Every business goes through cycles, whether the owner cares to admit it or not. Business owners must first understand these cycles exist and realize when their company is entering a new one. The challenge is knowing how to manage the changes required to survive and thrive.
It begins with the start-up phase, where plans are made, products are defined, and strategies are formulated and implemented. This can be a difficult period for the business owner because hopes and dreams are attached to the success of their venture. Failure is a real possibility, but motivation is fueled by emotions rather than clear-headed thinking. From an outside point-of-view, an entrepreneur or potential business owner should stop and think about what they’re doing before getting in too deep.
Have someone look at the financial projections objectively, or consider hiring a firm such as Brand Irons to conduct a feasibility study to clarify the route to profitability. Base your business decisions on cold, hard facts instead of wishful thinking. Emotions can be brought back in with your marketing strategies.
Once the tough stage is behind, the next business phase is either a growth spurt, the transition to a different attack plan when there’s no growth, or closure. Growth is often the easiest phase for owners to manage. It requires adding production capacity, employees, sales people, and other elements that are indications the business is doing well.
The caution in growth stages is to continuously keep on eye on the numbers. Growing your business means adding more revenue, and it also means adding problems tied to that growth. Outside advice can prove valuable in matching projections to actual results and avoiding sugar-coating what may appear to be a rosy picture. Stay real.
As the company grows, business expands to fulfill the demands of the marketplace. There are many lessons where companies tried to expand too quickly and lacked the marketing or infrastructure or management to handle the expansion. Krispy Kreme doughnuts tried an expansion program and had to re-trench, as did Sonic with drive-in restaurants in northern climates. Controlled expansion is far more manageable, despite how strong a management team you may believe is in place to handle it.
One of the most difficult phases in the life cycle of a business for the owner to grasp is when the business has entered a maturity stage. Maturity can be caused by product or service obsolescence, changing market conditions, an inability to adapt to changes, the aging of owners and management, as well as time itself.
When it becomes obvious that a business has reached maturity, the critical decision is determining what to do about it. The major factor to look at is whether the products and/or services are still relevant to the consumer. Changes are needed when you can determine that what you’re doing is no longer relevant.
The logical choice for handling maturity is the next phase in the diagram, which is transition. Transition might involve selling the business, turning it over to a different management team, or implementing changes to adapt to the market’s demand. Keep in mind that maturity is a good phase for a business and may last for quite some time. Successful businesses start out with an end result in mind, making the transition a planned event. Mature businesses should also be considering transition options.
At every stage in the life cycle of your business, you can benefit from the advice of professional business consultants, such as your accountant, attorney, insurance agent, financial planner, and yes, a business and marketing advisor. Their role is to help you make more money and reduce your risks.