The Business Life Cycle, What Stage Are You In?
The business life cycle is the progression of a business in phases over time. I have divided the cycle into six phases: Nightmare, Survival, Growth, Scale & Systemize, Value Enhancement & Tragedy. The cycle is shown on a graph with the horizontal axis as time and the vertical axis as dollars. In this article, we will assume three financial metrics to describe the business life cycle phase: sales, profits, and cash flow.
The Nightmare Phase – The reality of starting your business and subsequent frustration of what you have done sets in. You fear people don’t want what you are offering. Cash is very tight; you are not sure how to adapt to your new reality and you may experience depression.
The Survival Phase – A few things start to work. You still struggle with what direction to go and what to offer. Results are starting to trend up, there is a glimmer of hope.
The Growth Phase – You experience rapid sales growth. As sales increase, the business starts seeing a profit. However, profits still lag sales. Finally, cash flow during the growth phase becomes positive, possibly generating excess cash flow for the first time.
The Scale & Systemize Phase – Sales and profits continue to increase, and for the first-time cash flow exceeds profit. You are building Systems, Processes & a stronger team that allows you to delegate responsibility (build a succession plan), scale faster, and start to feel in control of your future and destiny.
The Value Enhancement Phase – Positioning the Company for maximum increase in value, personal wealth, and personal wellness. Successful businesses extend this cycle by reinventing themselves and investing in new technologies and emerging markets. This allows companies to reposition themselves to continue their growth.
The Tragedy Phase – Unfortunately, many business owners hang on too long and stop reinventing themselves and their Companies. The owner often finds they lack a plan, have lost their passion for the business, exhibit low energy, and just want out. This usually results in declining sales, profits, and cash flows.
An honest assessment of where you are in the Business Life Cycle and seeking help (if needed) to change your path allows you to course correct. You can take control of your destiny and have it all: wealth, health, and happiness. To hear the story of how Jim changed his outcome and has moved from the Tragedy Phase back to the Value Enhancement Phase, listen to the Voices from the Bench Podcast below. (The interview begins 5 minutes into the podcast).
Please give me a call at 314.610.1553 if you would like to learn more about where you are in the business life cycle and how I can help.