life cycle for business plan

Business Life Cycle: Definition, Stages, Examples

What is the Business Life Cycle?

What are the stages of the business life cycle, stage 1: startup, stage 2: growth, stage 3: maturity, stage 4: decline/renewal, example of a business life cycle.

Business owners need to be aware of the different stages in a company’s life cycle, regardless of which stage they are currently in. Knowing the key stages of the business life cycle and which one your company is now going through can help you better plan for the future. So what exactly are these stages? How can you tell which one you’re in?

Generally speaking, there are four stages in a business’s life cycle: startup, growth, maturity, and decline/renewal. However, the duration of these stages varies, and there are different indicators and factors to consider. In this article, you will learn about the various stages of the business life cycle and the most common milestones of each stage.

The business life cycle refers to the stages a business goes through over time: startup, growth, maturity, and decline/renewal. These four stages represent the financial evolution of a successful business. Each stage has a different duration and features unique milestones and indicators.

You may sometimes see the business life cycle represented by more than four stages, as some of the more complex stages are split into two. For example, the initial or startup stage is frequently divided into the development and launch stages. As you will see in the next section, the business life cycle is similar to the product life cycle but applies at the company level.

All businesses start with an idea that is nurtured and developed into a business plan and, eventually, a working business. This cycle has four main stages: startup, growth, maturity, and decline/renewal. However, the first stage is very challenging, and many businesses don’t make it past it.

This failure to reach later stages is sometimes due to unpredictable circumstances, but it is often the result of unclear or unachievable goals. To avoid surprises, business owners should know what to expect at each stage of the business life cycle. This allows you to set realistic objectives, especially for the initial stages. Below, you have descriptions of each stage and what you should expect in terms of financial indicators.

The first stage is extremely challenging. As a business owner, the startup stage is usually characterized by featuring no money and no sleep. In other words, you will be putting a lot of time and effort into getting your business off the ground, knowing that profits are still a long way away and you need to get some funding. It’s important to remind yourself that this is normal in the first stage and not a reason to throw in the towel.

To improve your chances of success, make sure you dedicate enough time to researching your idea. Your market research should cover supply and demand to help you design a viable and attractive business plan and proposal. Your objectives should be specific, measurable, and achievable. Vague and over-ambitious goals will likely lead to disappointment and are unlikely to attract investors.

Once you have secured funding, it’s time to create and launch your business. Depending on your industry and business model, this can take a while and incur many one-off expenses, including the launch. By this point, you’ve spent quite a bit of money without making any, so this part is exciting and scary in equal measure.

After the launch, your primary focus becomes making sales and growing your customer base. Depending on the industry, breaking even can take a long time, so profits are still in the future. Marketing expenses are likely to be a significant proportion of your spending.

How to Create a Business Budget (+ Top CFOs Tips)

How to create a business budget, the different budgeting approaches, and tips from top CFOs to ensure a structured and productive budgeting process.

The growth stage begins once the goals and milestones of the first stage have been accomplished. Not all companies have managed to break even by this stage, while others may already be making a profit. This very much depends on the industry you are in and the type of products and services you offer. Regardless, your main objective at this stage is to grow your sales and customer base. This doesn’t mean that growth is only an objective during this stage, but at this point, it’s your priority.

In other words, your sales and your customer base are growing. If you hadn’t already, you’ll reach the break-even point and start seeing some profits. In many cases, it is at this point that the business owner can start drawing a salary. If your product or service is doing well, it’s an excellent time to seek more funding to expand your offer or your operations. If you offer multiple products or services, it’s also a great time to evaluate their performance and decide on their profitability.

This is the most stable stage, as you have some brand recognition and an established customer base. This doesn’t mean that growth stops, but it does slow down. You’re doing well in terms of both sales and profits, and your senior employees have some tenure, so they can handle day-to-day operations. As a business owner, you have more time to focus on improving performance and planning for the future.

In fact, the future should be one of your main concerns. In large part, this planning for the future is what will determine whether the next stage is decline or renewal. If you wait until there are clear signs of decline, it may be extremely difficult to reverse it. On the other hand, you may be more interested in selling the business than renewing it, which will also require planning.

As mentioned above, a company can renew itself through different strategies. However, it’s almost always down to changing your product or service offer and can involve some rebranding and remarketing of your business. This is sometimes possible when the company is already in decline, but the more you delay, the harder it will be.

Some business owners prefer to sell the company rather than reinvest in renewal. In that case, you will need to evaluate your company’s worth and prepare the required financial statements and documentation. Finding buyers and negotiating the terms of the sale can be an extended process. If you take too long to decide whether to sell or reinvent your business, you may not get to decide at all. Sales and profits may dwindle to the point where you can’t find any buyers.

However, by knowing and understanding these stages ahead of time, your odds of success have already increased a little. If you do your research and plan carefully but flexibly, you can improve your chances by a lot more.

Discover what Cohorts and Customer Retention are, examples of each, and what good retention or cohort should look like.

You can find examples of the business life cycle stages in any industry. Of course, the evolution is easier to understand in hindsight and even more so as an objective third party. In other words, make sure you do some research to find examples of companies similar to yours since it could provide valuable insights.

When it comes to huge companies like Blockbuster Video, you have a lot of information available. In fact, you have detailed reports published by financial institutions. You can see how the company progressed through each stage. Founded in 1985, the company had a short startup period before it saw significant growth, then massive growth. At its peak, Blockbuster had over 9000 stores around the world. However, around this same time, Netflix and similar companies came into the picture, forcing Blockbuster into a decline. Despite many attempts to renew, the company could not recover and filed for bankruptcy protection in 2010.

As you have seen, there are four main stages in a business life cycle. However, since they are different in terms of duration, complexity, and milestones, some of these stages are sometimes broken down further for a total of more than five stages. For instance, the startup stage requires specific steps in terms of developing the idea, acquiring funding, and launching the business.

Regardless of how many stages you feel more comfortable working with, you will need different types of software to help you pull this off. Fortunately, you have great tools available to help you execute and manage your business. Accurately recording and analyzing your financial data is extremely important, and tools like Google Sheets or Microsoft Excel are of great help.

As your business grows, managing your data can become time-consuming and repetitive. Using a tool like Layer, you can effortlessly synchronize your data across multiple formats and locations. Additionally, you can automate repetitive tasks and schedule updates, saving valuable time. You can easily manage access to your data, assign tasks and monitor progress, and automatically share reports with your team and other interested parties.

Hady has a passion for tech, marketing, and spreadsheets. Besides his Computer Science degree, he has vast experience in developing, launching, and scaling content marketing processes at SaaS startups.

Layer is now Sheetgo

Automate your procesess on top of spreadsheets.

What to Expect and Plan for During Each Phase of Your Business

A version of this article was previously published in the December 2019 edition of  Wine Business Monthly.

Whether your business is in the start-up, growth, or maturity phase, or if it’s preparing for an exit or transition, entering a new stage is often exciting as well as challenging. Critical activities like strategic planning need to take place during each of these phases to meet future goals—and to prepare for an eventual exit. This article identifies key activities that should be focused on in each phase of your business.

Start-Up Phase

The start-up phase begins when you decide to turn your idea into a business. Start by breaking down this phase into concrete steps, such as:

• Write a formal business plan
• Secure financing
• Choose a business structure
• Pick and trademark a business name
• Secure proper licenses and permits
• Define job positions and hire staff
• Choose an accounting system
• Find a business location
• Insure against risks

There are myriad resources available to guide business owners through the start-up stage. Browse the internet; check with your local chamber of commerce and industry associations; and seek guidance from professionals, such as lawyers, accountants and experienced wine business consultants.

It’s important for founders to explore the potential impact of international, federal, state, and local taxes for each entity type: C or S corporation, LLC, and partnership. Making the right decision can help lower the tax burden of growing, running, and eventually exiting a business.

Accounting and IT Systems

Smart business leaders know making good decisions depends on having timely access to good information. Businesses that invest early in accounting and IT systems that can scale as a business grows often find the investment pays off, providing a competitive edge.

Economic Considerations

If your company is looking to grow quickly through acquisition, then it’s important to conduct due diligence on targets prior to any deals. This provides a risk assessment as well as insight into the past, present, and future financial performance and value of a potential acquisition.

Strategy, Planning, and Operations

In a startup phase, a business plan can be critical to raising funds, securing banking relationships, and establishing strategic market connections. The business plan will articulate your value proposition, market strategy, management team, operations model, and financial forecast.

Staffing and Management

To attract and keep the right people involved and motivated, it’s important to align potential financial incentives with desired behaviors, outcomes, and company goals. This can be achieved through cash, equity and/or deferred performance-based compensation programs for key employees.

Board Considerations

Some board positions might be empty when starting your company. Don’t rush the process of filling empty positions. These appointments carry a lot of weight and will affect the future of the company, which means they should be thoughtfully made.

Risk Management

There’s a great deal of risk in starting a business. Mitigate personal risk through proper entity structuring, internal controls, and personal insurance. For the business, focus on protection planning with the following items:

• Crop, fire, and flood insurance
• Property, plant, and equipment insurance
• Disaster recovery plan
• Business interruption plan
• IT data security, back-up systems, and protocols
• Key-man insurance
• Standard operating procedures

Evaluate and upgrade these risk-management measures at each stage of the business.

Other Key Considerations

Avoid surprises by taking time to understand how the funding used to start your business might impact its growth. At the same time, keep your lender and any shareholders apprised of the company’s performance—including changes in plans and opportunities. Stakeholders are more likely to be accommodating and provide additional capital if they’ve been kept informed.

Growth Phase

Expanding and innovating is a fundamental piece of the growth phase but anticipating and managing consequences of that growth should also be considered. This is the time to target and acquire new assets as existing assets continue to be developed.

Tracking changes to federal, state, and local tax laws can feel daunting because there are so many areas to juggle and because the laws can change frequently, with little notice. Understanding if, and how, tax changes impact your business enables you to reassess major components of your business, such as entity structuring, employee incentives, and investment capital.

Companies are best served at this juncture by focusing on consistently generating income and attracting new customers. It’s also a good time to evaluate the performance of any IT and accounting systems. Having clean, accurate financial and operational information provides critical insights into company performance and reinforces overall business value.

A company continually spends money during the growth stage, which makes it imperative to manage cash flow and monitor the amount of available leverage. Be sure to consider the needs of all stakeholders, including royalty owners, customers, and regulatory bodies.

Personal Finances

Your personal net worth grows with your company, which means now is the time to start estate planning. Take the time to assess your tax exposure and to whom your asset base will pass. Additionally, start finding ways to diversify your holdings, taking cash from the business in a way that’s strategic and in alignment with personal financial goals.

A strategic plan provides the opportunity to both engage your employees in the planning process and, ultimately, convey your roadmap for operational success. The planning process offers the opportunity to identify strengths, weaknesses, opportunities, and threats that need to be addressed through strategic initiatives and operational tactics.

If you’re able to offer performance-based compensation programs and benefit plans to employees, now is the time to consider how to offer and distribute them.

During the growth phase, the board is more active in business decisions involving acquisition or divestiture. It also focuses on monitoring internal controls, which means the board is more involved with the management team. Keep a watchful eye and adapt how the board and management interact to facilitate effective communication.

It’s a good time to begin solidifying a potential exit strategy or succession plan. While a plan may have been previously discussed, it’s important to revisit and adapt the plan while considering a capital infusion or company sale, both of which can have different implications.

Maturity Phase

The focus during the maturity phase is to remain competitive and sustainable by continuously improving productivity and best practices. While maintenance and growth are a priority during this phase, it’s also important to start evaluating your exit strategy and its impact.

It’s important well in advance of an exit to understand the income-tax implications of a transaction or sale. By making decisions during the maturation stage, a company can more effectively deploy mitigation strategies to lower its income-tax liability. It’s worth noting certain estate-tax savings strategies may also be employed in advance of an exit.

Your winery will likely be seeing increased efficiencies and a stable cash flow. Maintaining clean, accurate financial records and multiple-year forecasts will be critical to implementing a successful exit.

Continue to monitor and manage cash flow, but be aware of coming financial-reporting requirements. A company’s internal controls significantly impact the strength of a company’s financial reporting, which is why controls are critical for all companies.   

Your net worth has grown, and its structure has changed. There are three key items you’ll want to revisit during this phase:

• Your financial plan
• Your estate plan
• Charitable intentions

As your organization achieves critical mass, it’s important to regularly update your strategic plan and associated departmental operating plans to adapt to market changes. These plans will continue to play a critical role in aligning your plan, performance, and people with your mission and vision. They can also keep your employees engaged in what you’re trying to accomplish and institutionalize a culture of continuous improvement.

Using effective, efficient systems and processes, such as performance-based compensation, that align with your strategic plan may help to increase the profitability of the company. It’s also time to develop a succession plan that:

• Identifies candidates for future leadership and management roles
• Outlines specific training and development for those candidates
• Establishes methods for evaluating their performance to help determine eventual successor selections

During this phase, the board should be evaluating assets and divestitures as well as assessing how they’ll impact the company’s exit strategy. 

Preparing for a transition or exit should be top of mind during this phase. Communicate to key individuals their assigned roles and responsibilities related to the exit strategy. It’s also important to begin carving out financial statements and conducting earnings-and-profit studies to assess how they’ll support and impact the exit strategy.

Transition or Exit Phase

All of your hard work culminates in the exit phase. Whether you’re selling, closing your business, or taking a different step in its evolution, you need a transition plan.

If you’ve already outlined an exit plan, now is the time to implement it. If you haven’t decided on a strategy yet, it’s important to, at minimum, understand the federal and state income tax implications of a transaction.

As part of a negotiating strategy, understanding these issues before you sell your company can give you the leverage to structure the transaction in a way that reduces your tax burden.

To instill stakeholders’ confidence in your company’s current and potential value, you’ll want to provide:

• Well-organized and accurate financial records from the last three years, at minimum
• Financial statements audited by an independent CPA firm
• A multiyear forecast

This information increases the odds you’ll receive as much as possible for the years of hard work that you and your team have invested.

Prepare to pay the owners and participants in the company’s incentive programs. Additionally, be aware that post-closing settlements can often be contentious. You’ve worked hard to build your company—don’t leave money on the table.

Ensuring the exit plan is directly linked to your personal financial goals is especially important during the exit phase. Take the time to organize liquidity in a smart and strategic way, such as into buckets for retirement and living, taxes, and new ventures.

Update strategic and operational plans to ensure they’re aligned with your transition aspirations.

It can be challenging to keep employees motivated and engaged if their future roles with your organization are uncertain. Having the future executive team either identified and aware of their career path or already in place can lend greater stability and value to the company.

The board continues to actively work with management on decisions related to the exit.

Start Planning Now

Growth, maturity, and exit aren’t just the transition phases of your company. When you’re an owner, they’re also moments in your life when you must evaluate where you’ve allocated your financial resources.

By laying the groundwork for each transition phase, you can help ensure your assets are positioned where they’re most needed and of greatest benefit— to you, your team, and the company.

We’re Here to Help

For assistance with any of the phases outlined here, please contact your Moss Adams professional.

Assurance, tax, and consulting offered through Moss Adams LLP. ISO/IEC 27001 services offered through Cadence Assurance LLC, a Moss Adams company. Wealth management offered through Moss Adams Wealth Advisors LLC. Services from India provided by Moss Adams (India) LLP.

Related Topics

Contact us with questions.

Subscribe for Free Business and Finance Resources

What is the business life cycle (the five stages of business).

If you're interested in breaking into finance, check out our Private Equity Course  and Investment Banking Course , which help thousands of candidates land top jobs every year.

The Business Life Cycle

The Business Life Cycle is a strategy roadmap that tracks a company's growth, maturity, and decline. The Business Life Cycle is split into five stages and provides strategic insights at each stage.

Stage One: Development and Startup

The first stage of any business life cycle is the development and startup stage. This critical phase lays the groundwork for the business's future journey , making it essential for potential investors and stakeholders to understand.

Conceptualization of the Business Idea

At the heart of any business lies a unique idea or solution . This is the seed that, when properly nurtured, grows into a successful enterprise. Entrepreneurs identify a gap in the market or an unmet need that their product or service can fulfill. The conceptualization process also involves thinking about how the product or service will differ from competitors. This phase is characterized by creativity, innovation, and risk-taking.

Take, for instance, the genesis of Airbnb. The founders, unable to afford their rent, identified a unique solution – turning their living room into a bed and breakfast for attendees of a local conference. This innovative concept laid the foundation for a multi-billion dollar business.

Planning and Feasibility Study

Once the idea is in place, the next step involves conducting a feasibility study and crafting a solid business plan. This includes market research to gauge demand, analyzing competition, establishing pricing, and mapping out operational needs. It helps determine whether the business idea can be viable in real-world scenarios.

In the case of Airbnb, the founders validated their concept by hosting three guests during the conference. The success of this 'prototype' gave them the confidence to proceed.

Role of Early-stage Financing

Financing plays a pivotal role in the startup stage. Businesses typically don't generate a profit at this point, making external financing necessary. Funding may come from a variety of sources including personal savings, family and friends, angel investors, or venture capitalists. This seed funding enables businesses to carry out their plans, develop their product or service, and bring it to market.

Airbnb initially bootstrapped their venture, but as their idea gained traction, they attracted funding from Y Combinator, a renowned startup accelerator, marking their official entry into the world of venture capital.

Risks and Challenges in the Development and Startup Stage

Despite the excitement and potential rewards, the startup stage presents numerous risks and challenges. The business model might be unproven, the market could be unpredictable, and the competition fierce. There's always the risk of running out of funds before the business can generate a sustainable income. Moreover, attracting customers and convincing them to trust a new brand can also be challenging.

Airbnb faced its share of challenges in its early days, from being an unknown entity in a well-established hotel industry to struggling to secure its initial users. However, their innovative marketing tactics and robust user experience helped them overcome these hurdles.

Case Study: Successful Business During the Startup Stage

Airbnb serves as a compelling case study of a successful business during the startup stage. Their unique idea coupled with their understanding of the market allowed them to disrupt the traditional lodging industry.

Airbnb's success during the startup stage was due to a combination of factors: a unique and scalable business idea, a comprehensive feasibility study, timely acquisition of early-stage financing, and the resilience to navigate initial risks and challenges. Their journey encapsulates the dynamic and multifaceted nature of the development and startup stage in the business life cycle.

Stage Two: Growth

As a business starts to find its feet, it enters the growth stage. The enterprise expands, market share increases, and profits start to accumulate. Sound cash flow management is crucial in this phase as the inflow and outflow of cash determine the survival and expansion of the company.

Consider the meteoric growth of Facebook. After it went public in 2012, Facebook had the capital to grow significantly, acquiring companies like Instagram and WhatsApp, and diversifying its revenue streams .

Stage Three: Maturity

Once a business has carved out a comfortable market position and exhibits stable recurring revenue, it has reached maturity. At this juncture, businesses must be inventive in exploring new opportunities for growth while effectively managing assets and resources.

For instance, Microsoft, a tech giant, reached maturity years ago but continues to innovate with ventures like Azure and Microsoft Teams . Microsoft’s ongoing success demonstrates the importance of strategic planning during the maturity stage.

Stage Four: Decline or Renewal

Not all businesses remain prosperous indefinitely. Whether due to market saturation, increased competition, or external factors, a business may face a decline. However, strategies like cost-cutting, diversification, and market penetration can help reverse the downward trend . Private equity firms can step in, providing the needed capital and expertise to restructure and revamp the business.

Take the example of LEGO, which faced a severe decline in the early 2000s . Through restructuring and a renewed focus on its core product, LEGO navigated through the decline, demonstrating an inspiring renewal story.

Stage Five: Exit or Succession

Eventually, all businesses reach a stage where original owners or stakeholders might choose to exit. Choosing the right exit strategy—be it acquisition, Initial Public Offering (IPO), or management buyout—is critical. This is where investment bankers excel, assisting in orchestrating the optimal exit.

Family-owned businesses, like Walmart, underscore the importance of succession planning . From Sam Walton, the founder, to his son Rob Walton, and now his grandson-in-law, Greg Penner, Walmart's leadership has smoothly transitioned through generations, maintaining a consistently strong market presence.

Understanding the business life cycle can guide financial and investment strategies at each stage. This knowledge proves invaluable for finance professionals, aiding in the evaluation of business potential and growth opportunities. Keep honing this understanding to thrive in the ever-changing business landscape.

• Business 101

Recent Posts

The 4 Types of Real Estate Investments (Land, Residential, Commercial, Industrial)

Corporations: Examples, Structures, Pros, and Cons

What are the 4 Factors of Production? Land, Labor, Capital, and Entrepreneurship

1 comentário

The business life cycle, comprising five stages, is a fundamental framework for understanding a company's journey from inception to maturity. It encompasses birth, growth, maturity, decline, and rebirth or reinvention. Each stage presents unique challenges and opportunities. For those interested in exploring innovative financial approaches, the link https://icoholder.com/en/defi provides insights into the world of decentralized finance (DeFi), which can play a pivotal role in various business stages.

• Recently Active
• Top Discussions
• Best Content

By Industry

• Investment Banking
• Private Equity
• Hedge Funds
• Real Estate
• Venture Capital
• Asset Management
• Equity Research
• Investing, Markets Forum
• Business School
• Fashion Advice
• Technical Skills
• Finance Articles

Business Life Cycle

It depicts the progression of a firm from its early start-up phase

What Is A Business Life Cycle?

• Phases Of Business Life Cycle
• Phase 1: Start-Up/Launch

Phase 2: Growth

• Phase 3: Shake-Out

Phase 4: Maturity

Phase 5: decline/life cycle extension.

A business cycle depicts the progression of a firm from its early start-up phase to its maturity over a period of time.

Every firm goes through these phases, but the exact duration of the stage cannot be determined. 

Each phase is identifiable by looking at certain variables like:

Management strategies and priorities change along with the phases of business cycles. 

While evaluating a company from an investment perspective, it is essential to identify at what stage of its business life cycle the company is in, as it will directly affect the forecast inputs.

Key Takeaways

Business cycle progresses through startup, growth, shake-out, maturity, and decline phases.

Each phase's characteristics, financials, and management strategies vary, impacting investment decisions

Phases of Business Life Cycle

The business cycle of any company can be categorized into five stages:

• Launch/Start-Up
• Life-Cycle Extension

Each stage has its unique characteristics and challenges, which can be used to identify at what stage the company currently stands at. 

The phases of the business life cycle are compared organizations to the life cycle of living organisms. 

A vital feature of the organizational life cycle is that there is no specific duration allotted to each phase of the corporate life cycle, unlike the life cycles of organisms.

This comparison originated as early as the 1890s by the economist Alfred Marshall. Almost 60 years later, American economist Kenneth E. Boulding also suggested that organizations pass through a life cycle largely similar to organisms.

After this, there has been constant research and development in identifying and interpreting an organizational life cycle. 

Understanding the organizational life cycles of a company can help us understand the management's thought process and make a better investment call. 

Everything You Need To Break into Venture Capital

Sign Up to The Insider's Guide by Elite Venture Capitalists with Proven Track Records.

Phase 1: Start-up/Launch

The start-up phase is the very initial stage of the firm. At this stage, the business can be in various positions financially.

For startups, creating a Minimum Viable Product (MVP) is essential to test the product idea's viability and gather feedback from early customers. Further, while developing it the MVP cost can significantly impact the startup's overall budget and can play a major role in the startup's success or failure.

There are a few common factors in all the start-up phases. First, the businesses have very high expenses, and most expenses are focused on operating and customer acquisition, like advertising.

Another factor is that most of the capital raised is equity capital, as the companies are not creditworthy enough for bank loans or only eligible for high-yield debt.

The firm is not profitable at this stage, and the cash flow is negative . 

There are a few ways to categorize the life cycle of the start-up/launch phase, as explained below.

Pre-Seed Funding Stage

The pre-seed funding round, also known as the pre-seed capital or pre-seed money, is the first instance of capital raising for a start-up. The amount required is relatively low as the business model is the only thing being developed.

At the pre-seed stage, the start-up has only raised non-institutional funding to fund its operations. At this stage, friends, family, and own equity is the only type of capital that has been infused into the firm.

Timing is essential at this stage. If the time taken is too much, the start-up will not survive in the long run.

The pace of the pre-seed funding depends on the start-up's initial expenses. At this stage, the company is still pre-revenue and focuses most of its cash on developing the product or idea.

The amount of pre-seed capital will decide the further goal of the firm. In the majority of the cases, the only investors in a pre-seed round are the founders themselves.

Seed Funding Stage

This is the first official stage of funding that the start-up raises. The term " seed funding " refers to sowing a seed to help grow the company. At this point, the company is too young to get debt funding.

At this point, start-ups usually dilute their equity in exchange for seed capital. Angel investors, Venture Capitalists (VCs), and equity-based crowdfunding are usually the types of investors funding this stage.

The seed-funding VC involves a higher level of risk than regular VC funding rounds as the company is still at a very early stage.

The proceeds from the seed round are used in:

• Product development
• Market research

This is essentially the R&D phase: trying to find the product-market fit and fine-tuning the product to the inputs obtained through market research and product testing. Funding is also spent on fine-tuning the business model.

This stage is also usually pre-revenue but depends on the industry, sector, the vision of the founders, and, most importantly, the available funding.

Early Stage

At the early stage, the firm finally has a product that it can roll into the market.

In this stage, the operating costs drastically increase as new expenses like more salaries and advertising start to add up.

At this stage, a start-up also needs strategic investors who do not just contribute equity but also bring value to the organization, like connections and expertise which will help them expand.

Before this stage, all the funding was for:

• Operational
• R&D expenses

Still, the start-ups will require funds to roll out products into the market and other allied activities at this stage.

This is the most crucial stage for a start-up as inflows other than funding start to come in. An early-stage start-up is no longer pre-revenue.

At this stage, the founders must be prepared for aggressive marketing and expansion, and if this stage is successful, then only the start-up will be able to function as a business.

It is rare for the company to be profitable at this stage.

Growth Stage

The growth stage is when there is a certain level of product recognition and brand value. At this stage, the start-up still requires funding raised at very high valuations.

The firm will still require outside funding to fule large-scale CAPEX .

Series B and Serie C funding are raised at this stage.

1. Series B Funding: 

Series B round is done once the start-up has grown past its developmental stage. The product has some market visibility, and the company has no obligations to meet the market demand.

Series B funds are used to increase market presence and coverage through supply chains and marketing spending and to improve and expand the workforce.

2. Series C Funding:

At this stage, the start-up already has a successful product and established a user base with empirical growth.

The Series C funds are used for the expansion of the firm. Inorganic growth, like acquisitions, is usually funded by Series C capital. This is the most mature and capital-intensive stage for a start-up.

Usually, after this stage, the business stops being a start-up as they start showing profits and positive cash flows.

The growth phase of the business cycle is when companies start to become profitable, and small amounts of free cash flows begin to show.

The growth can be fielded by internal accruals or by raising debt. It all depends on the firm's profitability and the set capital structure . Usually, at this stage, it is a combination of both internal accruals and debt funding.

As the product/service starts to gain traction, the sales growth is very high and is usually followed by margin expansion. However, the growth in profits always lags behind the growth in sales.

It is counter-intuitive for a company in the growth stage to have a lot of free cash flow in hand, as most of the profits should be reinvested to fuel more growth.

The company balance sheet starts to look a little stronger but still has a lower net cash balance due to high investing cash outflows. As a result, the firm can appear weaker on the liquidity and current ratios.

Debt is usually used to fund significant CAPEX as they still need to spend a lot on advertising and hiring better talent. 

In growth, stage management is entirely focused on fueling growth.

Royal Caribbean Cruises ( RCL ) is a luxury tourism company providing holiday cruise services and is in the growth stage of its business cycle. 

RCL reinvests 100% of its profits, pays no dividends, and has a high level of debt; they have lower free cash flows.

Phase 3: Shake-out

The shake-out phase of the business cycle is also known as the consolidation phase. In the consolidation phase, the business becomes one of the market leaders and takes away market share from the smaller players.

At this stage, the free cash flow generation increases as the company become more efficient.

Debt levels start to go down significantly, but that entirely depends on the industry; e.g.,  a steel manufacturing company, even in its shake-out stage, will have a high debt because that is how the industry operates.

There still is a high level of sales growth, but the bottom line outgrows the top line. As the firm becomes more efficient, the margins start expanding while the expenses begin to decrease.

As more scale is achieved, brand recognition, an established efficient framework, and supply chains are established. The efficiency ratios like asset turns and inventory turnovers also improve drastically, making the balance sheet very strong.

As the company's balance sheet strengthens, the short-term and long-term debt gets better rated as they have more cash to service that debt.

If the company is publicly listed, multiple expansion also happens at this stage as a further effect of re-rating. Multiple expansion is when the valuation multiples like the Price-to-earnings (P/E), Price-to sales (P/S), and Price-to- book value (PB) start to swell up.

The multiples start to increase because buying volumes go up for higher-quality companies.

The profitability ratios like ROE and ROIC also start to grow, indicating the business is generating a higher return on its invested capital .

The dividend payout also starts to grow as the firm keeps generating more cash than its reinvestment needs.

The primary focus of the management at this stage is to fule growth but also, at the same time, focus on making its operations more efficient.

Amazon ( AMZN ) is an excellent example of a firm in its consolidation phase.

Even though Amazon is one of the biggest companies in the world, due to the sheer size and growth of the e-commerce industry and its new business vertical of Saas through  AWS , Amazon is still in the consolidation phase of its life cycle.

The maturity phase is very self-explanatory. Growth slows down, and the sales grow at a very steady level closer to the industry or economic growth rate.

The margins and free cash flow are at their highest. The major reason for the rapid growth in free cash flows is because the CAPEX stabilizes, which is a significant cash outflow.

The dividend payouts are at their highest, attracting many buyers. A mature firm usually trades at a premium multiple. 

At this stage, the growth cannot come from organic elements, so inorganic expansion like M&A is the only way for the firm to grow at a higher rate than the industry or economy . 

The majority of the capital allocation of a mature firm either happens in Mergers and Acquisitions or for enhancing shareholder value through buybacks and dividends.

Mature firms usually have low levels of debt, and the debt they have on their books is of the highest quality, usually AAA or AA rated.

The major focus of the management is to keep their market share stable while growing at a sustainable rate.

Sherwin-Williams ( SHW ) is the world's most extensive paints & coatings company. It is an excellent example of how a mature company fuels growth. 

The majority of its capital is allocated towards buybacks and M&A, which is the only way for a mature firm to grow.

Please refer to the following article by Marcellus to understand how a firm grows in its mature vs. consolidation phase.  Sherwin Willams vs. Asain Paints

Walmart ( WMT ) will serve as an alternative example to Sherwin-Williams. Walmart cannot fuel inorganic growth with M&A as its business model is not structured to support acquisitions. 

The only way for Walmart to grow organically is if it chooses another geographical area with no presence or a lower level of market penetration.

This is the final phase of the business life cycle. At this stage, profits, cash flows, and sales of a business start declining as a company begins to lose its competitive advantage .

The company starts losing clients as its product becomes more commoditized or redundant due to changing trends.

If a company is listed at the decline stage, a PE rerating happens as it starts losing its competitive advantage and market share to its competitors.

The main focus of the management at this stage should be on changing the firm's positioning to adapt to the current scenario. Innovation is the critical element necessary for a life cycle extension to happen.

Innovation can usually come in several ways. It can be through product innovation, where the firm can either introduce a new product or change the existing product to fit the current market demand.

Nokia is right now at the decline stage of its business life cycle.

The reason for the decline of Nokia is that the management was unable to accept the changing environment; thus, the firm went into a decline phase, still struggling for life cycle extension.

Everything You Need To Understand Restructuring

To Help You Thrive in the Most Prestigious Jobs on Wall Street.

Free Resources

To continue learning and advancing your career, check out these additional helpful  WSO  resources:

• Break-even Point
• Common Stock
• Principal Payment

Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.

or Want to Sign up with your social account?

What are the 5 stages of a business life cycle?

Just as a seed must be planted before a tree can flourish, a business doesn't spring to life fully formed. There are generally five stages in a business entity life cycle , and each stage has differing and unique entity management needs.

The 5 stages of a business life cycle Stage 1: Seed and development

So, you've had a great idea for a business ' congratulations! You're officially at the seed stage. Now you need to plant that business seed and start to nurture it so that it can grow into a successful business. This first stage of the business entity lifecycle is sometimes called the seed stage and sometimes the development stage, depending on the sector and the industry. It's where you take your idea and start to assess whether it's worth developing into an actual business. A business plan soon follows once key target areas are identified and a strategy is developed. It's here that you ask yourself :

• Does this concept, product or idea fill a need in the market?
• Will it be accepted in the market?
• How do I establish a business structure?
• Will this idea yield me any profits?

Once you've analyzed the market and the concept and decided that it's still worth pursuing, your seed is in the ground and you move on to the next phase of business entities.

Stage 2: Startup

Businesses usually go one of two ways at the startup phase: They seek funding, either from a bank or another investor, or they decide to 'bootstrap' and work within their means initially. At any rate, startups must be incredibly resourceful and flexible regardless of funding ' it's a matter of iterating, testing and learning, and trying again, knowing that you are unlikely to have everything perfect from the outset. Startups must be committed to doing it over and over again until they get it right. Startup business entities face many challenges , including:

• Managing cash reserves
• Managing sales expectations
• Accounting management
• Establishing a customer base
• Establishing a market presence

It's also at this stage that you'll start to pay closer attention to entity management. You won't have many processes in place yet, but the beginnings of your governance and compliance function will start to appear. It's important to think about things like the appropriate entity type for your business, and the right jurisdiction in which to incorporate. In the US, many venture capital firms will require a startup to be incorporated in Delaware ; in the UK , one-person startups may work as a sole trader, while groups may incorporate a limited liability company.

Stage 3: Growth and establishment/survival

The growth phase is where our business solidifies its place in the market and its view on the world. Your business strategy will start to settle down more, though many at this stage of the business entity lifecycle will embark on a stage of aggressive and quick growth ' it all depends on the end goal for the business entity. It's also where entity management starts to get more intense, as the focus is turned inward, and the initial blocks of the growing company begin to build. Recruitment drives bring both experienced senior leaders and lower-level workers into the fold, and client relationships are strengthened. Your clients become advocates and help you to grow your business, too. There's an oft-quoted statistic that nine out of every 10 startups fail. To make sure your business entity is the one in 10 that succeeds, you'll require investment to grow and mature your business. It's likely you'll seek outside investment capital or build up a debt profile. Either way, entity management must be tight, whether it's to ensure any personal guarantees signed with banks don't negatively impact directors, or whether it's to track and manage the equity given to investors.

Stage 4: Expansion

Your business has become routine, and your confidence has grown. You've got great leaders and workers helping to build your business further, and your position in the industry is established. Now's the time to start thinking about the next phase: Expand further and keep growing, or maybe even plan for your exit. It's here that businesses often see rapid growth in both revenue and cash flow as they get more comfortable with how they do things, but it's important not to get complacent. Ensure compliance and governance is given the priority it needs in your business entity, and keep a robust corporate record ' investors, auditors and regulators could all ask to view your entity data at any minute. As you expand, keep in mind that just because your business worked in one jurisdiction does not mean that it will automatically work elsewhere. Each new office should be treated as a new startup, with the appropriate level of research and analysis undertaken to inform any expansion strategies.

Stage 5: Maturity and possible exit

A mature business doesn't have to be one that's hitting the headlines as the talk of the town. Sometimes, a mature business chugs along with sustainable profit growth and loyal employees reaching long service leave time. Many mature businesses have a strong cash position, which makes them an attractive target for mergers or acquisitions. The business may also reach a position where it devolves into spin-offs for other products or services, and grows into a wider subsidiary group. Business owners at this final stage of the business entity lifecycle are focused on:

• How long the business can maintain and manage the appropriate rate of cash flow
• Expanding the business
• Finding and executing an exit strategy

Whether exit or further expansion is the end goal, entity data again plays a pivotal role. Any exit will involve robust analysis of the company's position both internally and externally, and the entity managers must be ready to efficiently and effectively get the right information to the right people at the right time.

Manage the five stages of a business life cycle with technology

So, what are the five stages of a business life cycle? Whether you're at seed, startup, growth, expansion or exit, you'll need to have strong entity management and an ability to interrogate real-time entity data that you know is accurate and up to date. Entity management software can help your business throughout its lifecycle by:

• Storing entity information and documents in a highly secure format to create a single source of truth
• Creating organizational charts to highlight gaps in entity data
• Managing the ongoing accuracy of the corporate record using compliance calendars, reminders and workflows for better data
• Reporting on governance and compliance requirements and electronically filing statutory forms into global regulatory bodies
• Integrating data from multiple business units like legal, tax, finance, treasury and compliance to build a single system of record for all corporate governance

Diligent Entities , a secure, cloud-based entity management software, also closely integrates with the board portal and secure file-sharing platform to create the Governance Cloud , helping you to fulfill modern governance requirements and deliver the right information at the right time. Get in touch and request a demo to see how Diligent Entities can help you, no matter which stage of a business life cycle you are currently at.

Solutions Solutions

• Board Management
• Enterprise Risk Management
• Audit Management
• Market Intelligence

Resources Resources

• Research & Reports

Company Company

Your data matters.

The 7 Stages of a Business Life Cycle and How to Win in Each One

Table of Contents:

• Conception Stage
• Start-Up Stage
• Early Stage
• Growth Stage
• Rapid Growth Stage
• Maturing Stage
• Innovation or Decline Stage
• Get Support for Your Business at Every Stage

On average, about 4 million businesses are started annually in the United States. However, 18% of small businesses don’t make it to their first birthday, and 50% fail within five years. What do most unsuccessful start-ups have in common? They don’t understand the phases of the business life cycle and how they affect their company. 

The 7 stages of a business life cycle are conception, start-up, the early stage, growth, rapid growth, the maturing stage, and innovate or decline. If you want your small business to succeed, you must understand how each stage works and what to do during those stages to win. Let’s look at the seven stages of a business life cycle and how to make the most of them. 

1. Conception Stage

The Conception stage is the first step in establishing your new business. It’s a time when you should focus on brainstorming and researching potential business ideas. At this point, you will have time to consider what kind of company you want to start and why it will succeed. 

Assess the Market

You may have already determined the niche within an industry that would work best for you based on market demand, competition, and available resources. In this stage, many people search for funding or partnerships (if needed).

Write a Start-Up Plan

It’s still early enough for an entrepreneur to determine the feasibility of their business idea and collect suggestions from outside advisors to decide if they should move forward. It’s also the best time to begin creating a start-up plan . This start-up plan covers your capabilities, the resources you’ll need, potential customers, marketability, potential sources of start-up capital, and if your business idea has profit potential. 

Be Prepared to Put in the Work

The majority of small business owners report working at least 50 hours a week and the beginning stages can often be the most demanding. Entrepreneurs usually handle most of the day-to-day tasks themselves at the start, so it’s prudent to be proactive in managing your time, planning and organization. If you lack follow-through or focus while you get your business off the ground, the road can get rocky or become a dead-end before your business even opens its doors. 

2. Start-Up Stage

You’ve taken steps to open for business in the start-up stage. Sales are usually inconsistent at the beginning, and you may be trying to find your footing in the market. 

Be Flexible

You might find yourself in a situation where profits aren’t coming through the door as fast as you think they should. If this happens during your start-up stage, think creatively about ways to reduce costs while experimenting carefully to adjust your product or service to the market’s needs, wants and expectations.

Develop a Three-Year Business Plan

The start-up stage is the time for a formal business plan that covers the next three years and a marketing plan to help your business gain the stability it needs to survive. You’ll use this plan to assess your progress and make management decisions with your goals in mind. The plan may frequently change as new information arises, but it’s an important guiding tool for successfully establishing your business. 

3. Early Stage

The early stage of a business is often the most exciting because you see the cash flow and income you hoped for starting to happen. Even though you’ve developed a customer base that allows your business to survive, you’re still trying to attract customers and figure out how to be most competitive in the market. It’s time for you to take on the responsibility of delegating, communicating vision and paying close attention to marketing. 

Develop an Aggressive Marketing Plan

Hiring a marketing firm or internal marketing professional can help refine your brand’s competitive edge. Your business will need a marketing plan that includes branding, public relations, advertising, social media and search engine optimization strategies to help it gain visibility in its niche market.

Hire, Delegate and Outsource

Most businesses don’t have many employees at this point, but it’s time to begin hiring a competent management team for your business’s success and your own well-being. To be most effective, you’ll need to delegate some of the responsibilities you’ve been handling on your own. Plus, having knowledgeable feedback from professionals who understand the details of your business can also help you make effective decisions and adjustments that support growth. 

Outsourcing some business functions that are time-consuming or expensive can also help you break free from an overload of day-to-day tasks. You may subscribe to automated services or contract with specialized companies for specific functions like cleaning your commercial space or financial management and tax preparation. 

4. Growth Stage

During the growth stage, your business will be taking in steady cash and spending money to meet expanding market demands. The growth stage is the time to hire a bigger team and expand your capabilities to satisfy more customers. It’s also a time when investors see the viability of your business and may be more willing to provide the funds you need to grow.

Share Your Vision Clearly and Constantly

It’s time to let your outstanding personality and excellent communication skills shine. Managing these relationships with new customers, employees and investors will become your top priority and most significant responsibility.

Continue in the delegation process while sharing your vision with your team for the business’s direction and how it relates to their personal growth opportunities.

Strategize and Plan for the Future

This is a time for heavy planning and strategy sessions. In addition to your business and marketing plans, you’ll need to add a strategic plan that includes clear goals and measurements to evaluate your business’s progress. This strategic plan is not just about you and the company; it involves all your employees and the direction you’ll go together. This document helps you define clear goals within your business and should guide actionable steps to be taken by every employee in your organization.

As your team grows into specialty-serving teams or departments within the business, an operating plan will help you coordinate all business functions, so they interact effectively and smoothly. Your planning should outline every business function in steps required to meet an end goal.

Finally, you’ll need to create an exit strategy. Even if you plan on owning the business until you retire, you may want to distance yourself from daily operations at some point. Even if you plan on continuing to be fully involved, you should at least consider what exit opportunities are available to you at this point and all stages from now on. Having an exit strategy helps influence the direction of your business and encourages you to build value in it.

Secure Funding for Greater Capacity

It’s time to secure funding to expand and hire employees, purchase equipment, make more space or fulfill other needs your business faces as it grows to accommodate the demands of more sales.

There are several options for funding the growth of your business, including private investors, conventional lenders, SBA loans and non-profit organizations that help small businesses secure 

funding. Research your options and decide what is best for your organization, financial status, and goals. 

5. Rapid Growth

At this point, you’ll probably feel incredible. Your business is growing, and fast. You’re outpacing the industry in growth and your competitors are probably taking notice. 

Expand Responsibly

As impressive as the rapid growth stage is, there’s no guarantee that it will last so you should be cautious in continuing to expand your staff and expenses permanently. All your operations should be systematized and streamlined to standardize your customer experience as you grow and to keep your costs predictable. 

You also should ensure you assess your suppliers’ current capacity. Product or service shortages or delays can harm your reputation and stress customer relationships. 

Evaluate and Restructure Leadership

Your planning systems are in place, and your management team should keep things flowing smoothly. For some entrepreneurs, this is an excellent time to sell your business. Your success may be outgrowing your skillset or your bandwidth for the complexity of issues you’ll begin to face. 

If you decide to stick with it and grow professionally through the experience, there are several opportunities for you and your team to adapt. You may have to add more specialized expertise to your management team to provide practical guidance on a greater level. There may be opportunities for professional development through training, tapping into your industry’s network and furthering education. 

Prioritize Goals

All of your management team should participate in an annual review of the company and have input in revising the business’s strategic plan. The directives from this annual plan need to be clear and should only change with significant updates in the information available to you and feedback from the entire team.  

Your priorities should be concise and vision-directed. Having too many priorities outlined in your strategic plan as you take on new markets can put undue pressure on your team, processes and cash flow. 

6. Maturing Stage

You’ve established yourself, and your business is steady in the market. Your sales patterns have stabilized, and you’re a leader in your industry. It would be best if you worked to preserve the value you’ve gained and balance short and long-term growth.

Reinvent and Remain Flexible

Your business is creating wealth during the maturity stage, so you have the space and opportunity to innovate, strategically expand and acquire complimentary companies if you choose. Some entrepreneurs may split the company into smaller business units based on each department’s offering. 

Continue to Lead with Vision

It’s essential to continue to communicate the business vision and keep it at the forefront of planning and decision-making. Your responsibility is to lead a team that can agree on the shared values of each organization member. You should also ensure that your employees have a sense of ownership and well-being so you don’t have a high turnover rate due to misaligned values. 

Plan for Transformation or Exit

As you plan for the future, consider how your business will transform as time goes on to stay relevant, profitable and competitive. As the company has proven profitability and value, you can also revisit your exit plan and consider if it would be a good idea to cash in on your investment of time and money. 

7. Innovation or Decline Stage

The last stage of the business life cycle is the call for a business to either innovate or decline. In this stage, companies must look for new ways to innovate their products, services and markets. 

Find ways to Stay Fresh

Companies in this stage of the life cycle should consider diversifying their product offerings and expanding into different types of industries. If you fail to innovate at this stage, you can count on losing at least some of your business or over time, becoming completely irrelevant and unprofitable. 

Encourage Creativity

Influential leaders will foster a creative culture and invite constant input from their team. Taking strategic risks is worthwhile at this stage, and you must constantly reinforce your vision. If your team moves away from a shared vision, you can be distracted by internal confusion and be caught off guard by the next new wave on the horizon. 

Pay Close Attention to External Conditions

It would help if you encouraged your team to stay in touch with changes in your industry through reading, networking, conferences and education on how other businesses are innovating and pushing initiatives forward. Whether you consider your competitors or keep watch on completely different industries to find ideas for keeping your products or services relevant, considering how your business can adapt can be the difference in your survival. 

Get Support for Each of the 7 Stages of a Business Life Cycle

Knowing what stage you’re in and where your focus should be can give you the keys to success and where you need to grow as a leader. For example, if you’re starting, it would be a mistake to spend excessive money trying to create buzz around your product before it even exists. But if your business is thriving and growing rapidly, marketing may become more important than the product itself.

Key performance indicators and essential responsibilities change for an entrepreneur at each stage of the business life cycle. At any stage of your business, it may be necessary to secure funding to get to the next goal.  TEDC Creative Capital offers several lending options and learning opportunities to support Oklahoma businesses start-up, grow and innovate. Explore the lending options available and our learning opportunities for current and aspiring entrepreneurs to help small business owners win at each of the seven stages of a business life cycle.

Understanding the Business Life Cycle

In this guide, we’ll be taking you through the life cycle of a business from launch to maturity and whatever comes after. We’ll examine the four phases of business growth:

By the time we reach the mysterious fifth stage, you’ll have a blueprint for success for your business.

The Purpose of the Business Life Cycle

Although all businesses are inherently unique, they often follow a similar trajectory. In fact, if you plot a business’ journey from conception to present on a timeline, you’ll usually see five distinct phases. It’s similar to how people grow and mature; the business life cycle shows businesses maturing from infancy through adolescence to adulthood and eventually, old age.

According to the Startup Genome Report, 90% of small businesses fail. To be clear, almost all businesses start as small businesses before processing through the stages of business growth. And when a business does fail, it doesn’t usually happen right away.

Why? It often boils down to poor planning, preparation, and decision-making.

The business life cycle may have originated as an analytics tool, but it’s increasingly used as a business blueprint. Since it outlines the trajectory of a business, entrepreneurs can use the business life cycle to build stronger, healthier businesses.

The 4 Phases of Business Growth

Of the five business cycle phases, the first four relate to starting, growing, and sustaining a business. Those four stages also make up the majority of the life of a business. Don’t worry, we’ll cover the fifth stage a little later.

The stages of business growth have been labeled and re-labeled many times. However, the most straightforward, accurate model consists of these four stages: launch, growth, shake-up, and maturity.

Phase 1: Launch

Before it grows and matures, a business must be launched. This requires an investment of resources to get the business off the ground. However, revenue is low because the business is new and doesn’t have an established base of customers. This makes launch the least profitable time for a business. It’s often considered the riskiest of all phases , too.

The most important thing to remember about the launch phase is that it shouldn’t be rushed. Putting time and effort into a launch is how you build a strong business.

Additionally, keep sustainability in mind. Hiring is a prime example. Aim for a sustainable balance with your hiring. If you’re overstaffed, the unnecessary payroll eats into your revenue; if you’re understaffed, your business is less productive.

Launch can be further broken into two distinct sub-phases: development and startup.

Development

Development refers to the initial idea and the research that follows. For most failed businesses, the problems can be traced back to insufficient development. No matter how much you may like your idea, you need to know whether it’s actually worth pursuing. In other words, is the idea profitable ?

After verifying the idea is worth pursuing, you can begin preparing for launch. For ecommerce, this means you need a website, which in turn, means finding a web host and hosting plan. Make sure the website can accommodate the amount of traffic you expect to get.

From there, you’ll need to set up WordPress, design the frontend, and set up WooCommerce . Depending on the site, this can require considerable resources, or it could be as easy as installing a theme.

If you’re not using a managed hosting solution, the site will also need to be extensively tested. A major post-launch crash would really hurt the reputation and stability of a brand new business.

Keep in mind that these are all things that need to be ironed out before you even begin to think about marketing, social media, and the actual launch.

Once you’ve done the research, finished your testing, and gotten everything ready, it’s time to launch. In other words, you’re ready to make your ecommerce site available to the public.

Phase 2: Growth

If it’s a newborn at launch, then a business is an adolescent during the growth phase. At this point, the business is establishing an identity. In other words, the business owner is figuring out what works and what doesn’t work for the business.

After minimal returns in the launch phase, the growth phase sees revenue increasing steadily. This allows pricing to remain level (or possibly even decrease) as the business pushes past the break-even point . With the business now profitable, the owner starts looking for opportunities to grow the business. The goal is to further boost revenue and more specifically, profits.

So how do you boost profits during the growth phase? Typically, business owners focus on three important components: marketing, sales, and scaling.

Marketing is arguably the most important ingredient for growth. The idea is that with climbing revenue as proof of concept, marketing will increase reach and bring in more business.

Additionally, since overall revenue is higher, business owners can afford continuous marketing. Key advertising platforms like Google Ads and Facebook Ad Manager can bring in even more business, so revenue continues to increase.

In addition to marketing, sales is another major focus during the growth stage of the business growth cycle. It’s even common for businesses to establish designated sales teams during this stage of growth.

With a growing focus on sales, businesses transition from a passive business strategy to being more proactive.

In terms of business, scaling refers to increasing the capability and capacity for growth. Every business owner wants to see his or her business become a success. However, a business needs to be able to support increased capacity without compromising capability.

The purpose of scaling is to increase capacity to meet higher demand. Therefore, scaling is primarily a question of logistics. For instance, you need to consider whether you have space and capital to support expanded inventory. You also need to consider whether your supplier(s) have the production capacity to fulfill larger orders.

Phase 3: Shake-Out

After significant growth, the shake-out period sees revenue increasing at a much slower rate. This typically occurs because of market saturation or an influx of new competitors, or possibly a combination of the two.

Even though sales are still increasing during this period, profit actually begins to decrease. This can be attributed to a combination of two factors:

• Revenue growth has slowed.
• Cash flow has either remained the same or increased.

During the shake-out period, sales reach their peak, but they may begin to decline if cash flow doesn’t decrease.

The best way to prevent a sales decline is to minimize expenses. Since revenue growth has slowed, you must compensate by reducing your expenses. This reduction can be achieved by revisiting the business expenses, such as marketing, inventory, and general operating expenses.

Phase 4: Maturity

Like a person nearing retirement, maturity is the stage of business growth where sales and revenue have really slowed down. However, the business is still fairly resilient with consistent revenue. On average, annual revenue growth is about 5% per year . Then at a certain point, profits begin thinning, too.

One of the key challenges that business owners face in the maturity stage is the increased competition. By this point, it’s likely that many competitors with similar businesses have emerged. These new competitors benefitted from being able to reinterpret products in novel ways.

Having reached the maturity stage, the business growth cycle comes to a close. At this time, many business owners begin thinking about the next steps or potentially an exit strategy.

The Final Phase of the Business Life Cycle: Renewal

The business life cycle is a model for the future so you know what’s in store for your business. In turn, you can make decisions now that minimize the likelihood of undesirable outcomes.

The implication of the business life cycle is that just as there’s a beginning for a business, so too, there is an end. As the business winds down, the owner can start to consider a new direction for his or her life — but businesses don’t actually have to end. Or at the very least, the end can be significantly delayed.

Most iterations of the business life cycle have the fifth stage as decline. In other words, they portray the fifth stage as essentially the beginning of the end for businesses. But in reality, you have a choice.

When your business reaches maturity, you’re faced with an important decision: Do you want to exit the market or revitalize your business?

The decline stage closes the life cycle that started with development and launch. Sales and revenue continue to shrink until profits dry up completely. The business owner returns to much the same place as when the journey began, much like a bell curve returning to zero.

How To Delay the Decline

When the decline has already started, it’s harder — albeit not impossible — to stop. Because any strategy for delaying or mitigating decline almost always requires cash flow, meaning there needs to be consistent revenue.

One of the go-to solutions for staving off decline is to allocate a larger budget to marketing. Specifically, a business owner can try some marketing tools that haven’t already been used like social media or affiliate marketing .

Another option would be to find ways to incentivize purchases. For instance, customer loyalty reward programs encourage repeat business. Customers are more likely to make purchases and make more frequent purchases when loyalty programs are offered. These programs also reward customers who have continued to make purchases throughout the life cycle of your store.

How To Begin Renewal

Instead of letting years of hard work go to waste, the fifth stage can alternatively be a period of renewal for a business. In other words, it’s time to make a triumphant return.

In this phase, business owners step back to reassess their businesses. They look for growth opportunities and ways to realize them. The idea is to breathe new life and relevance into the business which often makes the renewal phase a time for creativity, exploration, experimentation, and innovation.

So how do you renew a business? The obvious way would be to tap into emerging markets and product trends. When trending products are actually related to the current industry, this option is particularly appealing. However, you shouldn’t ignore a promising product solely because it’s unrelated to your current industry. In fact, it’s possible that changing directions could make the new iteration of your business even more successful than it was before.

Once a plan for renewal is in place, the business will likely return to the growth stage of the business growth cycle.

What the Business Life Cycle Can Do for You

Now that you’re familiar with the business growth and life cycles, what can you do with them?

Ultimately, the value of the business life cycle is that it lets you plan for what’s to come. When you’re familiar with the business life cycle, you gain insight into the overall trajectory for your business. In turn, you can make smarter decisions that lead to higher revenue , higher profits, and more longevity for your business.

Build a Stronger Business with Managed WooCommerce Hosting

The foundation for a great ecommerce business is a great hosting plan. Fortunately, Nexcess has you covered. Packed full of built-in, cutting-edge technologies, fully managed WooCommerce hosting  gives you everything you need to create a one-of-a-kind look for your store. Best of all, you’ll attract tons of customers because WordPress is natively optimized for SEO.

For details, visit our products page to discover how Nexcess hosting plans can help you start your business.

Nexcess, the premium hosting provider for WordPress, WooCommerce, and Magento, is optimized for your hosting needs. Nexcess provides a managed hosting infrastructure, curated tools, and a team of experts that make it easy to build, manage, and grow your business online. Serving SMBs and the designers, developers, and agencies who create for them, Nexcess has provided fully managed, high-performance cloud solutions for more than 22 years.

• Search Search Please fill out this field.

What Is a Life Cycle?

• How It Works

Special Considerations

Types of life cycles.

• Life Cycle FAQs

The Bottom Line

• Business Essentials

Life Cycle: Definition in Business, Types, and Examples

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

The term life cycle refers to the course of events that leads from the beginning to the end of a product, business, or industry. This means that a life cycle brings new products, companies, and industries into existence, sees them grow, and eventually leads to their critical mass and decline. There are several key steps that life cycles take, including development, growth, and decline. Understanding how the life cycle works can give investors and others a better understanding of how to invest their money.

Key Takeaways

• A life cycle in business follows a product, business, or industry from development to decline.
• Product life cycles are the most common and include the following stages: development, introduction into the market, growth, maturity, and decline.
• Companies may still be profitable during and after they've reached their peak.
• Growth can still take place during the maturity phase of the life cycle.
• Investors should understand how life cycles work in order to make more informed decisions about their money.

How the Life Cycle Works

The idea of a cycle in a business context is borrowed from biology. In biology, a life cycle represents a series of changes that an organism undergoes, from birth to death. Extended to a business setting, an entity's formation and eventual decline follow a similar path to biological applications.

The life cycle represents the entire existence or life of something in the marketplace. This includes products and services, businesses and corporations , and even industries. In most cases, even the economy goes through a life cycle. We look at each of these in more detail a little further down.

Throughout each of these types of life cycles, there is a development, maturity , and decline phase. As such, the life cycle represents the length of time it takes for a product to be introduced in the market until it is eventually removed.

The life cycle is also commonly referred to as the business life cycle.

There is a misconception that growth tends to stop when a product or business hits its peak in the market. In certain cases, profits may dip or a business owner may consider selling their company during this period. This may be the case for startups and newer businesses.

But this isn't a one-size-fits-all approach. In fact, reaching the maturity stage can often mean that growth continues, as margin improvements and innovations translate to an increase in income. Although growth can still happen when a product hits maturity, a more mature firm with older products may be more likely to issue dividends than firms in the other phases.

This is why investors need to understand the life cycle works. Doing so can help them make better and more informed decisions about how to invest their money. For instance, it's important to note that firms that are predominately in the development phase are generally characterized by lower sales and are more speculative in nature than firms in the growth or maturity phase.

As mentioned above, there are different types of life cycles that take place. The most common ones that are discussed are the product, business, and industry life cycles. But there are others that take place in the realms of finance and investment that people should understand.

Product Life Cycle

One of the most common types of life cycles is the product life cycle . This deals with how long products last in the market from development to decline by different companies, whether they are new/startups or established corporations.

The following are the five steps involved in the life cycle of a product (or service):

• Product Development Phase: This phase includes market analysis, product design, conception, and testing of a product or service. Funds from the initial start-up are typically used for this phase, and if revenue is low and development costs are high, it can be a period of low cash flow for the company.
• Market Introduction Phase: This marketing phase includes the initial release of the product, usually marked with high levels of advertising. At this stage, the company may be spending its capital in the hope of generating revenue in its next phase. The money for this phase usually comes from early investors, company owners, or suppliers.
• Growth Phase: This phase is when sales growth begins to accelerate, characterized by increasing sales year-over-year. As production levels increase,  economies of scale may occur generating better margins. As such, more investment in growth is required. An increase in competition is probable, gross margins might then decline, making the product less profitable on a per-unit basis but the volume is higher. Cash flow and capital might come from profits, bank loans, partnerships , and rounds of investments from venture capital firms.
• Maturity Phase: In this stage of growth, a product will reach its peak demand in the cycle. Further spending on advertising will have little to no effect on increasing demand because it plateaus, and the cash flow streams come from higher profits due to economies of scale, established branding, supplier credit terms helping working capital due to volume buying, bank financing due to the business strong financial health. Private equity firms are interested in this cycle stage and company profiles.
• Decline/Stability Phase: The decline/stability phase arrives when a product has reached or passed its point of highest demand. At this point, demand will either remain steady or slowly decline as a newer product makes it obsolete.

Business Life Cycle

Businesses also have their own life cycle. This means they go through various stages that lead from their creation to their decline—just like products. The following are the most common stages in the life cycle of a company:

• Startup: This phase is characterized by research and development (R&D) . This includes the type of business, the products and services they intend to sell, the costs associated with running the business, and how the company will be run, among other things. A business model is key during this stage, as it helps keep the owner(s) on track and can mean the difference between getting financing/raising initial capital and struggling to get off the ground. Once this is all done, the stage is set and the company can officially launch.
• Growth: This is the stage at which companies distinguish themselves from their competition in the market. Owners tend to (and should) focus on ways to grow and expand. This includes focusing on client relationships, increasing business investment, and seeking capital. Some companies may take on debt to finance their growth or may consider going public through an initial public offering (IPO) . This is also a good time for business owners to identify and address any areas that may challenge or stunt growth.
• Maturity: The business should be established in the market by this point with a strong management team and dedicated employees. Annual growth should be consistent and there may even be opportunities for acquisitions , whether that's of a rival business or a new product line. Company owners may also want to consider spinning off business lines and/or products if this makes sense. Owners may want to reinvest their money for further growth or decide if it's time to cash out and sell their stakes.
• Decline: Revenue may rise and fall during the maturity stage. But if there are consistent drops, there's a good chance it's in decline. In order to save the company, a business owner should look at ways to turn it around. This may come through innovation. If this isn't possible, the only way to move forward is to reinvest or sell. Keep in mind that investment will cost more during this stage than the previous one and selling may be more difficult and come with a lower reward.

Understanding how these stages work can make a big difference to investors and, more importantly, to business owners. Many businesses fail to get off the ground during the startup phase because owners don't take enough time and rush through the process. Those who are well-prepared can ride the waves and better navigate themselves through any challenges that may arise to success.

Industry and Economy Life Cycle

Industries and economies often follow the same stages during their life cycles. These include:

• Expansion: Rapid growth, higher production levels, and lower interest rates occur during this time. Other factors that make up this stage include an uptick in employment, supply and demand of goods and services, and profits. There is the threat of inflationary pressures increasing when the economy expands too quickly.
• Peak: Growth hits the maximum rate during this stage. There are several key characteristics that stand out during this period—notably, a short-term stabilization in prices. This can be followed by a reversal downward. As such, there are normally imbalances that arise during the peak, which require correcting.
• Contraction: A slowdown of growth leads to a correction. This is characterized by higher unemployment , a drop in consumer demand, and higher supplies. Businesses and individuals start to curb costs and spending. Prices reach such a high point in the economy that intervention may be needed, such as increasing interest rates and/or increasing the money supply .
• Trough: This is the point where industries and economies reach their lowest point. For instance, demand wanes to the point where consumers don't spend as freely as before. Although things may be tough, the trough does provide an opportunity for companies and individuals to restructure their finances and their budgets .

The analysis of a business or company can show the stage a company is in and the same is true for an economy. By analyzing the four stages of a company's industry life cycle , financial decisions, like estimating forward-earning ratios and projecting future financial earnings and performance, can be made with greater knowledge.

If we think of the economy and commerce as a "living organization," adapting and transforming to its surroundings, we can find many biological analogies for business challenges, such as "survival of the fittest."

Examples of Life Cycles

Coca-Cola released this diet soda in 1963, decades before Diet Coke's heyday. Tab was the company's first foray into the diet drink market. The drink became popular in the 1970s and early 1980s. But its popularity fizzled out when Diet Coke created a decline in the Tab's market share.

Coca-Cola discontinued Tab in 2020, along with other products that were underperforming . This discontinuation marked the decline life cycle phase for the once-popular diet beverage.

Electric Cars

Electric cars are in their growth cycle as of April 2021. The global Electric Vehicles Market was worth approximately $140 billion in 2019, the most recent figures made available by Facts & Factors, which published a 175-page research report on the electric vehicle market.

The electric car is a prime example of a product in the growth phase. It is estimated that by 2026, the electric car market will hit $700 billion. And it's not just Tesla running the electric car charge anymore. Top market players also include Kia, Hyundai, BMW, Volkswagon, Ford, and Toyota.

What Are the Stages of a Product Life Cycle?

The product life cycle is the time it takes to go from development to decline. Put simply, the life cycle for a product takes place from conception to the time it is removed from the market.

In What Stage of the Business Life Cycle Does Seed Financing Occur?

Seed financing is a form of financing that is used to help businesses, their products, and services get off the ground. As such, seed financing is typically required and used during the first or the development stage.

What Impact Does the Life Cycle Have on a Small Business?

Businesses of any kind or size are affected by a life cycle. This means that if a small business can experience growth and maturity if it makes a product or provides a service to its customers. It can also go into decline, which means the business could fail if challenges aren't properly addressed.

In Which Part of the Business Life Cycle Does Facebook Fall?

Meta (formerly Facebook) may be in the maturity phase. This means that it may be heading into decline or stability, according to various sources, including GWS Technologies.

In business, a life cycle is a way to describe the birth, growth and maturation, and eventual decline of a product or service. By understanding the sequence of events in a life cycle, companies can make better financial decisions. These steps include product development, market introduction, growth, maturity, and decline/stability, and in many ways, mirror the biological life cycle of a living organism.

Managing the lifecycle of a product is helpful in many ways for a company, from getting a better understanding of how to improve on a new product, increasing marketing and sales, and reducing errors or waste, like the packaging.

The Coca-Cola Company. " Tab: 57 Years of Trailblazing ."

The Coca-Cola Company. " Coca-Cola Reshapes Beverage Portfolio for Growth and Scale ."

Facts and Factors. " Electric Vehicles Market Share Projected to Reach USD 700 Billion with 22% CAGR By 2026: Facts & Factors ."

GWS Technologies. " Facebook Organic Reach in the Decline Stage of Its Lifecycle ."

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

• Mobile Forms
• INTEGRATIONS
• See 100+ integrations
• FEATURED INTEGRATIONS
• See more Integrations
• See more CRM Integrations

• See more Storage Integrations
• See more Payment Integrations

• See more Email Integrations
• Jotform Teams
• Enterprise Mobile
• Prefill Forms
• HIPAA Forms
• Secure Forms
• Assign Forms
• Online Payments
• See more features
• Multiple Users
• Admin Console
• White Labeling
• See more Enterprise Features
• Contact Sales
• Contact Support
• Help Center
• Jotform Books
• Jotform Academy

Get a dedicated support team with Jotform Enterprise.

Apply to Jotform Enterprise for a dedicated support team.

• Sign Up for Free

How to Write a Business Plan

How to prepare for the 4 stages of business life cycle

No business stays the same forever. Yours will undergo a continual evolution , transforming from an idea to a full-fledged company. In the process, your startup will go through various life-cycle stages. Each is critical to your ongoing success, and each brings unique opportunities and challenges that require you to make critical decisions. 

You should prepare your company for the following four life-cycle stages:

You should prepare your company for the following four life cycle stages:

Seed life cycle: development, startup life cycle: launch, expansion life cycle: grow, exit life cycle: pivot.

In the development stage, you need to nurture your idea to grow it into a full-fledged small business. Test your business idea for viability, sustainability, and demand. Research and feedback will help determine if this life cycle can — or should — continue.  

Other challenges you’ll face in this stage include obtaining resources, such as time and money, to pursue the business. To address this challenge, identify available talent and leadership who can help guide your business idea to the next life-cycle stage. Often, the money will come from bootstrapping or from a seed investor who understands companies at this stage.  

Your business exists because all indicators during the seed life cycle pointed to its value and viability. Now it’s time to turn the idea into a legitimate business that has a specific product or service to sell.   

As part of this life cycle, business owners need to manage a strategy to gain awareness, new customers, and revenue for the business. Begin to establish healthy product lines, distribution channels, and a business structure at this stage. While leveraging existing research, focus on the tactics that can help you satisfy the expectations of your target customers and become profitable. 

The main challenge here is to not burn through your funding. This growth phase requires you to keep a lean budget and learn how to do more with fewer resources. Managing your cash flow effectively will help your investors feel confident about getting the return they expect. 

If you’ve managed to get through the first two cycles, you’re not running a new business anymore. You’re now adding customers, generating consistent income, and covering operating expenses. Your business is entering an expansion stage and may now be seeing the impact of the competition or changing market conditions and customer preferences. 

This stage is a good time to plan how you’ll expand into new market segments and earn larger audiences. This requires keeping a close watch on your current financial, management, and operational processes for ways to add efficiency. You may need additional talent to help you scale the business in this growth stage. 

Many factors will challenge your efforts to gain greater market share, including changing audience interests, economic cycles, and regulatory measures. Here again, thoughtful research can help you expand into new products and services or geographic areas. 

Beyond significant preparation and research, this life cycle requires financial support from sources of money such as joint ventures, licensing, or new investors.

It’s important to have an exit strategy, whether you intend to sell your business or merge with another company. Although some well-known brands have been going strong for decades — some for a century or more — most businesses going on forever. At the very least, you may want to attempt a pivot. This could involve making wholesale changes to your product offering to gain a bigger market.

If you think you’ve reached the final stage of the business as you originally envisioned it, you can merge with another company or put the business up for sale. No matter what you choose to do, the exit life-cycle stage involves research, a realistic company valuation, and a transition plan to address how you’ll exit. 

A proper valuation of the business includes assessing business operations, management, and competitive barriers to prove the company’s worth to potential buyers. You’ll also need to create a legal buy-sell agreement. The transition plan should address how you’ll take care of the employees and other assets you’ve nurtured throughout the business life cycle.

Unique aspects of business life-cycle stages 

Each of these business life-cycle stages may not be straightforward or take place sequentially. Some go through the stages quickly with the sole intent to build the business and sell it to the highest bidder. This often happens with tech founders who hope their startup catches the eye and pocketbook of a large tech firm. Other companies focus on slower business development, opting not to expand as much or as quickly. 

The timing of life-cycle stages may be less relevant than a company’s ability to adapt to changes that signal the need to move to the next level. Knowing when to make these moves often determines whether a business is a success or failure. 

You’ll also need to pay attention to external trends and factors in order to overcome ever-changing challenges and take advantage of opportunities. Conduct regular research and assessments, make the most of feedback mechanisms, update business plans and strategic roadmaps, and seek advice from business advisors.

Thank you for helping improve the Jotform Blog. 🎉

• Startup Growth

RECOMMENDED ARTICLES

How to write a business vision statement in 8 steps

How to run a car wash service

Use your business plan to see if your business idea works

How to write a business mission statement in 5 steps

How to build a COVID-19 business continuity plan

When and how to make a lean business plan

5 types of organizational structures for entrepreneurs

The 8 forms every small business needs

How to do a competitive analysis in 7 steps

How to plan for the 5 stages of small business growth

10 best recession-proof business ideas

Five examples of business goals and how to set them

Addressing key challenges through the business life cycle

How to become a tattoo artist in 10 essential steps

Align your business plan with each stage of growth

How to write an effective executive summary

The 5 toughest things entrepreneurs face when starting a business

How to develop action steps from your SWOT analysis

How to write a compelling business plan for a new market

How to tackle critical startup development issues

Crafting a mini business plan for a crowdfunding campaign

5 tools that help with writing a business plan

The best business plan software to grow your business

Send Comment :

1 Comments:

More than a year ago

Good afternoon Sir, My name is Darlingtonia Litondo from African in a country called Zambia.Age of about 21,born in a family of two,my elder brother and I. I want to have this opportunity to talk to you about my business plans that I have been having ever since I was 17 of age. Business plan 1. »Opening up a restaurant,more like Hungry Lion,but it shall be called"The Laughing Hyena".The meaning behind this name is to drive the hunger of people in the emotion as they're eating,making entertainments to them as they're eating they should enjoy the food,I got it from Hyenas themselves, when you look at these animals called hyenas they don't eat quietly but so noise and loud.It is the one am applying here,there should be music,and some performances to be done. Even the cooking of food is much way different from other restaurants.I will explain more you reply to this comment I have just send to you. I have read this Advice, it has helped me not to give up on dreams am having in but am having the problem of NO resources for my business plans.

• Search Search Please fill out this field.
• Building Your Business
• Becoming an Owner

The 7 Stages of Starting and Running a Business

The Lifecycle of a Business

Darrell Zahorsky is an expert in search engine optimization (SEO) and marketing. He has worked for companies and clients such as Blackberry, ADP, and Subway.

The Seed Stage

The start-up stage, the growth stage, the established stage, the expansion stage, the decline stage, the exit stage, frequently asked questions.

Hero Images / Getty Images

A small business goes through various stages of development. Your challenges will change and require different approaches to be successful. You need to be able to anticipate upcoming challenges and have strategies to succeed at each stage of the business lifecycle.

Key Takeaways

• Start with one idea while working to establish a customer base and market presence
• Focus on expanding and growing your business even after it becomes profitable
• Work with valuation experts and tax professionals if you're planning on exiting your business

The seed stage of your business lifecycle is when your business is just a thought or an idea. Most seed-stage companies will have to overcome the challenge of market acceptance and pursue one opportunity. Don't try to take on too much at once.

At this stage of the business the focus your focus should be on making sure your idea works well with your skills, experience, and passions. You'll also need to decide on a business ownership structure, come up with a business plan, and get funding.

You might be able to self-fund your business, get investments from friends and family, or apply for government grants. If you have some sort of existing client base for your business already, you may be able to get them to invest.

Once your business legally exists, you'll need to make sure you can provide whatever products or services you're planning on selling, and establish a customer base and market presence. You might need to change your business strategy or raise more cash if your expenses are higher than anticipated.

Try not to burn through your cash too quickly. It may take longer than you anticipate for your business to become profitable or break even.

If your business is growing, that means that your revenue and customer base are also likely growing. You might need to hire and train new employees to handle with the additional workload that comes with a growing business.

You may also need to invest additional money in the company to maintain your success. If you don't have enough cash available, you might be able to take out a loan through the Small Business Administration.

It's still a lot of work to maintain your business once it's become self-sustaining or even profitable. Make sure you're maintaining or growing your revenue stream by keeping up with any new developments in the industry or changing customer preferences.

If your original business is doing reasonably well, or if it can't grow anymore without a new customer base, it may be time for the business to expand into a new market. In some cases it may be easier for you to expand into a small, niche market, because a larger market is likely to be more competitive and may take longer to break into.

Make sure you do plenty of planning and research before deciding where to invest your resources. You may want to focus on markets that are related to your existing business.

In the decline stage, sales, profit, and cash flow all decline. A business owner might be forced to sell or close their business if they cannot sufficiently cut costs or increase their profits. A business might be able to avoid declining by reinventing itself, or branching out into new markets or technologies. That way, it can reposition itself and begin new growth in the marketplace.

There are a few ways you might leave a business that you started. You might be able to sell your business and start a new venture, the business might not have worked out, or you might be ready to completely retire from work.

Can You Sell Your Business?

Even though it might have taken years of hard work to build the company, you'll need to consider its real value in the current marketplace. A qualified valuation expert can help you figure out the fair market value of your business and may be able to help you come up with a strategy to help you increase the profitability of your company before you sell.

Closing Your Business

In some situations, you may need to close rather than sell your business. If you have any partners, you'll need a written agreement when closing the business. If you have an LLC or a corporation, you need to legally dissolve it.

You'll need to cancel any registrations, permits, licenses, and business names as well as your Employer Identification Number. Make sure you notify federal and state tax agencies that you are closing your business.

Make sure all your financial obligations have been met. Pay any employees you might have, and handle final returns of income tax and sales tax. You'll need to maintain business documents after the business has closed, including tax and employment records.

You'll need to keep tax and employment records after your business has closed. You'll typically need to hold onto these records for three to seven years.

If you can, you'll also want to consult with a tax expert or financial advisor while closing out your business. That way you can make sure you're meeting all of the necessary requirements.

What Is the Stage After Start-Up?

The stage after the start-up stage is the growth stage. You'll need to make sure your business begins to grow a revenue and customer base.

How Do I Start My Own Business From Scratch?

You'll need to do market research to find out if your idea has the potential to be profitable. You'll also need to write a business plan and figure out how to get funding for your business, whether it's through investors, loans, or self-funding.

U.S. Small Business Administration. " Loans ."

CFI. " Business Life Cycle ."

U.S. Small Business Administration. " Close or Sell Your Business ."

Plan Projections

ideas to numbers .. simple financial projections

Home > Funding > Business Life Cycle Stages of a Start-up

Business Life Cycle Stages of a Start-up

A start-up business will usually go through a number of identifiable stages during its lifetime. The four main stages are the start-up stage, growth stage, maturity stage, and the decline stage collectively known as the business life cycle stages.

Sales and the Business Life Cycle Stages

The particular stage a business is currently operating in is determined by its level of sales revenue relative to previous periods; this is demonstrated in the business life cycle stages graph below.

Each of the four business life cycle stages has its own characteristics and problems and determines among other things the particular funding and working capital requirements of the business at that point in time.

The fours stages are discussed in turn below.

Start-up Stage

The start-up stage is the first of the business life cycle stages and takes the business from its initial idea through to launch and first sales.

While the business needs substantial funding, its cash position is weak and unfortunately the reduced equity base together with an inexperienced management team, lack of collateral, and lack of ability to make repayments, make it difficult for a business to obtain debt finance . As a result during this stage of its business life cycle the business is likely to have to rely on alternative funding sources such as, for example, bootstrapping , personal funds, loans from friends and family, and grants to fund its operations.

Growth Stage

The growth stage is the stage during which the business starts to establish itself in the market place and gains customers.

During the growth stage sales are substantial and growing rapidly. The business starts to generate trading profits for the first time as the sales now exceed operating expenses.

Unfortunately sales growth leads to a substantial increase in the working capital requirement as the business starts to increase its inventory levels to satisfy customer demand and to offer credit terms to customers, increasing accounts receivable.

While the business still needs substantial amounts of cash to fund growth, its profits are starting to increase the equity base, the management team are more experienced, and collateral and ability to repay have improved. The business is therefore able to seek out debt finance in addition to equity finance to fund its operations.

Maturity Stage

The maturity stage is the third of the business life cycle stages during which the business is truly established in its industry with a proven business model.

During the maturity stage the sales growth rate has slowed and sales and profits have stabilized. The business no longer needs to invest so heavily in additional sums for property, plant, equipment and inventory.

The profits have improved the equity base of the business which now has an experienced management team and sufficient collateral to raise substantial amounts of debt and equity finance if required. The business may even have surplus cash and uses this to pay dividends to equity shareholders.

Decline Stage

The decline stage is the final stage of the business life cycle model where the business starts to lose market share and sales start to decline.

Ideally the business will recognize the start of the decline stage and take action such as investing in its current market place to maintain the business in a steady state in its maturity stage, or investing in new opportunities to move the business into a further growth and expansion stage, or exiting the business in a controlled manner.

If no action is taken the business will continue into the decline stage, sales will fall and unless operating expenses are reduced, eventually losses will be made.

The declining sales figures reduce the amount of cash available. Unfortunately businesses in this stage often try to maintain dividends which, together with the trading losses, weaken the equity base and the ability of the business to borrow additional funds. In addition the banks will often recognize that the business is in its decline stage and be reluctant to lend additional debt finance.

Business Life Cycle Stages Summary

Each of the four business life cycle stages has its own characteristics, problems and goals. The start-up stage is about survival and building a foundation for the future, the growth stage is all about increasing sales and in particular accelerating the sales growth rate, the maturity stage is concerned with maintaining stable profit levels, and finally the decline stage is about trying to reverse the decline by exploiting current and new markets.

By adjusting the assumptions used to reflect the current goals the financial projections template can be used at any stage in the lifetime of the business; however, in order to be able to plan effectively a business needs to understand which of the four business life cycle stages it is currently in.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

You May Also Like

Product Life Cycle Explained + Examples

Arlene Soto

13 min. read

Updated May 11, 2024

Everything has a shelf life. Whether it’s a car, your phone, exercise equipment, or anything else — eventually its use and sales potential will run dry. That’s because anytime that a product enters the market it follows specific product life cycle stages.

The stages of a product life cycle take it from being introduced as the next big thing, to something that everyone has and eventually everyone has forgotten about. This process is constant, meaning that every business needs to be aware of how it works and how it can affect their products.

Let’s look at the ins and outs of the product life cycle and how you can leverage it to manage your business.

• What is a product life cycle?

The product life cycle is the length of time from when a product is introduced to the consumer market up until it declines or is no longer being sold. This cycle can be broken up into different stages, including: development, introduction, growth, maturity, saturation, and decline. The full product life cycle is typically used to determine when it’s appropriate to increase advertising, adjust pricing, explore new markets, redesign packaging and even adjust your messaging. 

• What are the stages of a product life cycle?

Each stage has its costs, opportunities, and  risks , and individual products differ in how long they remain at any of the life cycle stages. While there are differing opinions regarding if there are four, five, or six stages of the product life cycle, each option includes the following steps. 

1. Development

The development stage of a product life cycle is the research phase before launch. Technically, this falls outside the definition of a product life cycle, but it’s a vital step to be aware of. In short, it’s used to determine the viability of a product, confirm when it should go to market and how to approach your official launch.

At this stage, costs are accumulating with no corresponding revenue. Some products require years and large capital investment to develop and then test their effectiveness. Since risk is high, outside funding sources are limited. 

Existing companies often fund research and development from revenue generated by current products. For startup businesses, this stage is typically funded by the entrepreneur from their own personal resources. For those developing a new product, it may be wise to land on a  minimum viable product  (MVP) as early as possible. 

This can be as minimal as a sketch or as complex as a sample or prototype version of the product itself. You just need enough to show how your product will work to  potential investors  and customers. The earlier you can validate its market potential, the more likely you’ll be to land investment and launch.    

2. Introduction

The product life cycle introduction stage is when your product is first launched in the marketplace. It’s where you step beyond the product itself to  develop a market  for the product and build product awareness. Here, you’ll work to carve out a  target market , conduct a market analysis to understand the competitive landscape, and ideally land your first few sales.

Marketing costs are high at this stage, as it is necessary to reach out to potential customers. The best approach when promoting a new product is to focus on testing distribution channels and messaging. While your advertising budget may be hefty, you can strategically leverage it to identify  marketing channels  that lead to higher conversions. This is also the stage where intellectual property rights protection is obtained. Depending on your market position, product pricing may be high to recover costs associated with the development stage. It also may be lower, meaning you’ll initially be running at a loss until you gain traction. This is where landing initial funding efforts and mapping out  your cash runway  are vital to the success of your product.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

In the product life cycle growth stage, the product has been accepted by customers, and you are now striving to increase market share. That means that demand and revenue are growing, ideally at a steady rate. How long you achieve steady growth fully depends on your product, the current market landscape, and the adoption rate of customers.

If you’re entering an already crowded market with a product, you’ll likely  see competitors  react fairly quickly. If you’ve entered a market with less competition or are first to market in a breakout industry, you’ll likely see a slower response by new or current entrants. 

In either case, your response during this phase is to fine-tune your messaging, solidify your brand presence and expand into new distribution channels. This also may be the time to consider adding additional services to support and further differentiate your product. Things like support services, add-ons, or insurance packages are just a few options to consider. Having these additions available, or at least in progress, can better help you react to competitors and extend the return on investment (ROI) from a given customer.

4. Maturity and saturation

The mature stage is when sales will level off. This doesn’t mean you aren’t still growing, you just won’t see the same level of rapid growth as before. Typically at this point, you will begin to lower prices, offer free additions or make other adjustments to keep your products competitive. 

At the same time, you’ve also become more efficient. Production costs tend to decline, costly mistakes in the manufacturing process can now be avoided. Even your marketing expenditure is likely more refined and effective at this stage. So, while you may not be growing in volume, you’re likely at your most profitable in this stage.

However, it’s worth remembering that your competitors have likely now solidified their own offerings in this stage. This means that they have taken a portion of the market, further leading to the flattened growth of your own product. Most consumers are likely already using a version of your product and have begun  developing brand preferences .

This is when any adjustments to advance your product or the services that accompany it, should be made. If you’ve hit the point where any real adjustments simply aren’t possible, then your messaging, services, and add-ons should take full focus.

You may only be able to make incremental changes but can still look to market it as a refresh accompanied by new features or benefits. Video game consoles are a great example of this, where incremental updates to hardware are often touted to sell new consoles. The  Nintendo Switch OLED  edition is the latest example, where the only update is a new, slightly larger, and crisper screen. 

The decline stage for a product occurs when the market becomes saturated, competition peaks, and customer needs start to change. Companies at this stage have several options: 

• Discontinue the product
• Sell the manufacturing rights to another business
• Find new uses for the product
• Tap into new markets

It’s at this stage of the product life cycle that you’ll really need to weigh the costs and benefits associated with each option. Are you really capable of revising the product? Are there other features you simply haven’t tapped into? Is there a market you haven’t looked into that could benefit from your product?

If you can, look to run different  forecasting scenarios  during this time to see what each decision could lead to depending on product performance. Hopefully, you have other products to help support your business when one declines. Ideally, you’ll have multiple products or iterations running at different points in the product life cycle. 

• How do you know what stage of the product life cycle your products are in?

There’s no guarantee how long a product will stay in a given stage. This can make it difficult to know what stage you’re in and when you’ve entered the next one. 

Knowing the characteristics of each stage can help you better identify your current position. However, it’s often easier to look back at performance to determine where your business is and where it’s headed. You can leverage  this actual performance  to then help paint the picture of what to expect in the future. In fact, you can tie this exercise into your financial forecasts and compare them directly to your financial statements.

This process will ensure that you are always considering what comes next. It will give you a more informed perspective of the future, while also helping you avoid poor strategic decisions. This will also help you better understand the value of a given stage, making it far easier to apply the same methodology to other products. 

• How to use the product life cycle to manage your business

Knowing what stage you’re in can effectively help you develop a strategy for your product. As we explored above, the stage has just as much influence over your decisions as it does sales performance. Here’s how you can leverage your understanding of the product life cycle stages to manage and grow your business. 

Establish authority

During the introduction stage, you can look to position your product as the cheaper, better, or any number of benefits over the competition. This is when you not only establish the brand for the product but your business as well. 

Do you want to be known as the low-cost alternative? The eco-friendly or local solution? Or maybe you want to focus on  your company mission  and how your business operates.

Whatever the case, this is the stage where you solidify how you stand apart. 

Set a pricing strategy

Each stage has a potential impact on your pricing. The introduction stage is all about positioning against competitors and trying to offset development costs. Growth can go any number of ways depending on availability, additional features, support, and other benefits. Maturity and saturation may be directly impacted by competitors, leading to further advancements and price decreases.

The decline stage will almost ensure a price decrease or a return to the introduction stage with a new version of the product. This will  start the pricing conversation  all over again, with the performance of the original product directly influencing your initial price position. The better you understand where your product sits in the cycle, the better you can prepare and adjust pricing when necessary. 

Create a marketing strategy

The performance of a product can directly depend on how well you market it. Thankfully, each stage of the product life cycle helps you test and refine your marketing strategy. During the introduction stage, you’re exploring different channels, testing different ad mediums, and working to connect with a target audience. The growth stage is when you’ve refined your channel selection, found winning copy, and streamlined your spending.

The maturity and decline stages are another opportunity to test new channels and adjust your strategy. Maybe you introduce a blog, try selling the product on a channel you avoided with new messaging, or further test copy and image variations to increase your return. 

In any case, each stage presents more opportunities to research and test new concepts that help solidify your  marketing strategy . 

Extend or vary product use

Knowing the stage your product occupies and what comes next can help you better prepare to make adjustments. For example, if you’re in the growth stage and begin to see signs of maturity or even decline, you can begin exploring ways to extend the value of your product. As we’ve said before, this could involve doing a refresh, adding on additional services, or looking to  tap into adjacent markets . 

• What factors affect the product life cycle stages?

How you choose to create, position and market your product are all elements under your control in the product life cycle. However, it’s worth noting that there are external factors that can directly influence how well your product performs and how long it sits in a given stage.

Ease of entry

How competitive the market you’re entering a product into can directly influence its success or failure. It can also influence the number of competitors that attempt to enter the market. If barriers to entry (number of competitors, expenses, market size, technology) are low the product life cycle is more likely to be short. If they’re higher, making entry more difficult, you’re more likely to see an extended product life cycle.

Advancements in technology

If you’re working within an industry or country that experiences a rapid rate of technological advancement (ie. phones, computers, etc), the life cycle of your product is likely very short. On the other hand, some products, locations, and industries only experience limited advancement, meaning that a single iteration may be relevant for far longer.

The key here is to understand how quickly technology changes, what changes are relevant for consumers, and when an iteration will be necessary to stay competitive. A good example of this in action is the  screen resolution of televisions . 

While some, incredibly expensive models, can achieve 8K resolution, the majority of sales and support are focused on 4K resolution. Depending on your market position, it may make sense to be the market leader and focus on high-end sales. On the other hand, if you deal in mid-range televisions and monitors, it likely makes more sense to keep your products at 4K output with a few options for 8K to test if it’s relevant.

Rate of market acceptance

Continuing the TV example, the life cycle of your product also depends on how quickly it’s accepted by consumers. 4K televisions have been available for years at this point, but are only now becoming the baseline. This is due to not only the price of earlier models, but support by streaming services, consoles, traditional cable, and other hardware manufacturers.

This has led to a somewhat lengthy product life cycle. The introduction stage took years for it to officially become accepted by the market. Additionally, the promised replacement of 8K is potentially years away, meaning that the growth and maturity stages might be even longer. 

It’s often viable to explore historical product life cycles to see what the acceptance rate may be. And keep in mind that the benefits of a longer or shorter life cycle fully depend on the stage. If it sits in the introduction stage for too long, you may not see an effective return to cover expenses. However, if you expect it to break into a lengthy growth stage, it may be worth it.   

Economic forces

The actual state of the economy can directly impact the duration of a product life cycle. A sudden dip, brought on by a  global pandemic , for example, may stretch out the introduction phase due to less or selective spending by consumers. On the other hand, the recovery of a financial crisis can also shorten an introductory and even growth phase due to a mass increase in spending.

This is a very broad example, and it fully depends on your target audience, the impact on your industry, etc. Just keep an eye on market trends and note any changes to ensure you’re prepared to adjust accordingly. 

Keep your full product life cycle in mind 

Understanding the product life cycle is a vital part of managing and growing your business. It can help you devise a more detailed roadmap for your business, make better strategic decisions and even help you create more accurate financial forecasts.

If you’ve  created a business plan , make sure that exploring your market position is part of your  regular plan reviews .

You’re likely already looking into everything involved in the product life cycle, but it’s well worth taking the time to solidify what the position of your product is on a regular basis.

Arlene Soto is the director of the Small Business Development Center at Tillamook Bay Community College. She is the former director the Southwestern Oregon Community College Small Business Development Center Director. She is responsible for outreach to Coos, Curry and Western Douglas Counties in Oregon to provide small business development services through free, confidential business advising and low-cost training programs. Arlene has been working with businesses in the accounting field since 1976 and in management since 1988. She is a Certified Management Accountant and a NASBITE Certified Global Business Professional with a Master’s degree in Management from Marylhurst University and a Bachelor’s degree in accounting from Portland State University.

Table of Contents

• Keep your full product life cycle in mind 

Related Articles

8 Min. Read

21 Best Market Research Resources for Small Businesses

6 Min. Read

How to Tap Into Underserved Markets

5 Min. Read

Why Niche Audiences Are Important and How to Find Yours

4 Min. Read

Industry Research Versus Market Research: What’s the Difference?

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

• Describe the different purposes of a business plan
• Describe and develop the components of a brief business plan
• Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

• These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
• Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

• You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
• Would you have started the Laughing Man Foundation?
• What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

• What steps should the new restaurant take to create a new business plan?
• Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

• 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
• 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
• 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
• 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
• 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
• 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
• 54 Foodstart. http://foodstart.com
• 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

As an Amazon Associate we earn from qualifying purchases.

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Access for free at https://openstax.org/books/entrepreneurship/pages/1-introduction

• Authors: Michael Laverty, Chris Littel
• Publisher/website: OpenStax
• Book title: Entrepreneurship
• Publication date: Jan 16, 2020
• Location: Houston, Texas
• Book URL: https://openstax.org/books/entrepreneurship/pages/1-introduction
• Section URL: https://openstax.org/books/entrepreneurship/pages/11-4-the-business-plan

© Jan 4, 2024 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.

• SOAP Web Services for Project Management

Project Version 2

Service to operate on a project and maintain the project related data. A Project represents the effort and resources required to achieve a significant business objective within a specific, usually finite, time frame. Projects are used to plan, track, manage and control both the financial aspects and the work effort required.

Life Cycle Status: Active

QName: {http://xmlns.oracle.com/apps/projects/foundation/projectDefinition/publicService/maintainProjectV2/}ProjectDefinitionPublicService

Service WSDL URL: https://servername/fscmService/ProjectDefinitionPublicServiceV2?WSDL

Logical Business Objects

Projects : Project Foundation : Project

Relationships

The following table describes how this service data object is related to other service data objects or business object services.

getProjectOrganizationByTemplate

Isprojectkeyunique, updateproject, createproject, getprojectstatus, changeprojectstatus, findproject, findprojectsupdatedafter, mergeprojectdata, getdfltobjattrhints, getservicelastupdatetime, getentitylist.

Returns a list of valid project-owning organizations for a project template.

Request Payload

Response Payload

Checks if the attributes in the project key are unique.

Updates a project. WARNING: The operation does not support all the attributes. Please read description for each payload attributes before using this service operation.

Creates a project using a project template.

Retrieves the current project status and the next allowable statuses.

Changes the status of a project.

Retrieves details for a project.

Finds projects that meet the specified criteria.

Searches for a list of projects that were updated after a given date.

Updates project attributes and descriptive flexfields. Assigns and updates project classifications. Use one of the following parameters to identify the project you want to update: 1. ProjectId 2. ProjectNumber 3. ProjectName If you provide valid values for more than one parameter, then the project is identified by using only one parameter in the order in which they are listed above.

Retrieves user interface hints, such as the service data object label and object attribute labels, for the specified service data object and locale. As a prerequisite, invoke the getEntityList operation defined on this service to get the list of possible values for the viewName request payload element.

Returns the date and time when the schema files referenced in the service definition last changed.

Gets the list of service data objects defined on this service.

The following tables list the privileges required to perform the service operations, and the duty roles that each privilege is granted to.

Service Operations to Privileges Mapping

Privileges to Duty Roles Mapping

Duty Roles to Duty or Job Roles Mapping