Understanding Growth and Expansion During The Business Life Cycle
Though there are numerous industries and ways of conducting business, a fundamental base of all business is a business life cycle. A business life cycle is the progression of your business in phases that follows your product or service from creation to maturity to decline. Your business strategy should correlate with where you are in the business’s life cycle. Two critical stages that we will focus on in this article are Growth and Expansion.
Growth is when organizations start to see profit, an increased and consistent cash flow, and their products and/or services have added value to the marketplace. This is also when product development, creating a solid team structure, and customer development will happen.
Expansion is when GDP (gross domestic product) has a consistent growth for at least two or more quarters and it in turn allows organizations to allot time to development in other areas of business. This stage allows more emphasis on overall business development which can include methodology development and operational development.
A Closer Look Into Growth
The main goal of all businesses is simple: earn a stable profit. When your business hits it’s groove and starts seeing a steady income, it is time to grow a small business. Growth can be both exciting and intimidating because it can end up being a strategic balancing act between cash flow and client base.
The growth stage sees incredible progress such as lucrative sales growth, overall business risk decrease, and the ability to pay off debt. Before committing to new business changes, take the time to review and revise your business plan to match the new growth. Revisiting your business plan can help you determine what is necessary for your business from a finance and personal perspective.
The balancing act comes into play when new demands of a growing business, such as accommodating to a more diverse clientele or expanding their services or products, need to be met while still managing increasing levels of profit, strengthening customer relationships, outperforming the competition, and accommodating to an expanding workforce.
The growth stage gives organizations the chance to build a high-quality team of people who have specific skill sets to take over critical business roles that can help achieve overall business growth. The increase in income allows significant time to be devoted to the recruitment process to help find the right people who fit into the business work culture. Bringing in these people early will not only take a variety of responsibilities off the shoulders of owners and CEOs, but it will allow extra focus on establishing order, meeting demands, and achieving goals.
Expansion can be characterized by two quarters or more of rapid growth when a business’ product or services prove to have long term value and they could add additional resources to their business. By this phase, you are in a routine and know what to expect out of your business. This phase is also when you determine what is possible for your organization.
In this phase of the business life cycle, you should, just like in the growth stage, revisit your business strategy, and align it with your current needs. Your goal in this stage is to maximize potential while understanding limitations. Doing this will allow your organization to have the opportunity to reach a greater customer base, add sales, add marketing resources, development resources, increase your market share, the possibility of mergers and begin to consider greater investments.
The expansion stage can be critical because over expanding can prove costly for a business. Understanding your business strengths, weaknesses and asking questions like “what’s driving profits?”, “what are my competitors doing?”, “what are the current market conditions?” can help manage expectations and build strategies to efficiently expand.
To capitalize on the success of your business, it is wise to capture a larger market share, have a proven business, marketing, and operations model, and find new cash revenue. Having a solid understanding of your business can help with challenges such as an increasing marketing competition, moving into new networks, adding services or products, and expanding your existing business overall.
The Importance Of The Business Life Cycle
Understanding how the business life cycle works and what stage of the cycle your business is in is critical in making informed strategic, realistic decisions. All businesses regardless of size, product/service or industry should utilize the business life cycle and accommodate their business strategies to match the stage they are currently experiencing to reach a business’ real potential and maximum overall growth.