April 11, 2020 Last updated April 20th, 2020 459 Reads share

The Business Lifecycle and How to Win at Each Phase

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Although every startup has its own path to follow, most businesses ultimately go through the same phases as they grow and evolve. This is called the startup lifecycle. 

It takes some businesses longer time to progress through each phase than others. Some might hit a snag or even collapse and others may change focus along the way. 

But every successful business will eventually pass through these stages, encountering many of the issues highlighted below on their path to lasting success. 

The normal failure rate for startups is about 85-90%. The key to running a successful startup is to know your strengths and weaknesses and to conquer all the challenges you face on your journey. Preparation is essential to this, and the magic bullet is to get the right support from the right people at the right time.

Here’s a rundown of the five main startup phases, and what you can do to successfully graduate from each of them: 

Seed Stage

The seed stage of your company lifecycle is when your company is just a thought or an idea. Most seed-stage businesses would have to overcome the challenge of acceptance by the target market and find a niche opportunity. It’s very vital to be frugal at this stage and not to spread yourself and finances too thin. 

At this stage of the business, keep your focus and emphasis on matching business opportunities with your expertise, experience and passions. Other focal points include agreeing on a company ownership structure, hiring qualified hands, and business planning.

Early in the business life cycle, with no established market or buyers, the company can rely on cash from founders, friends and relatives. Other possible funding sources include suppliers, customers and government grants.

Startup Period

At this phase, the startup is typically in its first year. Now, you’re beginning to market your business and highlight your value proposition, hoping to win over your first customers. It is at this point too that you discover whether your business is genuinely viable or not.

It is important you concentrate on increasing your customer base and market position, along with monitoring and maintaining cash flow. 

Focus on how you can improve customer service and experience. Work on improving the elements of your offering that are most valuable to consumers. 

Your early interactions with customers will have a big impact on your goal of establishing brand trust and reputation for your new company.

Development Stage

The next stage of a startup is scaling or growing — the further development of your client base, your services, and your business itself. 

At this point, which can start from year 2 to 3 and last for years, you’re putting processes in place to improve your brand value and recall. 

Make sure to request and act on feedback from early customers and use the feedback to refine your product or service to provide improved solution to the market. 

At the development lifecycle, your attention needs to be centred on operating the company in a more organised way to cope with increasing income and customers. 

You’ll need to hire skilled accountants and know some accounting basics yourself. You’ll also need to recruit competent and experienced talents in other areas of the business to deal with rising service or product demand. 

Continue optimising your marketing campaigns to effectively pull in clients and increase your conversion rates. Train and properly equip your employees and develop the workspace and other facilities to support your growing workload.

Bear in mind, though, that you’re going to need to remain agile as you grow, as the process can sometimes spring surprises at different turns. This phase of the business requires a good knowledge of your process.

Established Stage

You’ve arrived on the big stage now and your company can no longer be classified as a startup, but an established business. 

At this point (probably year 3 or more after setting up), you can see substantial growth, but not at the drastic pace you’ve seen since scaling up. Focus on growing customer satisfaction, retention and loyalty, evaluating and improving your marketing strategy, and enhancing your strengths further.

The challenge you may face at this point is that it can be pretty easy to rest on your oars during this lifetime. But you need to fix your eyes on the bigger picture. 

Remember that issues like the economy, competition, or shifting consumer preferences can quickly change the game and ruin all you’ve worked for.  

Concentrate on development and productivity. To set your brand apart in an established market, you will need better business practices in addition to automated processes and outsourcing to increase productivity. 

At this stage, your business cash flow from revenue should significantly improve and access to funds from other sources like banks, creditors and governments should be easier. 

Expansion Stage

This life-cycle stage is marked by a new phase of expansion in new markets and distribution channels. This stage is often a choice by a small business owner to scale further and gain a greater share of the market, pursuing new sales and income sources.

Expanding to new markets needs planning and analysis. Your emphasis should be on companies that complement your current expertise and capabilities. Moving to unfamiliar places can be catastrophic.

Your focus at the expansion stage will be on adding new goods or services to existing markets or extending existing businesses to new markets and customer forms. 

In addition to business revenues, other sources of finance could also be banks, joint ventures, new investors and partners, licensing firms, etc.

What You Need to Learn to Make the Most of Each Startup Stage

Wherever you’re on the startup lifecycle, keep these ideas in mind while you move towards the next one.

Be patient. Irrespective of where the startup is at the growth stage, it can be difficult to completely accept that phase without wanting to jump the gun. Resist the lure of cutting corners. Each of the stages needs to run its full course, and this sometimes can take years.

Every business is unique. Comparing your success to the progress rate and level of other startups can be productive only if you’re learning from their successes and mistakes. Comparing your business experiences with others should inspire you, not discourage or weigh you down.

Keep the customers at the forefront of everything you’re doing. The interests and needs of your customers are very important. After all, no business can exist without good patronage by its target customers. 

Finally

Understanding the traditional startup lifecycle can be very useful in helping you remain motivated and focused when things get difficult.

Remember, you’re not the first to set out on a rough startup path, and drawing on the experiences and insights of your peers and forerunners can make the whole process a lot simpler – and significantly improve your chances of success.

Isabelle Munachimso

Isabelle Munachimso

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