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The Business Life Cycle

25th September 2020 by Simon Towers Leave a Comment

The Business life cycle

For many businesses, having some perspective as to where they are in their business life cycle makes the world of difference to the decisions they make. In this post, I share the recognisable phases that businesses go through in their lifetime, in the hopes that it will help give you some context to where you are right now.

Life Cycle versus Business Model

I thought I would start this off by distinguishing between these two concepts, because you could get a little blurry!

Life cycle, for me, is describing the timeline of a business – from a standing start (and all that comes with that) to the different growth milestones (and the resulting joys and aches that come with that). The lifecycle stages that I will share are:

  • “Start-up” phase (0 to 3 years)
  • “Proving” phase (4 to 6 years)
  • “Investment” phase (7 to 10 years)
  • “Steady Growth” (Mature) phase (10 to 15 years)
  • “Exit Planning” phase (15+ years)

Business Model, is the type of business structure that you choose for your business. This determines pricing, profitability, resources, investment and so on. For example: will you have a retail shop? Are you in Manufacturing? Is your business completely online? Are you service based or product based, or a mix of the two?

Answers to these questions help define your business model (i.e. the money-making mechanism to your business). You may also want to take into account the lifestyle you envision for yourself – because this will also help determine what kind of business you want. (Check out Daniel Priestley’s Entrepreneurial Journey – he maps this out nicely for you to plot where you think you fit in).

Life cycle phase: Start Up (0 to 3 years)

These beginning years are the important ones where you are testing your idea, getting feedback on what you are selling, getting to know who your ideal customers are and experimenting with different market routes (and marketing messages).

At best you will be breaking even during this phase.

Important focus points:

  • Be open to constructive conversations with your accountant about costs v investment building activity
  • Start systemising your business from Day 1
  • Be quick to adjust or adapt, this will serve you well in future

Life cycle phase: Proving (4 to 6 years)

During this phase, you will be taking what you’ve learned in your first 3 years and apply it systematically into your business.

This period is where you will be taking on extra help, whether that is a VA or employee, or a mix of these. The focus needs to be in removing you from the day to day pure delivery of your product or service, otherwise you will not be able to grow. This will happen over time, but you have to learn to put the processes in place to help others support you.

During this period, you may also want to sharpen up your branding and messaging, so that you get closer to outwardly sending out the right messages to your ideal customers. Use the information you have gathered during your first 3 years and put it to use.

Hopefully from year 4 you will be making a profit. You will also be taking a steady salary (whatever that is) in order to support your living expenses. This is important for motivation!

Important focus points:

  • Look at ways to automate as much of your processes as possible (templates, step-by-step guides, etc)
  • Delegate that which you cannot automate
  • Actively seek a peer group that will support your next stage in growth
  • Gain more strategic skills wherever possible (around productivity, marketing, business process, etc)

Life cycle phase: Investment (7 to 10 years)

Now is the time to spend money to make money… as they say! You will have gathered from the years to date that you will need to up your game in terms of the tools, equipment, solutions or people you need to get your business to the next stage of growth.

This period is where you will be investing money in more strategic marketing efforts (video marketing, branding, marketing collateral), better business tools (CRM system, email marketing, project management, helpdesk support, etc) and possibly engaging a business coach or mentor to support you more directly.

While the previous phase was all about trying to remove yourself from the day to day. This should be pretty much done by this time. 80% of your time will be in actually managing the business, the people and the innovation of your service/product offer.

Important focus points:

  • Investing in the tools and equipment needed to give your business the edge to grow faster and delivery your service/product better.
  • Review your service/product offering and ensure that it is future proof. Can you innovate how its delivered or introduce any new in-demand products/services which your customers have been asking for?

Life cycle phase: Steady Growth / Mature  (10 to 15 years)

This is the period you have been waiting for, where:

  • profit %’s are improving year-on-year
  • you are narrowly focussed on delivering what your customers love
  • you are able to possibly take a holiday and not be anxious the whole time

This phase is one where you will be adding more value to your whole business by gathering case studies of happy customers, looking for win-win partnerships with other brands and seeking more visible strategic opportunities in the press or in your local community.

You have proven your business concept by surviving this long and making a good return. You are in a better position to approach funding institutes / banking now if you wanted to look growing your business through acquisition, franchising or just expand organically.

Important focus points:

  • Planning for further growth & looking at what you need to do that
  • Maintaining a healthy flow of new business; reducing churn of existing business; and keeping a healthy cashflow viewpoint

Life cycle phase: Exit Planning (15+ years)

This is when you look at where you want to be at the point of exiting the business. You may already have started to think about this in the previous phase, but by this time – you should definitely have a plan.

This is the culmination of all your hard work, investment and smart moves from the previous 15 years. It’s wise to look at who will take over the business if you move on, and what does “moving on” look like?

Not everyone wants to exit a business, especially if they are passionate about it. However, it’s a good business decision to at least value the business at this point and look at opportunities for the next phase in the business’ life (i.e. being owned by someone else).

Important focus points:

  • Engaging a business broker to evaluate your business as it stands today and provide you with expert advice on what you can do to improve the value or buy-ability of your business.
  • Doing some research on what you would like to move on to:
    • Perhaps buy a different type of business; or
    • reduce your weekly commitment to the existing business; or
    • go into a joint venture with someone in a different business; or
    • take up a new hobby!

By understanding which phase you are currently in, in your business life cycle, and what lies ahead, I’m hoping this will help you to make sense of the actions and activities you do day-to-day. Possibly it will give you some perspective too, so that you don’t get too buried in the stresses and strains of running a business.

If you can recognise which phase you are in, and would like to have a conversation about planning for the next phase, then feel free to contact me to arrange a confidential chat. I have been working with businesses – solo, small, medium and large for going on 3 decades now. I’m sure I can help guide you in the right direction.

Feel free to email me, or contact our offices.

Filed Under: Small Business, Start-up Information

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