Business Life cycle // 5 Stages and their Telltale Signs

Business Life cycle // 5 Stages and their Telltale Signs

The year that has been, has forced many organizations to re-think the yardstick with which they measure success, and performance. Business leaders are tasked with ensuring their organizations will navigate uncertainty while building resilience and creating truly sustainable models.

The pandemic has not only altered, but also accelerated organizational understanding of themselves, their values, visions, goals, models, as well as offerings in products, and services.  Organizations have had to review their overhead costs, especially that of rented office spaces.  The ‘next normal’ for office space management, will be highly driven by flexibility. 

Another element that is business-critical, is that of understanding which business life cycle stage you are operating under. Starting a business is never an easy task. As a leader, you are always faced with the challenge of trying to see your organization through various stages. 

However, not all businesses will experience every stage of the business life cycle, and those that do may not necessarily experience them in chronological order. You will need an acute understanding of what stage you are in, so that can decide the right strategies for your business. It also helps you allocate the proper resources to the right places to fuel continued growth.

In this article we highlight the different business life cycle stages, the challenges you might incur, and a few questions you need to ask yourself or consider to have so as to maximise business success.

Seed & Development

Normally, this is the first stage for most businesses. The seed & development stage mostly involves identifying your idea, researching and conceptualizing it.  The aim is to understand how viable your idea or concept is likely to be. It is the soul searching stage.

In Kenya, a country with 500,000 to 800,000 young Kenyans entering the job market each year, 23.4% launch into business for better income, while 20.5% do it to be self-employed, and 17% do it because they have the requisite skills. You have to think of the ‘why’ behind launching your idea/concept. Knowing this adds credibility to what you are offering and gives potential partners, team members, customers and investors something to buy into. It also helps you start to build resilience for the  more difficult business life stages up ahead. 

In the seed & development stage, you seek advice around the feasibility of your business idea from as many sources as possible. It’s where you take a step back, and also ask yourself if you have what it takes to make it a success.

It is also the business life stage where you identify the key target areas of your areas and develop them. At this stage, you ask yourself questions like:

1. What need does my business fill in the market?
2. How do I create a business structure?
3. What profits am I looking at?

Startup

Once you have thoroughly finished on your seed and development stage, the next business life stage is putting your idea out into the market. It is the stage when you have your idea and you are ready to kick things off. You now have a startup. 

The Startup stage involves raising funds, either from a bank or an investor; and is viewed as one of the riskiest stages. You are tasked with being incredibly resourceful, and flexible regardless of funding availability or lack thereof.

As a startup owner, one of the key tasks to get done is pitching your business. You, your panthers & team, will be tasked with pitching your business to investors repeatedly.  It means that you will work and rework your pitch deck many times over. You will definitely need to consider including these 11 Slides In Your Pitch Deck. 

Organizations that are successful today, most likely had to make hundreds of pitches before securing the first round funding. Akili Network which was set up in 2012 got major funding in 2019 and launched their free-to-air children’s television network Akili Kids! in 2020. At the launch of the children’s content platform earlier in the year, Jesse Soleil, President & Co-founder, spoke of the almost 8 years of conceptualization, and hard work.

CEO Cellullant, Ken Njoroge, one of Kenya’s influential business people, once mentioned that among the hurdles the organization had to jump was meeting over 60 different investors over a 2 year period that took up 400 pitches across the world.

Apart from constantly sprucing up your pitch deck to raise funds, you are likely faced other challenges such as:

1. Deciding the appropriate Entity/Type for your Business
2. Managing Cash Reserves
3. Being Compliant with Government Business Regulations
4. Creating Achievable Sales Targets & Expectations
5. Accounting Management
6. Tax Compliance
7. Establishing a customer base
8. Establishing a market presence
9. Brand Building
10. Communicating Your Offering

Finally, you are probably running the business alone, and it can get lonely. You should seek out startup communities where they will give you an opportunity to connect with people outside of business. A coworking community such as Nairobi Garage can help greatly with this.

Growth & Establishment

Your head might be so deep in getting your startup off the ground, you fail to realise that you reached the growth and establishment business life cycle stage. How do you know you are there? 

You’ve been generating a consistent source of income, and regularly taking on new customers. At this stage, cash flow should start to improve as recurring revenues help to cover ongoing expenses. You’ve started to break even month on month, and are starting to look forward to seeing your profits improve steadily.

In the growth & establishment stage,  you will also notice that your business strategy is being executed successfully. The business life cycle will also embark on a stage of aggressive and quick growth depending on the end goal for the business entity.

Focus becomes more business development driven. Your role is more centered on being the head of the organization. The difficult task of delegating some of the hats that you wear, to more highly qualified new hires. You are now tasked with recruiting both experienced senior leaders and lower-level workers on board to help in strengthening client relationships, and retention. 

Some of the biggest challenges for a business owner in this stage is:

1. Dividing Time between New Range of Demands
2. Managing Increasing Levels of Revenue 
3. Attending to Customers
4. Dealing with the Competition
5. Accommodating an Expanding Team

Expansion Business Life cycle

The organization has expert staff handling critical business areas, and things are falling into place.  Your business has now firmly established its presence within the industry. Now you’re ready to expand.

Your business could now be experiencing rapid growth in both revenue, and cash flow as the blueprint has now been established. It is at the expansion business life cycle stage that you start your research on other new markets. 

However, as you investigate expanding your business be careful not to over do it or expand too fast. A lot of organizations also fail at this stage just by overlooking a few things. Take your time to plan carefully and be realistic on the best possible chance of potential returns.

We’ve interviewed several CEOs who have graced Nairobi Garage spaces over the years. One thing that has been clear is that, what works in other markets, will not necessarily result in the same success for another. Therefore, at this stage questions to keep in mind include:

1. Can the business sustain further growth? 
2. Are there enough opportunities out there for expansion? 
3. Is your business financially stable enough to cover an unsuccessful attempt at expansion?
4. Are you the type of leader who is up for the task of further expansion at this stage?

Remember that the business graveyard is littered with organizations that took on too much and failed. Your task is indeed to take on new challenges as you look to constantly expand but measure your risk and do your best to secure the organization for all eventualities.

Maturity & Possible Exit

You & your team have navigated the expansion stage of the business life cycle successfully, now your offering is well known, and respected across many markets. Your organization has by now seen stable profits year-on-year. 

As a business leader, you are now faced with two choices. Either to expand your business further or exit and leave room for new blood. 

It is at this point that many organizations change leadership. For example a seasoned, career CEO can be brought in to navigate the organization through new challenges.

There is the option of selling shares, either partial, full or selling the entire organization. Many business owners don’t recognise the cues to sell either because of lack of changing leadership or decline in business. When they finally decide to sell, the business isn’t worth much. Being honest in this stage, ensures that you don’t get stuck in this situation.

In Summary

In a recent survey, 46% of the respondents said they have seen an increase in web traffic, seeking information, products & services. A positive sign that there is more opportunity to meet customer needs that have changed drastically since the pandemic broke out. 

It means, there is room for that idea that has been sitting in the back burner to come out and play. There is an opportunity for that startup to move into the growth and establishment business life cycle. It is a sign that once we settle into the ‘next to normal’ your organization might be primed for expansion. 

Finally, in the event that your organization was not quite ready to take on the challenges, 2020 brought, perhaps it’s time to step aside and let new blood in to take the idea you once had into the future. Whichever business life cycle stage you are in, there is room for understanding, improvement and growth into the next one.