Stages of the Business Cycle: How Your Business Will Develop Over Time

As an entrepreneur, it helps to know what the different stages of the business cycle are, so that you can better prepare yourself for what’s to come. While no two companies are exactly alike, your company will experience a life-cycle that is fairly similar to what many other companies have seen in the past.

This is especially useful information to have because knowing the various phases of the cycle before they actually arrive will allow you to preemptively allocate the use of the resources at your disposal. Let’s take a look at the different stages that your business will generally experience, and you will see how the universal business cycle applies to your company; no matter what the product and/or services you offer.

The Stages of the Cycle: The Seed Stage

If you haven’t actually begun building your business, this is where it all begins. During the seed stage, your business is just a thought that you have in your head. However, that’s exactly where all ideas start. Since you haven’t actually committed to anything yet, the main challenge you’ll face during this stage of your company’s development is dedication to your idea.

We’ve all had ideas in our heads at some point in our lives that, for whatever reason, fizzled out and faded away. You don’t want that to happen with your own company. During this conceptual stage, you want to pour as much energy as possible into researching your idea and making sure that it’s not only feasible for current market conditions, but that your idea for a business is a sustainable one. Even at this early stage, you want to think in the long term. Ask yourself the infamous interview question:

“Where do you see yourself in one/five/ten years?”

Work from there when developing your company, but remember to be realistic. It’s absolutely fine to dream big, but don’t dream so big that you take on more than you can actually handle. During this stage of development, you will also want to look at establishing sources for seed money to get your feet off the ground. Look for bank loans, investors, grants, and anything else that can help you get started and you’ll be well on your way.

The Start-Up Phase

Congratulations! You now have a living, breathing company from which customers can purchase goods and services. Your focus now is to manage your money carefully during this phase of the business cycle, as it’s likely that you don’t have a substantial cushion upon which you can rely to run your company. You want to keep an especially close eye on the way your business develops because of that.

During this phase, keep a very close eye on the business plan that you established during the seed phase. As things happen and new developments arise, don’t be afraid to scale back on certain areas of that plan and expand on others. It’s important to remember that, above all else, you want to be flexible. While this is true for all stages of the business cycle, I would argue that it’s more important here than anywhere else, as the formative years of a business are often the most crucial.

While establishing your customer base and hiring talent that will help you move closer to your business goals, you want keep a very close eye on your expenses.  Try your best to keep them low in whatever ways you can without hurting your sources of revenue.

The Established Stage

Your company went from being an idea, to becoming a reality, to growing into a respectful company, and now you have a name. At this point in the game, you want to always look for ways to bring in new customers, more revenue, and different ways to increase your market share in the marketplace.

While you should always strive to improve the processes that you’ve set up over the past few years, it’s especially important during this phase of the business cycle. This is because, as your company grows and becomes well known, more people will be looking at you. I don’t necessarily mean customers.

When you gain some recognition, fledgling companies that are in the same position you were in previously, may see your firm as something to go after in order to establish themselves.  Do everything you can to show customers and investors what you plan to do to expand on your successes and continue evolving as a company.

This means you constantly have to be planning your next move by looking at new markets to tackle and trying to figure out how you’re going to branch out.  Look at introducing new services, partnering with other firms, and, most importantly, keeping focused on emphasizing what you do best.

The Maturity Stage

This stage of the business cycle is the one that you’re likely aiming for. At this point, people know who you are, the money is coming in steadily, and your groundwork has been well -laid so that you can enjoy much-deserved success.

The keyword during this phase of your business’s life is stability. However, with stability often comes increased competition.  Therefore, you want to keep an eye on the way that things develop in order to maintain your market share and defend the position you’ve worked so hard to obtain.

While innovation is something that you want to practice at all times, it can often be what separates you from other companies of similar notoriety at this point in the business cycle. Take what you’ve done to reach this point, improve on it, always keep your customers and their desires in mind, and you’ll enjoy success for years to come.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

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