The 7 Stages of a Business Life Cycle and How to Win in Each One

Table of Contents:

  1. Conception Stage
  2. Start-Up Stage
  3. Early Stage
  4. Growth Stage
  5. Rapid Growth Stage
  6. Maturing Stage
  7. Innovation or Decline Stage
  8. Get Support for Your Business at Every Stage

On average, about 4 million businesses are started annually in the United States. However, 18% of small businesses don’t make it to their first birthday, and 50% fail within five years. What do most unsuccessful start-ups have in common? They don’t understand the phases of the business life cycle and how they affect their company. 

The 7 stages of a business life cycle are conception, start-up, the early stage, growth, rapid growth, the maturing stage, and innovate or decline. If you want your small business to succeed, you must understand how each stage works and what to do during those stages to win. Let’s look at the seven stages of a business life cycle and how to make the most of them. 

1. Conception Stage

The Conception stage is the first step in establishing your new business. It’s a time when you should focus on brainstorming and researching potential business ideas. At this point, you will have time to consider what kind of company you want to start and why it will succeed. 

Assess the Market

You may have already determined the niche within an industry that would work best for you based on market demand, competition, and available resources. In this stage, many people search for funding or partnerships (if needed).

Write a Start-Up Plan

It’s still early enough for an entrepreneur to determine the feasibility of their business idea and collect suggestions from outside advisors to decide if they should move forward. It’s also the best time to begin creating a start-up plan. This start-up plan covers your capabilities, the resources you’ll need, potential customers, marketability, potential sources of start-up capital, and if your business idea has profit potential. 

Be Prepared to Put in the Work

The majority of small business owners report working at least 50 hours a week and the beginning stages can often be the most demanding. Entrepreneurs usually handle most of the day-to-day tasks themselves at the start, so it’s prudent to be proactive in managing your time, planning and organization. If you lack follow-through or focus while you get your business off the ground, the road can get rocky or become a dead-end before your business even opens its doors. 

2. Start-Up Stage

You’ve taken steps to open for business in the start-up stage. Sales are usually inconsistent at the beginning, and you may be trying to find your footing in the market. 

Be Flexible

You might find yourself in a situation where profits aren’t coming through the door as fast as you think they should. If this happens during your start-up stage, think creatively about ways to reduce costs while experimenting carefully to adjust your product or service to the market’s needs, wants and expectations.

Develop a Three-Year Business Plan

The start-up stage is the time for a formal business plan that covers the next three years and a marketing plan to help your business gain the stability it needs to survive. You’ll use this plan to assess your progress and make management decisions with your goals in mind. The plan may frequently change as new information arises, but it’s an important guiding tool for successfully establishing your business. 

3. Early Stage

The early stage of a business is often the most exciting because you see the cash flow and income you hoped for starting to happen. Even though you’ve developed a customer base that allows your business to survive, you’re still trying to attract customers and figure out how to be most competitive in the market. It’s time for you to take on the responsibility of delegating, communicating vision and paying close attention to marketing. 

Develop an Aggressive Marketing Plan

Hiring a marketing firm or internal marketing professional can help refine your brand’s competitive edge. Your business will need a marketing plan that includes branding, public relations, advertising, social media and search engine optimization strategies to help it gain visibility in its niche market.

Hire, Delegate and Outsource

Most businesses don’t have many employees at this point, but it’s time to begin hiring a competent management team for your business’s success and your own well-being. To be most effective, you’ll need to delegate some of the responsibilities you’ve been handling on your own. Plus, having knowledgeable feedback from professionals who understand the details of your business can also help you make effective decisions and adjustments that support growth. 

Outsourcing some business functions that are time-consuming or expensive can also help you break free from an overload of day-to-day tasks. You may subscribe to automated services or contract with specialized companies for specific functions like cleaning your commercial space or financial management and tax preparation. 

4. Growth Stage

During the growth stage, your business will be taking in steady cash and spending money to meet expanding market demands. The growth stage is the time to hire a bigger team and expand your capabilities to satisfy more customers. It’s also a time when investors see the viability of your business and may be more willing to provide the funds you need to grow.

Share Your Vision Clearly and Constantly

It’s time to let your outstanding personality and excellent communication skills shine. Managing these relationships with new customers, employees and investors will become your top priority and most significant responsibility.

Continue in the delegation process while sharing your vision with your team for the business’s direction and how it relates to their personal growth opportunities.

Strategize and Plan for the Future

This is a time for heavy planning and strategy sessions. In addition to your business and marketing plans, you’ll need to add a strategic plan that includes clear goals and measurements to evaluate your business’s progress. This strategic plan is not just about you and the company; it involves all your employees and the direction you’ll go together. This document helps you define clear goals within your business and should guide actionable steps to be taken by every employee in your organization.

As your team grows into specialty-serving teams or departments within the business, an operating plan will help you coordinate all business functions, so they interact effectively and smoothly. Your planning should outline every business function in steps required to meet an end goal.

Finally, you’ll need to create an exit strategy. Even if you plan on owning the business until you retire, you may want to distance yourself from daily operations at some point. Even if you plan on continuing to be fully involved, you should at least consider what exit opportunities are available to you at this point and all stages from now on. Having an exit strategy helps influence the direction of your business and encourages you to build value in it.

Secure Funding for Greater Capacity

It’s time to secure funding to expand and hire employees, purchase equipment, make more space or fulfill other needs your business faces as it grows to accommodate the demands of more sales.

There are several options for funding the growth of your business, including private investors, conventional lenders, SBA loans and non-profit organizations that help small businesses secure 

funding. Research your options and decide what is best for your organization, financial status, and goals. 

5. Rapid Growth

At this point, you’ll probably feel incredible. Your business is growing, and fast. You’re outpacing the industry in growth and your competitors are probably taking notice. 

Expand Responsibly

As impressive as the rapid growth stage is, there’s no guarantee that it will last so you should be cautious in continuing to expand your staff and expenses permanently. All your operations should be systematized and streamlined to standardize your customer experience as you grow and to keep your costs predictable. 

You also should ensure you assess your suppliers’ current capacity. Product or service shortages or delays can harm your reputation and stress customer relationships. 

Evaluate and Restructure Leadership

Your planning systems are in place, and your management team should keep things flowing smoothly. For some entrepreneurs, this is an excellent time to sell your business. Your success may be outgrowing your skillset or your bandwidth for the complexity of issues you’ll begin to face. 

If you decide to stick with it and grow professionally through the experience, there are several opportunities for you and your team to adapt. You may have to add more specialized expertise to your management team to provide practical guidance on a greater level. There may be opportunities for professional development through training, tapping into your industry’s network and furthering education. 

Prioritize Goals

All of your management team should participate in an annual review of the company and have input in revising the business’s strategic plan. The directives from this annual plan need to be clear and should only change with significant updates in the information available to you and feedback from the entire team.  

Your priorities should be concise and vision-directed. Having too many priorities outlined in your strategic plan as you take on new markets can put undue pressure on your team, processes and cash flow. 

6. Maturing Stage

You’ve established yourself, and your business is steady in the market. Your sales patterns have stabilized, and you’re a leader in your industry. It would be best if you worked to preserve the value you’ve gained and balance short and long-term growth.

Reinvent and Remain Flexible

Your business is creating wealth during the maturity stage, so you have the space and opportunity to innovate, strategically expand and acquire complimentary companies if you choose. Some entrepreneurs may split the company into smaller business units based on each department’s offering. 

Continue to Lead with Vision

It’s essential to continue to communicate the business vision and keep it at the forefront of planning and decision-making. Your responsibility is to lead a team that can agree on the shared values of each organization member. You should also ensure that your employees have a sense of ownership and well-being so you don’t have a high turnover rate due to misaligned values. 

Plan for Transformation or Exit

As you plan for the future, consider how your business will transform as time goes on to stay relevant, profitable and competitive. As the company has proven profitability and value, you can also revisit your exit plan and consider if it would be a good idea to cash in on your investment of time and money. 

7. Innovation or Decline Stage

The last stage of the business life cycle is the call for a business to either innovate or decline. In this stage, companies must look for new ways to innovate their products, services and markets. 

Find ways to Stay Fresh

Companies in this stage of the life cycle should consider diversifying their product offerings and expanding into different types of industries. If you fail to innovate at this stage, you can count on losing at least some of your business or over time, becoming completely irrelevant and unprofitable. 

Encourage Creativity

Influential leaders will foster a creative culture and invite constant input from their team. Taking strategic risks is worthwhile at this stage, and you must constantly reinforce your vision. If your team moves away from a shared vision, you can be distracted by internal confusion and be caught off guard by the next new wave on the horizon. 

Pay Close Attention to External Conditions

It would help if you encouraged your team to stay in touch with changes in your industry through reading, networking, conferences and education on how other businesses are innovating and pushing initiatives forward. Whether you consider your competitors or keep watch on completely different industries to find ideas for keeping your products or services relevant, considering how your business can adapt can be the difference in your survival. 

Get Support for Each of the 7 Stages of a Business Life Cycle

Knowing what stage you’re in and where your focus should be can give you the keys to success and where you need to grow as a leader. For example, if you’re starting, it would be a mistake to spend excessive money trying to create buzz around your product before it even exists. But if your business is thriving and growing rapidly, marketing may become more important than the product itself.

Key performance indicators and essential responsibilities change for an entrepreneur at each stage of the business life cycle. At any stage of your business, it may be necessary to secure funding to get to the next goal. 
TEDC Creative Capital offers several lending options and learning opportunities to support Oklahoma businesses start-up, grow and innovate. Explore the lending options available and our learning opportunities for current and aspiring entrepreneurs to help small business owners win at each of the seven stages of a business life cycle.