Business Managment – 5 Stages of the Small Business Life Cycle

business owner, business growthEvery organization goes through a natural life-cycle including small businesses. Yesterday I led a Strategic Retreat for business owners where we talked through this topic. These retreats take place every 90 days. It's a full day away from your business to work "on" the business instead of "in" the business. Every quarter we assess where our businesses are and where we are as strategic business owners. We set goals and we hold each other accountable to our goals and vision. We create a written plan of action for the next 90 days, and then we come back in 90 days and do it again. Each quarter we also work on some strategic system in our business. Yesterday this group had great accomplishments to share and they engaged our process with passion. Everyone assessed where their business was in the small business life cycle. Good business management is essential as small businesses move through the cycle. Here are the 5 stages that small businesses go through.

1. Infancy

The key in this initial stage is to produce sales. Sales is essential for cash flow. Typically the sales effort in "Infancy" is much weaker than it should be. The goal in "Infancy" is to create a sales organization - stabilize the product, create a sales process, then diligently stick to it. Typically everything (especially sales) revolves around the owner. The biggest problem in "Infancy" is cash flow. Businesses die in "Infancy" due to a lack of cash flow. That's why sales is the most important priority.

2. Childhood

This is when the idea is working and cash is flowing. The danger here is too many distractions. Everything looks like an opportunity, especially with marketing activity and expenditures. It's easy to drift away from your core competencies and waste a lot of time and money. However, cash flow is good but it all depends on the owner. There are no real policies, procedures, or systems. The owner is the system and he/she is working themselves to death. Businesses die in childhood due to a lack of focus and a lack of systems. Typically the owner just burns out. A shift is needed from doer-ship to leadership, from management by intuition (i.e. management by the seat of the pants) to professional, systematized management. When the founder decides to reorganize and to systematize, the company moves into the next stage.

3. Adolescence

This is where the company goes through the process of being re-born. The company begins to find life apart from the founder/owner. Systems are defines and implemented. The danger in this stage is for entrepreneurial leadership within the company to feel inhibited and start to leave. This happens when the systems are too burdensome (e.g. too much paperwork, too much reporting, etc.) However, it is critical for the business to find the right balance between structure and creativity. Once achieved, the business becomes sellable. But there are 3 challenges that make this transition difficult:
  • Delegation of Authority - the owner must create and submit to systems; this enables others to assume more responsibility.
  • Change of Leadership - the owner brings someone in (or up) to be a manager; the emphasis must switch to systems, policies, and administration; however, long-time employees may resist this! The founder/owner must not violate the policies and procedures so as to not undermine the new manager.
  • Change Management - the emphasis is now on internal improvement and quality in every area; however, people do not generally like change, they do not like anyone "messing" with how they do things! As you might imagine, these 3 challenges lead to conflict.
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4. Prime

This is that season when the business is systematized and turnkey. It can run predictably and consistently without the owner. The problems here are usually around management training and the ongoing potential to lose entrepreneurial leaders within the organization. Some of the characteristics of this stage are:
  • Vision and values are embraced - they "walk the talk"
  • Goal alignment - everyone is focused on satisfying the customer and building the brand
  • Conscious focus and priorities - there is clarity and focus; everyone knows what to do and what not to do
  • Functional systems and organizational structures
  • Predictable excellence
  • Growth in both sales and profits

5. Reinvention

This is where a company reinvents itself in some way. Maybe there is a new product line, a new market niche, or an entirely new core focus. Organizations will not stay in their prime forever. They must renew and reinvent themselves for the future before complacency or decline sets in. What stage of the life-cycle is your business or organization in today? We help businesses in every stage of life. Our mission is to empower business leaders to achieve exceptional performance in their businesses and live balanced, meaningful lives. If you need some help determining where your business is and what the next steps should be for you, contact us for a FREE 30-minute consultation. We're here to help you.  

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