The life cycle of a business, much like that of a human being, goes through many stages. Just as a person is born, grows to maturity and dies, business entities pass through the same stages. Although business experts disagree on the number of distinct stages in a business life cycle, they typically agree on what occurs during each critical stage.
The start-up phase represents the birth of the business. The entrepreneurs, much like expectant parents, devote massive amounts of time, money and emotional investment in launching their new venture. At this early stage, the owners use much of their energy to establish a sizable customer base, purchase inventory, open bank accounts and hire employees. As with parenting, the start-up phase brings many sleepless nights from a combination of worries about the future and expectations for developmental milestones.
After the start-up stage, a successful business often achieves a level of expanded capabilities. The company establishes a reputation, encounters increased demand and stabilizes its business practices. This growth phase has its share of both issues and opportunities. The company may require an infusion of capital, either through taking on debt or selling off equity, to meet increased demand. The company also usually encounters higher sales totals and better profit margins as it builds its visibility in the market.
Just as a young person reaches adulthood, a prosperous business also reaches a more mature stage during its life cycle. The increased capabilities encountered during the growth phase lead to the company achieving a stable presence in its industry. At this stage, the owners no longer need to pour their energy into every aspect of the company. They can choose either to stay with the business or allow new management to take over its operations.
Every year, thousands of businesses close their doors for the last time. The death of these businesses can be attributed to many factors, including poor management, government regulation or changes in the industry. During this stage, businesses often see declining sales, decreased profits or steep losses. The company may fall out of favor with its customers, carry high debts or encounter cash flow issues. Any of these issues can lead to the company’s eventual decline and closure.
Living in Houston, Gerald Hanks has been a writer since 2008. He has contributed to several special-interest national publications. Before starting his writing career, Gerald was a web programmer and database developer for 12 years. He also started Story Into Screenplay, a screenwriting blog at www.StoryIntoScreenplay.com.