Every business goes through various stages in their development, with similar characteristics at each cycle. What may be the main focus of challenge at one particular stage, may differ tremendously with another stage, and it is best to know how to navigate each stage in order to be successful. The difference between a successful business and one destined to fail is in the accuracy of how the business owner can anticipate the challenges beforehand, and swiftly address them.
The business life cycle falls on 2 broad categories, The Innovation Cycle, and The Market Cycle. As the name suggests, the innovation cycle is where the entrepreneur has an idea and is in the process of creating the right base infrastructure to anchor the business before they venture into the market. The market stage on the other hand where the business is already a reality in the world and is going through real-life growth based on market activity. If we can simplify this, the innovation cycle is pre-revenue, while the market cycle is post-revenue, though this may not apply to all industries like tech, but let’s keep it simple for now.
This piece aims at addressing the characteristics of these stages, the challenges you may face and how to overcome them and move on to the next stage;
The Innovation Cycle
Definition Stage
What is it? – This is the stage where you put the business into the paper. Here you define the company’s operations from the value proposition to customer segments, from the key resources to the Key activities, and layout what is the expected cost and revenue structure for the business. This is where a market feasibility study is done to determine whether the business is legit, on paper that is. Have a look at our blog on the Business Model Canvas here
What are the Challenges? – The challenges one may face here is the lack of data to make an informed decision. Being in a 3rd world country, data or lack thereof may be a huge source of misinformation and may lead to wrong insights.
How do you address this? – The only way to address this is to complement your desktop research with actual field research. This is the only way to tie your data with actual on the ground data.
Development Stage
What is it? – This is the stage where you start setting up the company infrastructure. This is from a legal, financial and operational standpoint. Incorporate your business, assess your financial needs & have a path to raise it (Mostly through savings and family at this point), and look at your operational needs (do you need a partner, or can you handle it on your own?).
What are the Challenges? – Here challenges arise in many forms but are all related to what do you exhaustively need to start your company at the bare minimum. Many people forget some licenses required, underestimate the financing needed, and overload themselves etc.
How do you address this? – Getting the advice from people who have set up a similar business goes a long way and if you can’t find one, getting professional help can save you a lot of headaches and time away from what you should be doing…growing your business.
Market Preparation
What is it? – Now you have your company ready, or just ready to take off. You need to launch ASAP, but first, you need to create some form of buzz in the market. This is the get-to-market plan. This involves a little bit of marketing and word of mouth frenzy to get people talking. You need to define your day to day activities to the letter, and clearly define your roles so that when you start you have a sense of routine going on.
What are the Challenges? – Launching before you have set up the company-wide routine will overwhelm you once you start getting customers and the roles have not been clearly defined. This will lead to customer dissatisfaction, which will lead to quarrels among the founders and finally the death of the company.
How do you address this? – Preparation is key. Have all the structures in place.
The Market Cycle
Introduction Stage
What is it? – Your product is already in the market and you are starting to see traction in terms of customer growth and revenue growth. You have insights that make you tweak the product a bit and restructure things like pricing and such. You are still not profitable but can project with some sense of confidence when you can start seeing the shift into profitability.
What are the Challenges? – Delaying in responding/reacting to the initial insights from the market can prove to be a costly mistake.
How do you address this? - The company must have a clear process of how to extract, interpret and react to the market data as fast as they can.
Growth Stage
What is it? – You are gaining market share and you are well on track to profitability. You are acquiring customers at an increasing rate and you have established a significant market presence
What are the Challenges? – With an increase in customers, the operations also get overwhelmed with servicing them, at the quality you promised them. This is a huge challenge as the company needs to balance operational efficiency and growth.
How do you address this? - Having a clear strategic plan for a minimum of 5 years will enable the management to anticipate a need for operational revamping, which will inform them of the amount of financing needed. This will ensure the company is not chasing the money to improve their operations, but have already foreseen this.
Maturity Stage
What is it? – The business is now firmly rooted in the market with its market share solidified. Their revenues are growing albeit at a slower rate, but consistently over the years. The business operations are now a well-oiled machine as everyone is settled in their roles.
What are the Challenges? – Complacency kicks in and the competition, who are innovating start eating away at your market share.
How do you address this? The point of the management is to rediscover and inspire the spark that the business had at the introduction stage and innovate on how to improve the products. Digital transformation can also be a crucial introduction into the business to keep up with the changing times. If executed well, a new cycle can be birthed from this stage and the company starts to experience the characteristics of a company in the introduction stage.
To know which stage your business is in, try our business life cycle calculator on or resources page.
Decay Stage
What is it? This is the valley of no return. This is the point where a mature company has begun losing revenue due to market share loss. This is mainly due to complacency and lack of change in the organization. At this point, the best option is to exit the business
What are the Challenges? – Exiting the business at this stage will mean that the company is sold at a discount of its fair value price.
How do you address this? – The best way to address the challenges in the decay stage is to avoid falling into this stage. If it is inevitable, exiting at a fair value, though far-fetched, can be achieved through identifying a buyer early in this stage.
Businesses do not necessarily follow this cycle stage by stage as with the age of tech startups, some companies are formed to innovate and exit the product to a giant, operating as an R&D department. However, the majority of companies, do fall into this cycle and it’s prudent for business owners to know how each stage presents itself, and how to address the challenges that come with the cycle.
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