- Challenge: Moving into new markets requires the planning and research of a seed or start-up stage business. Focus should be on businesses that complement your existing experience and capabilities. Moving into unrelated businesses can be disastrous.
- Focus: Add new products or services to existing markets or expand existing business into new markets and customer types.
- Money Sources: Joint ventures, banks, licensing, new investors and partners.
- Challenge: Businesses in the decline stage of the life cycle will be challenged with dropping sales, profits, and negative cash flow. The biggest issue is how long the business can support a negative cash flow. Ask is it time to move on to the final life cycle stage...exit.
- Focus: Search for new opportunities and business ventures. Cutting costs and finding ways to sustain cash flow are vital for the declining stage.
- Money Sources: Suppliers, customers, owners.
7. Exit Stage:This is the big opportunity for your business to cash out on all the effort and years of hard work. Or it can mean shutting down the business.
- Challenge: Selling a business requires your realistic valuation. It may have been years of hard work to build the company, but what is its real value in the current market place. If you decide to close your business, the challenge is to deal with the financial and psychological aspects of a business loss.
- Focus: Get a proper valuation on your company. Look at your business operations, management and competitive barriers to make the company worth more to the buyer. Set-up legal buy-sell agreements along with a business transition plan.
- Money Sources: Find a business valuation partner. Consult with your accountant and financial advisors for the best tax strategy to sell or close-out down business.
5. Expansion Stage: This life cycle is characterized by a new period of growth into new markets and distribution channels. This stage is often the choice of the small business owner to gain a larger market share and find new revenue and profit channels.
6. Decline Stage: Changes in the economy, society, or market conditions can decrease sales and profits. This may quickly end many small companies.
Each stage of the business life cycle may not occur in chronological order. Some businesses will be "built to flip"; quickly going from start-up to exit. Others will choose to avoid expansion and stay in the established stage.
Whether your business is a glowing success or a dismal failure depends on your ability to adapt to it's changing life cycles. What you focus on and overcome today will change in the future. Understanding where your business fits on life cycle will help you foresee upcoming challenges and make the best business decisions.