Growth is always associated with change and development. A growing business also goes through a business life cycle where the startup becomes a reality. Then as the market share increases, the business grows in size and revenue. Eventually, the business enters the maturity stage and becomes established in the industry, and continues to enjoy steady, steady growth. Unfortunately — like all growing things — some businesses don’t make it and they go into decline.
Do you want to turn a business idea into a thriving, profitable business that allows you to enjoy success? We have developed a guide to the various business growth stages every company goes through.
The Stages in a Business Life Cycle
Business life cycle refers to the processes all businesses go through from their inception to eventual stability or decline. Most experts describe the four principal stages of business growth — startup, growth, maturity, and renewal or decline. However, some business owners add additional stages of growth like shake-up or market introduction.
The Four Stages of Business Growth
To start and manage a successful business, it is vital to understand the four stages of business growth. Recognizing the growth phases helps you to plan for the next and drive the business forward. However, failure to identify which growth stage you are at could cause growth to stagnate or even go into decline.
1. Startup stage
The first stage of the business growth cycle — the startup phase or development stage — is the riskiest. This is the stage when the business idea becomes reality and the business launches. During this stage, it is crucial to get new customers, onboard employees, build a brand identity, refine your product, and stabilize your cash flow situation.
Building a solid foundation during the startup phase is critical. According to Forbes magazine, up to 42 percent of businesses fail to survive and succeed. Common reasons for failure include not having enough of cash, no market demand, and failing to develop a robust business strategy.
What is necessary to ensure that the startup phase is successful? Many successful businesses have found that using an industry-respected growth to goal model can help get past the startup phase. Here are a few essentials to ensure rapid growth for your startup:
- Have a detailed business plan
- Focus on hiring the best talent possible
- Have a set of goals and timelines to meet them
- Ensure you clearly understand your customer demographics
- Carry out thorough market research to identify opportunities for growth
During the startup stage be prepared to wear many different hats to make your business productive. This usually means pushing brand awareness, dealing with new clients, and resolving “teething” issues. You may also need the courage to take some calculated risks. However, your hard work and efforts will pay off if you stick to your plan and keep your goals in focus.
It is also necessary to be flexible. It’s not uncommon for entrepreneurs to discover niches in the marketplace that they didn’t identify initially. In this case, it can make sense to continue to explore new opportunities, while keeping a focus on growth and your primary business model goals.
2. Growth stage
The growth phase happens when you have a strong customer base, tangible profits, healthy cash flow, and increased market share. Businesses that deal with the startup phase usually start growing a year or two after starting out. You will now have a good team and have a set of established processes.
At this point in the business lifecycle, it is vital to keep focused on goals. It can be easy to take your foot off the gas and enjoy your initial success. However, until your business becomes established, there is still much work to do. One of the greatest challenges is to drive growth in the second stage is to gain an edge on your competitors.
What is necessary to ensure that the expansion stage is successful? Here are a few things to focus on as your business grows:
- Strategic planning can recalibrate your business plan to match current needs
- Analyze what is driving profits and focus on these areas
- Continue to carry out market research to create realistic, accurate forecasts
- Outsource non-core activities
- Continue to explore new business growth opportunities
- Delegate more authority to employees in the company
During the startup period, you probably took on many roles to get the business established. However, the growth period or survival stage is also a time of transition. It is time to delegate responsibility to trusted members of your team. This step is essential in the business life cycle because it frees up your time to focus on core aspects of running a viable business.
3. Maturity stage
The maturity phase of growing a business feels completely different from the first two stages in the life cycle of a new or established company. During the growth stage of a startup, you had to manage your business and work hard to accomplish your goals.
As you move through the maturity stage, your primary objective is to ensure that you stagnate or — worse still — go into decline. The maturity stage is typically characterized by stability and steady cash flow. A mature business has control over its customer base, and you likely have a solid market share in your industry. You are also safe from the risk of competition from startups.
However, the greatest challenge you face is to continue to drive growth. Stagnation and lack of growth is now the biggest threat to your business. After all, what happens if something stops growing? It usually dies.
How can you ensure that your successful business reaches the fourth stage of business growth? Here are a few tips we have learned from successful business leaders:
- Continue to explore new markets
- Focus on research and development to develop new products for customers or improve existing ones
- Build on customer loyalty to increase profitability and secure cash flow
- Consider selling the business or merging with another company
Remember that as a mature business, you can’t rest on your laurels. You still have opportunities to expand and grow your company. You can continue to increase your market share or even branch out into new areas.
4. Business renewal or decline
The last part in the four-stage business life cycle is the renewal or decline phase. Since the business was established, market conditions, consumer behavior, and purchasing habits have undoubtedly changed significantly. This situation forces every business to adapt to new conditions or go into decline.
To ensure business renewal, not decline, you will need to show strong leadership and flexibility to adapt to changing circumstances. This may require upgrading technology, pursuing new opportunities, learning new skills to boost your competitive edge.
There are a few signs that business risks going into decline. However, because you are an established business, you still have time to reverse the weakening share of the market. Here are warning signs of business decline:
- Increased employee turnover
- Online complaints and poor reviews or your products or services
- Clients pay bills late
- Teams find it difficult to collaborate
- Lack of aspirations and leadership from management
- Market share decreases and competition starts to produce better products
Of course, knowing if the business is experiencing blips in the market or steady decline can be challenging. However, the warning sign is several years of decreasing revenue.
What should you do if you’re experiencing business decline? You typically have two choices — reinvest or sell.
Reinvesting in the company can bring about renewal. However, you will need to carry out thorough market research, modify your business plan, and think about investing in new technology. If you decide to sell, then it’s vital to get the best advice from a trusted business consultant. You should have a solid exit strategy to ensure you get the best deal.
The Stages of Business Development — The Bottom Line
Regardless of your business or its stage of growth, you must always focus on long-term growth and keep your strategies fresh. It takes time, effort, dedication, and resources to get through the first two stages of business growth. Once established, you must build on your success to strengthen your core products and customer base.
However, the key to long-term growth is to manage an established business. After the mature stage, every business will risk going into decline. Therefore, it is vital to continue to pursue new opportunities, keep up to date with new industry trends, and keep your workforce engaged.
At Cunningham and Associates, we help businesses adapt to changing market conditions and drive continued growth. Contact us today for a free consultation to learn how to navigate your startup through each stage of business growth.