Tag Archives: growth cycles

Business Challenge: Managing Life Cycles

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.Business Life Cycle Diagram

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.

Brand Your Work – Work Your Brand  

Where Is Your Business?

Where is your business?

Two reasons we bring this up:  1) It’s important for your customers and prospects to be able to find your business; and, 2) It’s important for you to know where your business is in the cycle of life for a business such as yours.  Make that three reasons:  3) It’s critical that you know how your business is doing from the consumer’s perspective, which ties in closely with customer service.  Are you doing the right things to take care of customers and bring them back frequently?

#1 refers to your location, whether it’s the physical plant or your place in cyberspace.  You need to make it easy for people to find you, either through optimizing your search engine position and social media or providing clarity as to your physical location.  If your business is at the corner of a major intersection in town, just off the highway, or conveniently located next to a city park, use your advertising to tell people that’s where you are.

The focus of this blog, though, is on #2 – where your business is in its life cycle.

A typical graphic of a business life cycle.

A typical graphic of a business life cycle.

At left is one of hundreds of diagrams that try to explain the cycles a business typically goes through during its existence.

This example may seem foreign if you’re unfamiliar with Smith-Corona, which was one of the top brand names for typewriters in the days before computers.  When you think about a company that had a dominant role in the typewriter business and look at the life cycle diagram in that context, it is rather obvious why Smith-Corona disappeared from sight.  The company had grown and expanded to a position of maturity in the typewriter marketplace, but failed to make the transition when the new technology of computers entered the picture.  Transitions can be brutal, especially when most people and a majority of companies tend to resist change.

Take the time to think about your business.  This is always a good exercise.  It forces you to work on your business by thinking about where you are instead of remaining immersed in the day-to-day ennui that can stifle the growth or expansion cycle.  Do you consider your business to be on an upswing, or have things stabilized and stayed fairly steady?  Do you enjoy a high percentage of repeat business from the same customers or do you have a steady influx of new customers?  Are you unsure where you are because you’ve only been in business a year or two?

Have you grown as much as you can and now sales and production seem to have stagnated?  The question you may ask if you’ve reached this cycle is “Now what do we do?”  This is an excellent position for bringing in an outside consultant to examine and explore options.  They might help you discover that a simple change in your existing product line or offering a similar but slightly different service can re-energize sales and bump up production for an additional boost.  They might also find that what you’ve been doing for x number of years is out of style and an entirely new direction is needed.

Take those recommendations, whatever they might be, with a modicum of caution.  Weigh the costs of re-tooling and re-branding your business to make sure the change makes sense.  Change for the sake of change is rarely worth it, since change is constant anyway.

Here’s a big question:  What are your plans for getting out of the business?  Do you have an exit strategy in place?  Are you like a great many dreamers who insist that their business is their retirement plan and when they’re ready to retire, they’ll sell the business and live off the profits?  Think about that for a minute … or longer and do something about it before it’s too late.

We counselled a client with that mindset and talked frankly about the potential for that strategy to do what they anticipated it would to let them retire.  A buyer would have little interest in their facility unless the new owner was looking to first enter the marketplace and had yet to establish a base of operations.  If the buyer did have a facility, the interest level would be less.  The same would hold true for the equipment, machines, and tools which become antiquated the longer they have been in use.  Even employees, unless they’re willing to move, may be written out of a purchase agreement.

What the potential buyer has the most interest in is the customer base!

Lots to think about as you continue through the process of evaluating your company’s position in its life cycle.  When you need an independent party to help you through the process, contact Brand Irons at 920.366.6334.