Stages of a Business Life Cycle – Why It Matters Where You Are

“Where you stand depends on where you sit.” – quote attributed to Rufus Miles of Princeton University

I have been privileged to serve businesses in all stages of their life cycle. For example, I am now helping an owner sell the business I helped him to acquire over 30 years ago. Over the years, I have helped companies deal with a wide variety of issues and realize the commonality is often the current stage of the life of that business. More importantly, focusing on “where you stand” in the cycle can help an owner address the typical issues they will probably face not only in this stage but the next. It’s the old “I am more afraid of what I don’t know” syndrome I see so often. So while a complete listing of what to consider at each stage is way beyond the scope of any blog or article, some brief highlights will get you thinking.

It may have been the Boston Consulting Group or another organization which introduced this concept (or a derivation thereof) years ago, but to me there are typically four stages of the business life cycle:

  1. Startup
  2. Emerging
  3. Growth
  4. Mature

Startups are characterized by developing proof of concept, they are pre-revenue, may have a minimum viable product (MVP) and the owners are usually trying to define themselves. Challenges are funding, funding, funding (angels, friends and family), sharing equity and recruiting team members (usually centered around those that believe in the founder(s) vision.)

Emerging companies do have an MVP, some traction, and are looking to develop an effective approach to the market. They have raised funds from friends and family and are looking for that next round. Challenges are more sophisticated funding (VC’s, etc.), honing the customer experience, the product and approach, expanding the team, more disciplined equity grants and trying to keep control over everything – – being a bit more “directed” but monitoring culture.

Growth is when you start to hit stride. Product is developed and is appealing to the sweet spot of the market. Financing is less of an issue and you probably have cash flow to fund basic growth: your balance sheet is your friend. Team members are now recruited with more specific objectives in mind. Equity is more guarded (like a fine wine) and delegation and timely reporting of Key Performance Indicators replaces informal chats as to “how things are going.” Discipline works its way into almost all aspects of the business and controls (versus control) is the key word of the day. Organic versus acquisition growth is a constant subject of discussion.

Mature companies have usually achieved stability in market presence, financial rewards and in management team composition. Thoughts turn to succession planning, risk management (protecting what you have built) and perhaps an exit plan. Processes are helping keep the business intact and acquisitions and dispositions are a more frequent part of the conversation.

So there are issues to address at each stage in the life cycle, and at times, owners get a bit ahead of themselves like adolescents tend to do. Hopefully, by identifying where you are in the process and understanding that where you stand depends on where you sit, you will be able to successfully see your way through it.

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