new ideas and work-plan
- The market is conducive; monetary support is sufficient
- Probably the competitors are experiencing lose
- Or simply when you get the chance to do something bigger, better, or greater.
In fact, expansion can also begin when you notice a stagnancy in your business for over 5 years, with no decline, but saturated gain.
Stage 6: Maturity
Perhaps the most disheartening part of a business lifecycle is the maturity. When you have squeezed out the entire potential of your business when there is perhaps nothing new left to do with the business profile when the business incurs no new clients. It does not mean that the business is facing lose or joblessness, it simply means that the entire scope of the business has been tried and tested. However, most businesses do not even reach this phase; this phase is indefinite, some businesses may face it within a few years, and some businesses may still be a long away from this stage despite running for over 50 years. It is more of a hypothetical concept, where there is no growth, but no decline either.
Stage 7: Pack up
Many businesses skip the previous stage and directly land onto this final phase, where the business has incurred enough lose to lead to its close. When the financial debt is overhead, the workforce is thin, and the sale is bare. This is the realization that the business has outgrown its lifecycle and its time to wrap up.
Conclusion
Hence, these were 7 stages of a business’s life cycle. So if you are planning to start your own venture, make sure that you plan according to the stages mentioned above.
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Co-Authored With
Aditya works as a Growth Assistant at AirTract, a go-to place for all expert advice wherein people ask questions, write articles, share and learn from online courses. He has a Bachelor’s Degree in Computer Science Engineering and has been working in the field of Digital Marketing for the past two years. He is also a voracious reader and a big sports fan.
