The Life Cycle of a Business AND its Owner

Business success comes at the end of a lot of hard work and your business has evolved and grown over time. But how does a business actually grow, and what stages does a business go through during its life cycle? Below I examine what I call the four phases in a businesses life cycle.

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a. The Establishment Phase: All business owners go through this. 

Getting enough sales in the door to balance out the cash flow of the business so that it becomes positive. Understanding how the business operates, how the businesses finances work and, of course, managing staff. It can take some time to develop the skills to be a Confident, Competent and Compliant within their business. From what I see, it generally takes12 to 18 months to establish a business and start to move out of the establishment phase to the next stage.

b. This next stage I call the Consolidation Phase. In the consolidation phase, business owners generally have the skills needed to run an effective business. 

In other words, they are Confident and Competent business owners, well from an operational standpoint anyway, although they may not yet be fully compliant with everything required of a business owner to be able to take the next step, and although they are not far away and this will generally be achieved during this phase. The best way to judge if your business is ready to move to the next stage is that you notice that your cash flow has started to settle down, staff are well trained and work more or less unsupervised and you are generally starting to make a profit and, in some cases, a really good profit. You’re starting to build wealth.

c. Now you move into the Investment Phase. In this phase, you start investing into your business so that it can eventually run without you. 

Building your teams and expanding your business very quickly as the effects of leverage start to kick in. You are becoming true business operators rather than self-employed operators. The true test being when you leave the business for a few weeks and it runs smoothly or better without you. Your business is now truly valuable. Some business owners will never make it to this stage. They will stay within the consolidation phase for various reasons and this is fine. In the end, they are the owners of their business and really do run it as they see fit or within a comfort zone that suits them. But in all cases, eventually everyone moves through to the final stage.


d. The Exit Phase. At some stage in the future, everyone will sell their business and move on. 

It is just the way it is, so there is no use in not thinking about as you move your business through the four phases. It is best to confront it and plan for it right at the start. Generally speaking, this is when you realize all of your hard work and hopefully make a nice enterprise profit with the sale of your business. Business owners who have taken their business through the Investment Phase and now have a business that can run without them will, in almost all cases, sell their business for a much higher price. Their business is just more attractive to a buyer. The one thing that we all know for sure is that, at some stage, we will look to sell so we should be planning for the exit phase in a deliberate and positive manner. Done and prepared for well, it should be a very rewarding phase to progress through.

Have a think about what phase your business sits in at the moment and think about how you can progress through the phase until you ultimately exit. 

Goodluck with it all and I wish you all the success with the development of your business.