What Are The 4 Stages of Business Growth and Where Is Your Business Now?

As your business grows from a simple idea to a fully functioning organization, it will develop into different stages or phases commonly known as the “business life cycle stages”. It is important to understand these growth stages in order to understand what type of changes may occur in your business at each stage and what that will entail for you as a business owner or manager.

It is important to study each of these growth stages to understand exactly what you should be doing to maintain growth and continue reaching your business goals. By knowing which stage of growth your business is in, you can plan for the future and devise strategies and creative approaches to address existing and anticipated challenges. Take your pet as an example. If you know your golden retriever is set to grow to weigh around 30 kilograms, you may be more apprehensive about getting a golden retriever while you are living in a small apartment. You may opt to adopt a little chihuahua or even a medium-sized spaniel. This apprehension and understanding of the dog’s growth cycles will help you better plan your decision for which dog you would want to adopt based on your living situation.

So, what are the four stages of the business cycle and what should you do at each stage? Let’s discuss the business lifecycle stages in order — startup, growth, maturity, and renewal or decline — in detail.

Business Life Cycle Stages: The Startup Phase

Most people are familiar with the term “startup” – which usually indicates the early stages of business-building. This is the time when you are still a fledgling company and struggling to overcome various obstacles. A company like AirBnB can still be considered in its startup phase as they are still working on creating stable growth and becoming an established business.

The startup stage is considered the riskiest in the business lifecycle, with about 80% of companies surviving beyond the first year, before dropping to 70% in the second year. At the very beginning, it might be all about survival. You could be working on securing funding and testing the product or service with your target audience, and perhaps tweaking it to better fit their needs.

During the startup phase, you’ll be focused on building the foundations for your business and actually bringing it to life. You could be flying solo or with a partner or two, dividing up your time between being employed and working on getting your business up on its feet.

At this stage in the company growth lifecycle, you may feel a little lost. There may be poor resource allocation and planning, but you’ll start to get the hang of it after a few mistakes. You may also be micromanaging every aspect of your business because you just want to get it done right, but soon you will learn to understand that sometimes, the experts really do know what they are talking about, and it is better to leave it to them.

You could be doing the marketing, sales, and accounting yourself because you feel like “Hey, I could probably do it”. But then, you can’t keep doing everything yourself indefinitely if you want your business to grow. If you don’t take the time to study how your business is doing and make the required changes, you could see your startup folding within the first or second year.

To avoid such a scenario, it’s crucial to achieve a level of efficiency and put a system in place to facilitate consistent operational success and growth. Doing this usually entails:

• Developing a lean business model.
• Focusing on customer acquisition and satisfaction.
• Hiring the right talent.
• Delegating tasks.
• Encouraging creativity and initiative.
• Cultivating a progressive culture.

As you reach certain milestones, you also need to prepare for calculated risks. For example, would you need to hire more people for sales now that you’re gaining some market traction? Should you get a commercial space and stop working from your virtual, serviced, or shared workspace?

Look back and see where you started and where you are now. What did you do right? Where did you stumble? Use your knowledge to prepare for and tap into new growth opportunities.

Business Life Cycle Stages: The Growth Stage

Now that people are aware of your business needs and you’ve been gaining customers and growing profits steadily, you’re experiencing a period of steady, rapid growth.  An example of a business in its growth stage is Amazon which grew at an unprecedented rate in the last few years, especially after COVID.

This, of course, is an exciting time for you as you see all the hard work, money, and time you put into finally paying off. You have an office, a growing customer base, and investors coming in.

While you enjoy these years of success, managing your business for growth is essential. You need to keep yourself focused on your business objectives; otherwise, you could get swayed and end up somewhere you did not exactly plan for. There is a risk at this stage of losing company culture and values due to the rapid growth as well.

To stay on track, try to:

• Focus on efficient streamlined operations to facilitate more growth.
• Review and set your business goals to achieve purposeful growth and make efficient use of your resources.
• Maintain and grow your capital to ensure you meet your business’s financial obligations.
• Create data-driven, realistic forecasts to help you meet your business objectives.
• Hire the right talent to help you manage your business and provide stellar customer service.
• Cultivate and maintain business relations with vendors and suppliers.

At this stage, it would be ideal to get some extra help to manage your business growth and create realistic goals and projections for the future. You can choose to work with experienced business consultants in the UAE (or wherever you are based) to help you make the best management decisions.

Business Life Cycle Stages: The Maturity Stage

When your business matures, you achieve a certain level of security. You’ve overcome the risks and challenges in the startup stage and fulfilled and perhaps even exceeded your business goals during the growth stage. Now, you already have a well-established brand, a substantial customer base, and a strong market presence. A great example of a mature brand is Coca Cola.

You’ve successfully expanded both geographically and in terms of the products and services your business provides. Your company enjoys a steady and strong cash flow, and you have the means to take on risks and address issues as they come.

With this level of success, what could go wrong? Among the biggest risks for companies in the maturity stage is stagnation. As the owner of a mature business, you cannot afford to rest on your laurels and just sit back as the market changes and new entrants start to make your business seem irrelevant. You need to keep going and growing.

You can avoid stagnation by expanding your offerings and tapping into new markets. You also need to stay on the pulse of your market and be prepared to meet new customer demand. At this stage, some companies begin to seriously consider the idea of selling, merging, or buying other companies to grow some more. It is highly recommended at this stage to seek the help of expert consultants when it comes to expansion, specifically mergers and acquisitions. Their specialized knowledge and advice can help you make the right decisions for your business.

Business Life Cycle Stages: Renewal or Decline Stage

What happens at this stage depends primarily on what you decide to do when your business matures. If you want to avoid a period of decline, you should:

• Look for opportunities to expand.
• Be aware of changes in the industry that impact customer demand.
• Conduct competitor research to see what other avenues you can tap into.
• Stay abreast with technological changes or advances for your business to adapt.

During this stage, it may be difficult to tell with certainty if your business is on the decline, although a reduction in revenue is a clear-cut sign. Therefore, make sure you regularly check the health of your finances through internal and external audits.

This is also the best time to assess your business with the help of consultants who can tell you whether a business process reengineering is in order.

You may also decide to either sell shares or reinvest in your company. Either way, you need to work toward avoiding a decline and ensuring you have a strategy in place to continue growing, identifying new market opportunities, and meeting customer needs. An example of a business that did not make it out of the maturity stage is Kodak, as they missed the mark when it came to digitization.

Stay Ahead of all Stages of Growth: Keep Going and Growing

Whatever stage of business growth your company is in, knowing this with certainty can enrich strategic planning and ensure your success in the long term.

Remember, whether you’re a new entrant or an established company, it’s crucial to avoid complacency as this can lead to stagnation.

Focus on achieving your goals and always be on the lookout for growth opportunities. Need help strategizing? Contact us today.