5 Stage Of Business Life Cycle – A Beginners Guide

business life cycle

Once you make up your mind to start a new venture, you are already in the business life cycle. You will begin with the idea of a startup, and if you succeed, you will go all the way to the growth and maturity stages. That is why it is important to understand the business lifecycle. 

Each business has its own set of challenges. However, when you analyze each stage, you will learn some of the unique challenges that you need to deal with. 

You should be flexible in thinking and adapt your business strategy as you move ahead. The strategies for retaining your market share and attaining growth are very different from those of market penetration. 

5 Stages of the Business Life Cycle 

Research by the Genome Report shows that 90% of the startups that fail are due to self-destruction. It could be due to self-destruction or the bad choices of the founders and not bad luck, as some people may put it. 

There are some stages within the business lifecycle that are under your control. When you understand your position in the business lifecycle, you will be able to stay ahead of the game. 

You will be able to anticipate the potential obstacles and challenges for business. It depends on your current business stage and the one you are about to transition to. 

Therefore, as your business continues to grow and develop, so do your business strategies, objectives, and aims. That is why it is crucial to understand your current business life cycle.

1st Stage: Seed & Development

Seed & DevelopmentThis stage marks the beginning of the business life cycle before you even begin to exist officially. You have your idea in mind and you want to launch your business. The first thing you need to do is assess the viability of your startup. 

You should garner opinion and advice about the potential of your business idea at this stage. The main sources of information include your business associates, industry specialists, colleagues, family, and even friends. 

The success of your business will depend on several factors including your abilities, readiness of the market that you are joining, and the available finances. This phase is more of a soul-searching one. 

You need to take a few steps back and check whether your business idea is feasible. You should also confirm whether you have what it takes to make your business to succeed.  

2nd Stage: Startup

StartupAfter thoroughly canvassing and testing your business idea, you can now move to the second stage of the business cycle. This is the time of making everything official and launching your business. 

If you make errors at this stage, it will have adverse effects on your company several years down the line. It is one of the main reasons why 25% of all startups don’t get to the 5th business life cycle stage. 

The most important thing here is adaptability. You spend most of your time here tweaking your services and products based on the feedback that you get from your initial clients. You may find yourself making so many changes in your initial offering until you get confused. The good thing is that you will find clarity at the end of everything. 

3rd Stage: Growth and Establishment

Growth & Establishment At this stage, your business will be generating some consistent income and taking on new customers regularly. Your cash flow will begin to improve because the recurring revenue will assist you to cover for the expenses. You should now begin to expect your profits to improve steadily and slowly. 

The only challenge here is dividing your time among the many new challenges that need your attention. You will need to accommodate a growing workforce, handle competition, attend to clients, and manage the increase in revenues. 

At this point, you will need to hire smart people who have the complementary set of skills that your business needs. You will take most of your time handling the recruitment process. 

At this business lifestyle stage, you should begin playing the role of the company head. You should also identify those staff who can assume bigger responsibilities as the company continues to grow. 

4th Stage: Expansion

ExpansionAt this business lifecycle stage, running the enterprise will begin feeling like a routine. Employees are handling most of the areas but the business hasn’t established its presence within your industry firmly. 

You need to broaden your horizon by entering into new geographical locations and expanding your offerings. At this stage, businesses often experience rapid growth in terms of cash flows and revenues. 

However, don’t be cheated to become so comfortable at this stage. In business, if you aren’t moving forward, then you are moving backward. If you don’t have that constant desire to expand, you may get caught offside. 

This stage also comes with the risk of expanding so carelessly. Careful planning will help you to experience continuous success. Evaluate the resources that you have, and be realistic about the cost and effort and their potential returns. 

Be keen on how the expansion can influence your current product quality. The new offerings may mean changing your business strategies. If you take on too much, your venture may end up collapsing in this crucial business life cycle. 

5th Stage: Maturity and Possible Exit

Maturity & Possible ExitAfter successfully navigating through the expansion business life cycle stage, you will begin to realize stable profits within your company. Some companies enjoy steady growth, while others struggle to get to the same heights. 

At this stage, the entrepreneur can either push for further expansion or exit the business. If you choose to expand, you need to confirm whether your entity can sustain further expansion. Also, check whether there are expansion opportunities in the market. 

Check whether the brand is financially stable to cover for any unsuccessful expansion attempts. You also need to have leaders who are up to the anticipated expansion. You may be forced to bring in new business leaders who have the capacity to navigate through the new challenges. 

Other people look to move on at this stage through a sale. It can either be a full or partial sale, depending on the type and size of the company. Such a negotiation can bring in a whole new journey. 

How To Identify The Current Stage Of A Company? 

Knowing the different stages of a business is one thing, but applying that knowledge to work is a little different. Whether you are an entrepreneur or a C-suite employee, it’s important to know how to identify which stage your business is in. Here are some quick tips to help you identify the current stage of your company.  

1. The Age of Your Company

The first step toward identifying the stage of a company is through its age. Evaluate the number of years the company you work for has been in the marketplace. Companies that have been around for more than a few years and haven’t completed a decade yet are approaching the growth stage. These companies have just finished their Launch phase and are starting to grow. Companies spending more than 10 years in the marketplace are in their success stage. 

2. Check Out the Process

What’s the process of operation in your company? Is your company constantly planning, developing, and changing its work process? If yes, it’s between the first two stages of the business life cycle. Businesses in the launch and growth stage often refine and implement the best procedures in the industry. But, if your business already has a refined and well-tried and tested method for operating, it’s in the last two stages of the business. 

3. Analyze the Clientele 

A company in the matured stage usually has a clientele that does word-of-mouth marketing for them. Clients have used their products for years, and they recommend these products to other potential users in need. But, if your business is still struggling to build relationships with prospective customers or hasn’t built a fundamental B-2-B or B-2-C relationship, then it’s likely to be in the first two phases. 

4. Check Your Company’s Investments

To know which stage your company is in, you’ll have to go through the assets they are investing in.  Where does your company put its money? Companies that are in their growth or success stage are likely to invest their profit into the research and development of new products.  However, companies that don’t have enough additional revenue for investment are probably in their decline or maturity stage. 

5. Review Predictability

Some companies have relative daily predictability. These companies are making organizational changes through different periods and are in their success stage. If it’s easy to predict what the business will do in the next quarter or in the next year, then it’s sure that the business is in its maturity stage. Businesses that aren’t eating their revenue goals and ones that are difficult to predict are possibly in their decline phase. 

6. Assess Revenue

Assessment of business revenue also helps identify the stage a business is in. For example, if a seasoned company has been seeing a decrease in its revenue, then it’s in its maturity or decline phase. On the other hand, a new business with only a few years of age, bringing in hardly any revenue, has just left its launch phase and is entering its growth phase. 

7. Competitors

Any industry has businesses competing with each other at different levels. If you know who your business’s competitors are, it’ll be easy to tell which stage your business is in. When your business has a clear competitive edge over other market competitors, then your business is possibly in the growth or the success stage.


It is crucial to understand how you can navigate from one business life cycle to another if you want to succeed. However, some businesses rise very fast and may not go through all the above stages. Whatever the case, you need to understand all the above stages if you want to be successful in business. 

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