5 Stages Of The Business Life Cycle

Like a seed to be planted for a tree to grow and flourish, our business must establish a solid foundation to spring to life. 

Did you know that 9 out of 10 businesses and startups face failure just one year after launch? In most cases, our companies will follow a similar life cycle path – from launch to maturity. There are five stages that every company will go through to achieve success (or, well, failure). So, what exactly are these five stages of the business life cycle? 

1. Seed and Development

Congrats! You have a fantastic idea, so now it’s time to transform it into a successful business plan – to plant the seed. It is called that because it references the seed funding phase, where we, as entrepreneurs, seek financial support from investors. 

During this stage of our business, we’ll need to come up with a business plan. This is when we establish precisely what we want to accomplish, our objectives, strategies, and other plans that will guarantee business growth and help us launch our startup. 

Even more so, although the sales are pretty low, they are (hopefully) increasing as we focus more and more on advertising and marketing efforts. But unfortunately, if unsuccessful, as initial costs are high and our revenue is pretty low, many businesses are prone to suffer significant losses – or even worse, fail.

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2. Startup

This is when we will see an increase in our sales, but to sustain your business growth, it will be necessary to obtain funding from investors, get a bank loan, or our back pocket. Regardless, prepare for a period of testing, experimenting, maybe even failing, but then try again in a better way. This is when we’ll learn everything we need to know about what works and what doesn’t and implement these strategies successfully, especially when it comes to marketing and sales alignment.

The startup phase is represented by:

• Improving and establishing our brand identity and reputation through strategic marketing, public relations, and customer engagement initiatives.
• Adapting our business plan to meet growing demand may involve hiring more staff, increasing production, and investing in infrastructure.
• Learning how to make a profit.
• Establishing a sustainable business model.

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3. Growth and Establishment

For many of our startups, this business life cycle stage is all about solidifying our place in the market and making ourselves known among competitors. This is also when our business reaches a new point: the break-even point, and it’s time to grow. So, we’ll focus on market penetration by increasing marketing efforts to attract more customers and expand the customer base. 

The goal of this stage is to maximize profits and create a solid corporate structure. While reaching this business life cycle stage is difficult, it’s even more challenging to maintain momentum and stay competitive. The critical point is to build a team a dedicated and consolidated team that will take your business to the next stage.

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4. Maturity

The maturity stage of our business life cycle represents probably the highest level of security in our profit margins since starting and launching our startup. This means that we will see a stable annual growth rate and profitability, as well as a relative predictability of where our business is. 

Even more so, it’s also the time we expand our business – both in terms of market reach and product offerings. This can involve entering new geographic markets, targeting new customer segments, and diversifying our product or service lines to address additional needs and preferences.The maturity stage is represented by:

• Developing branches, subsidiaries, or product diversification.
• Annual growth of 5% annually.
• Creating strategies to stay competitive.
• Maintaining strong leadership and a positive organizational culture.
• Decide our future for the business. 

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5. Succession or Exit

Eventually, all of us will reach a point in our business growth strategies where we, as original owners or other vital stakeholders, might opt for an exit strategy. Whether through acquisition, merger, management buyout, going public – Initial Public Offering (IPO), or even liquidation, it’s time to choose which one aligns best with your business goals and circumstances.

For example, Walmart, a family-owned business, is incredibly focused on succession planning. From the founder, Sam Walton, to Rob Walton, his son, and now Greg Penner, his grandson-in-law, Walmart is known for its generational transitions, maintaining a strong market presence and significant competitive advantage. 

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‍Understanding the business life cycle stages that our startups will go through is extremely necessary to know how to grow our business and what business growth strategies to implement. All of these stages are similar for all businesses – but the time it takes to achieve them can differ from company to company and even from industry to industry.