Startup, growth, maturity and post-maturity.
Every business goes through these lifecycle phases.
Being able to identify and understand the phase a business is in makes a difference to the strategic planning and operations of the business.
Identify the characteristics and challenges of each stage.
ABOUT THE LIFECYCLE VIDEO
This video is quite detailed (10 mins). Watch it in one hit or in segments. It provides an overview of the different stages of the business lifecycle and provides some examples.
There is also a snapshot of each stage below.
Startup refers to the beginning stages of a business. From seed stage, where the idea is first formed. Through to establishment of the plan and business itself.
A business is considered a startup until they have an established customer base and steady revenue. While the business is still in development and relies on capital (initial) investment to survive, it is still a startup.
If it can’t stand on its own two feet…it is still in startup.
Many Web3 companies that specialise in crypto, NFTs, and blockchain technology will remain in the startup stage until Web3 becomes mainstream because there is not a large established customer base yet.
In startup, a business is developing what they are offering. This could mean they are developing their product to get ready for market, creating initial infrastructure or looking for investors. This is considered the riskiest stage of the lifecycle and a business can be in startup for years before they establish a customer base and revenue stream.
No established customer base
Very little (if any) revenue
Refining and developing systems
During this stage of the business life cycle, challenges include funding, money management, and market presence. Money is needed to launch a business, attract new customers, and generate revenue. Capital often determines which strategies a business can execute in the startup stage of a business.
- Establishing a customer base
- Breaking into a market (market acceptance)
- Funding the business with no revenue
Growth indicates a business is moving into either an established state or an expansion state.
Businesses in this stage often see rapid growth; the business is either growing into new markets or is establishing its presence in the industry.
Established state: a state in which the business is consistently generating revenue and adding new customers and should be generating a consistent source of income.
‘Zoom’ during the pandemic experienced amazing and rapid growth with an existing product.
Expansion state: a state in which the business adopts strategies to move into new markets and distribution channels, either geographically, demographically or expanding with a new product or service.
‘Taco Bell’ has only recently expanded into Australia.
Growth indicates a business has been thriving and has established its presence in its industry. A business expanding into new markets and distribution channels or potentially increasing its product or service range typically experiences growth.
Growing businesses are adding new customers and consistently generating revenue. This revenue helps pay the operating expenses and opens new opportunities for the business. They may be operating at a net loss or could be maintaining a healthy profit. The competition starts to surface at this point.
- Increasing profitability
- Expanding operations
A business in growth tends to have market acceptance but it needs to capitalise on its momentum and gain a larger market share. During this growth phase, businesses face several challenges, including how to handle revenue, develop customer relationships, and scale operations efficiently, especially if they experience rapid growth.
Expanding operations to accommodate for increased pressure without overextending themselves
Maintain quality customer experience
Develop and maintain a sustainable corporate culture
A mature business is often a successful business although this can shift quickly. The business may have been in the industry for a while and have a solid customer base and fixed revenue, but if they don’t keep an eye on consumer trends, emerging technologies, and its competitors it could quickly find itself in trouble.
A business in the maturity phase needs to evolve and adapt to its environment in order to remain relevant.
In most industries, the first company you think of is in maturity.
Streaming: Netflix, Stan, Disney
Phones: Apple, Samsung
Food markets: Woolworths, Coles, IGA
Mature businesses have a dominating presence in their market. It could still be growing but not at the substantial rate they may have previously experienced.
When the business matures, sales begin to decrease slowly. Profit margins get thinner, while cash flow stays relatively stagnant.
- Revenue slows but is stable
- Established customer base
Challenges during the maturity stage include increasing competition, uncertainty about adding new products or services, and questions about how to develop an appropriate exit strategy for the business.
Competitiveness must be maintained
Culture can shift as employees become too comfortable
Revenue tends to plateau
A business can slip into steady-state and not realise it. Characteristics are almost identical to maturity, but environmental factors have shifted and this means danger for the business.
Perhaps a new tech has come on the market, or a new competitor is about to dominate with an innovative strategy or a pandemic is sweeping the nation. Whatever the reason, if the business doesn’t do something – they are in trouble!
Developing new products or more competitive ways of providing customer benefits can spring a business into renewal. This type of change is rare and usually needs new change agents with new, innovative concepts and ideas.
Profits begin to fall as a result of poor management, often a direct result of a drop in sales or excessive expenses. This could result in a business moving into administration, receivership, or closure.
The business will fail unless something is done.
Typically, the business has failed to respond to increased competition and is losing market share. This phase is characterised by falling sales and loss of market share. The business soon becomes unprofitable and there are cash flow problems.
A business may take a strategic decision to reignite growth through renewal, or plan a possible exit strategy such as the closure or sale of the business, or the business may enter a state of decline.
- Revenue is on the decline
- Downsizing human resources and/or operations
The business must find a way to stay alive or find the most appropriate way to close. The major challenge for the managers of a declining business is an ethical one. The challenge is to ensure that the business is closed down in a manner that considers the needs of all the stakeholders.
Maintaining morale with employees
Preventing further loss