Businesses grow from intangible ideas to physical products or substantive services. When the light bulb goes off in an entrepreneur’s head, the clock starts at the first of the stages of the business lifecycle.
Seed
You’ve heard the expression “the seed of an idea.” Seeds grow, and ideas develop. But first, you have to examine them, test them, and try to determine if your idea is viable as a business. Most new businesses go through a start-up phase where the principal tests their idea, running it by friends and colleagues, and researching their intended market and target demographic. This way they can determine if the idea can turn into a viable, and profitable, business.
Development
If reactions to the idea are positive and research shows the idea could work, the next phase is to develop the idea. The principal produces a business plan, and the business continues to hone and test the idea. They may possibly develop prototype products, make adjustments based on testing and feedback, seek funding or “bootstrapping,” and work with available resources. Marketing is critical at this stage to ensure the business scales at an appropriate rate and doesn’t dive in too deep with products the market can’t support.
Expansion
This is the most challenging and exciting of the stages of the business lifecycle. Things are up and running, and the business begins to grow. The business solidifies its market position, expands its operation, increases revenue, and manages costs, so the business generates profits while still investing in further growth. Business processes expand to include more sophisticated systems for financial management, customer service, shipping, sourcing materials, operations, and production. The business adds customers and clients and deploys systems to cultivate and maintain them, while also working to grow the customer base.
Decline, Recession, Reinvention or Exit
When a business matures, it has to adapt to changing market conditions, try new products and reach new customers, or face decline and loss of market share. If the business hits a wall and can’t keep growing, reinventing itself, and reaching new customers, options include sale, merger, or dissolution. The principal may be ready to try something new or retire altogether, leaving the business in the hands of a buyer or new managers who can transform or reinvigorate the business.
