Your business would go through various stages of development, facing different challenges throughout its life cycle. What you focus on today may not be of importance tomorrow as your challenges will change from time to time and require different approaches to be successful. You need to anticipate the upcoming challenges and source finances effectively to be able to succeed at each stage of the business life cycle. So, how do you tackle these challenges to ensure you are on the right track of your business?
Challenge: Most seed-stage companies will have to overcome the challenge of market acceptance and pursue one niche opportunity. Do not spread money and time resources too thin.
Focus: At this stage of the business, the focus is on matching the business opportunity with your skills, experience, and passion. Other focal points include deciding on a business ownership structure, finding professional advisors, and business planning.
Challenge: If your business is in the startup life cycle stage, it is likely you may overestimate money needs and time to market. The main challenge is not to burn through the little cash you have. You need to learn what profitable needs your clients have and do a reality check to see if your business is on the right track.
Focus: Startups require establishing a customer base and market presence along with tracking and conserving cash flow.
Challenge: The biggest challenge growing companies face is dealing with the constant range of issues bidding for more time and money. Effective management is required, as well as a possible new business plan. Learn how to train and delegate to conquer this stage of development.
Focus: Businesses in the growth life cycle are focused on running the business in a more formal fashion to deal with increased sales and customers. Better accounting and management systems will have to be set up. New employees will have to be hired to deal with the influx of business.
Challenge: It is far too easy to rest on your laurels during this life stage; the marketplace is relentless and competitive. Stay focused on the bigger picture. Issues like the economy, competitors, or changing customer tastes are able to put an end all you have worked for in a blink of an eye.
Focus: An established life cycle company will be focused on improvement and productivity. To compete in an established market, you will require better business practices along with automation and outsourcing to improve productivity.
Challenge: Moving into new markets requires planning and research. Your focus should be on businesses that complement your existing experience and capabilities. Moving into unrelated areas can be disastrous.
Focus: Add new products or services to existing markets or expand the existing business into new markets and customer types.
Challenge: Businesses in the decline stage of the life cycle will be challenged by dropping sales, profits, and negative cash flows. The biggest issue will be determining how long the business can support negative cash flows. Consider if it may be time to move on to the final life cycle stage — exit.
Focus: Search for new opportunities and business ventures. Cutting costs and finding ways to sustain cash flow is vital for the declining stage.
Challenge: Selling a business requires a realistic valuation. It may have been years of hard work to build the company, but think about the real value in the current marketplace. If you decide to close your business, the challenge is to deal with the financial and psychological aspects of a business loss.
Focus: Get a proper valuation of your company. Look at your business operations, management, and competitive barriers to make the company worth more to the buyer. Set up legal buy-sell agreements along with a business transition plan.
Challenge: The life after a company is being listed on the stock market, you’re no longer a SME, and you have a bunch of stakeholders under your responsibility. The challenges you face include culture, communication, management systems, etc., that spread wide across various countries or regions. With the dramatic changes of global trade, regulation and financial environment, as well as increased experience and enhanced capabilities of listed companies, the outbound mergers and acquisitions (M&A) practices evolve and the challenges are shifted.
Focus: Target search and screening of small and medium-sized, mature or fast-growing companies that are preferred as your strategic partner of M&A. Corporate governance is undoubtedly the focus of after company being listed or integrated with the parent company of a listed stock market.
In essence, each stage of the business life cycle may not occur in chronological order. Some businesses will be “built to flip,” quickly going from startup to exit. Others will choose to avoid expansion and stay in the established stage, just like David who has never liked Level 8 – he is the new rich that enjoys his success at Level 6.
Whether your business is a glowing success or a dismal failure depends on your ability to adapt to its changing life cycles. What you focus on and overcome today will change in the future. Thus, understanding where your business fits in the life cycle will help you foresee upcoming challenges and help you in making the best business decisions.