What are the 5 business life cycle stages?
4 min read
Understanding the business lifecycle or stages of business growth will help you gain a better view of what your business should look like. Importantly, it will also help you recognise what the next step is and how to get there.
Tracking your business growth cycle from start-up to maturity is a tidy way to keep your business on an upward trajectory.
However, evolving your business and departing on a growth mission isn’t for everyone. Many small businesses stay in the early stages of business growth and never feel the need to continue expanding.
But if business maturity is on your mind, let’s define the five stages of business growth.
Growth process: the five stages of small businesses growth
There are five lifecycle stages of business growth. Let’s unpack and examine what each step entails and how to progress through these phases.
Stage One: Existence
Stage one in the business lifecycle is called ‘Existence’.
During this initial start-up phase, you’re solely focused on keeping your small business afloat. These are some of the key features of the Existence stage:
- You’ll be concerned with scoring customers and delivering your products and services to the market effectively.
- The business model is simple and linear, with yourself situated at the top and either performing most tasks yourself or delegating directly to any employees you may have.
- Your systems will be almost non-existent.
- Cashflow is your primary concern.
Questions that will arise during the Existence phase:
- How will you cultivate an initial customer base?
- What are your competitors doing?
- How will you go about targeting your audience and growing your market share?
- How will you implement initial marketing and sales strategies?
- Will you be able to adequately deliver your products and services?
- Is your business idea fiscally viable?
- Do you have adequate financing and resources to keep afloat?
Stage Two: Survival
Stage two in the business lifecycle is called ‘Survival’.
During the Survival stage you’re now operating from a foundation of viability. You’ve demonstrated to yourself and the market that there’s a desire for your products or services and that a market share can be carved out.
The Survival stage of the business life cycle is largely concerned with sustained profitability.
Some key features of the Survival stage are:
- You’ll be concerned with earning enough profit to cover financing and expenses with adequate sales and cashflow.
- Your business model will still be rather simple, with yourself still the key decision maker and driver of deliverables. You may have an employee or two at this stage.
- Your business systems will still be lean and largely centred upon sales targets, marketing, budgeting and cashflow forecasting.
Questions that will arise during the Survival stage:
- Is your relation between revenue and expenses healthy and sustainable?
- Are you making enough profit to give you hope of continued success?
- Are you experiencing profit decline?
- Are you generating a return on investment when it comes to your business expenses, outlay, equipment, and other assets?
- Are you able to comfortably pay off financing debt as required?
Stage Three: Success
Stage three in the business lifecycle is called ‘Success’.
When you have matured to the Success stage of the business lifecycle, you should be at the helm of a solidly profitable business which generates ample cashflow and is stable.
Your business’s future should look bright, your market share should be healthy, and you should be easily covering your debts and receiving solid ROI on your investments.
At this point in the five stages of the business lifecycle, you’ll be presented with two options.
- You may choose at this point to take a back seat when it comes to your day-to-day operations.
If you choose this route, you’ll likely be employing managers to keep the business healthy and will delegate responsibilities to others.
You’ll be seeking passive income from the business and will forgo any risky growth strategies, instead maintaining the current and profitable course. Essentially, you’ll be more hands-off and seeking a stable income from a healthy business.
- Your second choice at this stage of the business growth lifecycle involves aggressive and possible risky expansion. You’ll be chasing more market share, entering new markets, or seeking higher profits through investment. You could also be launching new products or acquiring smaller businesses.
This means you may be seeking further financing, incurring more debt, leveraging your capital, and focusing less on take-home profits.
With greater risk comes the potential for greater reward. But of course, there’s significant risk to this option and hard work will be required.
These are two clearly polarised options. This is exactly the point in your business growth cycle when you need to know what you want out of your business life. Do you want to keep pushing for growth or are you satisfied with your profits and are ready to take more time for yourself?
Stage Four: Take Off
Stage four in the business lifecycle is called ‘Take Off’.
Only if you’ve chosen the second choice above in the Success stage (aggressive expansion) will this stage of business growth apply. If you chose the first option above, this is where we leave you, as you’re now comfortable and successful.
This is the point where you may very well be sitting at the head of a large and successful company.
Some key features of the Take Off stage:
- You’ll be concerned with ensuring you have the cash, financing, and safety net to allow for increased expenditure.
- You’ll be making careful and strategic choices as to your growth strategy, such as new products, markets, or business acquisitions.
- You’ll be taking on or upskilling staff to engage with, and deliver upon, your intended growth opportunity.
- You’ll be decentralising the business.
- Your systems will be mature, and your workflows and reporting will be advanced.
Many businesses can either fail at this stage, enjoy increased success, or even look to sell what should be an attractive and valuable operation.
Stage Five: Resource Maturity
Step five in the business lifecycle is called ‘Resource Maturity’.
This is rarefied air and very few businesses will attain this level of success. You’re now looking at a mature and highly profitable business with excellent stability and outlook.
Some key features of the Resource Maturity stage:
- You’ll be concerned with balancing the monetary rewards of your expansion with your ongoing operational costs.
- You should now have full decentralisation in play and will have separated yourself as an individual from the business and any personal liability.
- You’ll have managers and key staff taking up the bulk of operational duties.
- Your systems will be fully matured, with top tier tools, workflows, reporting and strategic capability.
- You’ll be driving the business with an entrepreneurial spirit, tempered with a respect for stability and high cashflow and profitability.
- You’ll be diverse and stable enough to withstand market fluctuations and consumer shifts.
Challenges in the growth stage of a business
Most businesses will not complete the entire business growth lifecycle from start-up Existence to full Resource Maturity. Of course, this doesn’t mean you haven’t achieved success.
If you have an excellent idea, focus on cashflow and market share, have solid growth strategies while keeping an eye on prospects, you can have every chance of reaching these later stages.
Many businesses can remain in the earlier business growth stages and claim victory with a profitable venture, without the need to progress through every stage of business growth.