What Is the Business Life Cycle? And How it Applies to You

By Indeed Editorial Team

Published November 24, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

When starting a company or developing knowledge of companies, you may want to learn about the company growth stages. Every phase has its own set of goals, challenges, and areas of focus. By knowing more about these life cycles, you can determine a company's position and how you can move between phases. In this article, we discuss business life cycles, learn the difference between these life cycles and company growth, and provide you with information about where to place your focus in each cycle.

What is the business life cycle?

The business life cycle refers to the progression of businesses over an extended period of time. Companies typically separate this life cycle into five phases, namely launch or startup, growth, shake-out, maturity, and decline. Here's a description of the five phases of a business's life cycle:

Startup

In this phase, businesses and team members meet other professionals, vendors, and potential consumers. They identify new ways to sell products and services and implement ideas. In this phase, you may not have any processes, but consistently discover new ideas and develop your business model to help ensure optimal profits. There are fewer job titles in this phase, and upper management typically completes the responsibilities of several jobs.

This is one of the more challenging phases for businesses because business owners often underpay themselves to support the company. You can increase your chances of success in the startup phase by improving your business model, obtaining investors, and discovering new opportunities for increased income.

Related: What are the Responsibilities of a Supervisor?

Growth

In the growth phase of business life cycles, you explain your business model to clients. This requires enough knowledge of the business model to describe it to others. You may want to consider maintaining modest price increases as you obtain new clients. Consider how you can promote a reduction in turnover and ensure that you have consistent funds for payroll. Examine the inner processes of your organization and hire more members of upper management during this phase.

This helps build your team by delegating your workload to others. Spend resources on activities that promote company growth and identify potential barriers to your growth. You may also want to determine whether you have a strong relationship with clients and investors. You can invest money into career advancement opportunities for team members and in activities that improve organizational culture. This phase requires investment to continually build the company and to promote future profits. You can also seek investments from third-party investors or loans from banks.

Maturity

The maturity phase of business life cycles refers to the process of your team reaching your ideal growth. In this phase, the team begins to grow by the same standard annually. During this phase of the company's life cycle, you can take dividends from the company regularly based on your experience to generate a higher income.

In this phase, you typically navigate emergency situations and unpredictable obstacles. These businesses can defend their positions in the market and expand into various territories. You typically want your team to feel valued to maintain retention and prevent burnout. You can do this by implementing career advancement opportunities and focusing on the company culture.

Renewal and decline

The renewal and decline period for businesses refers to the decline of revenue that some companies experience after three consecutive quarters. This often happens when owners and investors reduce the revenue they provide to the company and when they limit their investments. Following this state of decline, businesses often restart their state of renewal. This may require an investment in new technology, people, and marketing strategies.

You can improve the business by identifying the renewal and decline phase and determining how to either avoid it or how to make changes that promote renewal. For example, some decide to withdraw their investment, merge with other companies, or recruit investors.

Differences between business growth and life cycle

Business growth refers to the evolution of a business and the process of small and medium businesses growing over an extended period of time. Professionals consider their businesses' legacies and aim to continuously improve them. This differs from business life cycles, which consider every phase of a business's growth.

What to focus on in life cycle phases

Here's a list of ways to optimize each phase by focusing on specific issues or areas of interest:

Startup

In this phase, it's advisable to focus on contacting your investors or discovering potential investors. Consider how you can discover new investors and how you can relay valuable information about the company to those investors. This requires significant market research. You also focus on your business plan to obtain financial help from investors. This plan typically establishes information about your strengths, weaknesses, opportunities, and all potential and perceived threats. Consider asking other professionals for advice at this stage of the life cycle. This provides you with insight into other successful businesses and business owners who previously experienced success.

You may also want to consider the market you specialize in and how you contribute to it. Consider whether similar companies already exist in your market. You may also consider the structure of the business and whether you have the resources required to conquer obstacles. The goal of this phase is to create an operational business. The challenge is to proceed from the startup stage to the growth phase.

Related: Research Skills: Definition and Examples

Growth

In this stage of the cycle, the company solidifies its presence in the market. This requires you to focus on your inner processes and operations. You may want to contemplate whether your current team meets the needs of your intended customers, clients, or audience. In this phase, members of upper management focus primarily on the company's operations. If your workload consists of responsibilities that you can otherwise delegate, you can hire new employees to complete those tasks. This helps your team grow by increasing the number of employees and reducing the size of each team member's workload.

You may also use this time to improve your relationships with your consumers. Think about how you can create customer-focused products and implement initiatives that consider those consumers. This phase still requires significant investment and communication with investors to grow and evolve the company. The goal of this phase is to maximize profits, along with creating strong organizational structures. The challenge of this phase is to address the demands of the business and to manage your revenue.

Related: Defining Roles and Responsibilities

Maturity

In this phase, you focus on expanding the business and meeting career and business goals. Consider whether there are any opportunities for expansion within that market. If not, you can also establish whether you want to expand into an additional market. You may also want to analyze whether you can afford obstacles and failures within this phase. This is important because the maturity phase already includes significant financial milestones, and investors and stakeholders have already spent large amounts of money to start and build the business. You may conduct both internal and external company position analyses at this stage.

All levels of management communicate concerns about obstacles and operations to ensure the company has the resources required to overcome obstacles. Consider when you want to exit the company and the conditions surrounding potential exits. For example, some individuals choose to exit their company following either the full or partial sale of the business. The goal of this phase is to determine your business goals, along with your involvement with the company. The challenges of this phase involve analyzing the strengths and weaknesses of companies.

Renewal and decline

Consider assembling a team of experts to evaluate the current state of the business and strategize for the future during this phase. This team typically includes accountants, lawyers, and other specialists. Consider professionals who have experience in your field or industry, along with those who already established innovation and research relevant to the company. In this phase, you also focus on your marketing and sales teams to determine the best ways to generate revenue and sales. These professionals help you make changes to the business and determine whether you have the capacity to implement those changes.

They also help you modify your business model, develop projections, and reduce the cost of expenses. The goal of this phase is to readjust your business by either innovating or reinvesting in the company. The challenges involved in this phase involve identifying the position of the business. You may also make the decision to invest, expand, or sell your role in the company. If you stay with the company, your goal is to continually renew and adjust the business to meet market and customer needs.

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