Growth

The business life cycle is the progression of a business in phases over time and is most commonly divided into five stages: launch, growth, shake-out, maturity, and decline. The cycle is shown on a graph with the horizontal axis as time and the vertical axis as dollars or various financial metrics. In this article, we will use three financial metrics to describe the status of each business life cycle phase, including sales, profit, and cash flow.

Market share is the percentage of the total sales in the market generated by a particular company over a certain period of time. This metric shows how large your company is compared to its competitors and the whole industry.

Business growth is an A-list objective of each company because without expanding a business stagnates. It's only the business owner who determines growth factors, so avoid following generally accepted success metrics. Your brainchild is a unique system that requires an individual approach. Although, if you don't aim to grow, all your business spheres will suffer. Let's consider this process in detail.

We'll start with the most obvious things. You can't increase your income if you don't expand your business. You may fix higher prices for your products but if you're a startup, you need to demonstrate your brand value to your consumers. To fend off competitors, you should differentiate and provide a strong competitive advantage. So, if that is a challenge for you, setting higher prices may be a complete failure. In this case, consider attracting new target markets or closing more deals.

People help businesses grow both directly and indirectly. They can either buy more from you or provide you with valuable insights that will allow you to improve. A company that doesn't invest in regular customer attraction, loses its growth opportunities. And here you can get trapped in a vicious circle because customers prefer to work with constantly evolving companies. So, to close more sales and attract new clients, you need to look for growth opportunities.

Companies investing their resources into development, increase their market share slowly, but surely. They outperform their competitors in various spheres which provides them additional perks such as better terms of cooperation with suppliers.

Growing your business affects the quality of customer care service as well. Companies investing in their support team, improve after-sales service, which results in a high level of customer loyalty, satisfaction, and retention. Although, businesses should pay special attention to building relationships with clients since rapid growth and attracting new customers sometimes make their loyal clients wait for the answer for hours. This may result in brand switching which is a bad sign for each brand since it's cheaper to retain an existing customer than to acquire a new one.

In addition, ongoing growth attracts job seekers. Everyone wants to be a part of a big community aimed to develop and create a perfect product. So, such companies receive a big number of CVs and can choose the most talented candidates to join their team.

Business growth allows companies to blow up their income, expand their product line, partner with suppliers on the most favorable terms, reach new audiences, and create a team of professionals. Now let's get to know the types of business growth.

4 Types of Business Growth

Business growth can be classified into 4 main types. Each type reviews growth from a different perspective and fits businesses at different stages. Let's consider each business growth approach in detail.

• Organic business growth. This type is considered the easiest but most effective way of business growth. It best fits startups and companies that have just entered the market, while being less effective in the long term for established brands. Organic growth implies physical business expansion, i.e. upgrading the product lines, producing more goods, working in several shifts, large space rental, opening a new storefront, etc. With this approach, expanding your business space lets you produce more goods, meet the demand, and serve more customers.
• Strategic business growth. This approach works well for long-term goals and companies that have gone through organic growth. They invest the money earned during organic growth into strategic growth strategies. This can include expanding the product line and reaching new markets via advertising campaigns.
• Internal business growth. This approach can be implemented between the organic and strategic types. It's not focused on production but aims to use the current resources more efficiently to optimize the company's workflow. It can be using a marketing automation system such as SendPulse or saving some costs by implementing lean systems.
• Partnership or merge business growth. As the name suggests, this approach implies cooperation with another company for mutual benefits. Such a partnership helps companies launch a new product together, produce more goods, grow the markets of both and enjoy customer loyalty of another brand.

Now that you know the types of business growth, let's consider the stages each company goes through during its existence.

4 Stages of Business Growth

Companies face different challenges at each stage of their development. Let's take a close look at each of them to know how to cope with these difficulties.

1. Startup stage. At the initial stage, the goal of each startup is to survive. The company starts from the business owner who finds several employees taking several roles. Their main task is to build brand recognition and deliver their product value on a tight budget. The main challenges of each startup include ensuring that the product is competitive and can meet customers' needs and expectations.
2. Growth stage. At this stage, the startup has a business model and does its best to grow. Since scaling a business scares lots of entrepreneurs, they often never even risk taking any actions to grow, losing all the opportunities. Although, it's vital to look for ways to increase the customer base. Still, it seems challenging because the startup is limited in funds.
3. Maturity stage. At this stage, the business came to certain stability which no longer requires such output from the owner. All the processes have been set and worked well sometimes for years. This stage makes the owners focus on geographical expansion, building worldwide recognition, and product diversification. Despite a more or less stable growth period, maturity requires more cash flows for implementing new strategies and promotions.
4. Renewal/decline stage. This is a risky one, however, it may still seem stable to the owners. They have regular income and brand awareness and may stop looking for new ways to expand. Hence, if they don't invest in new ideas and technologies, their business can decay.

Now you know the way each business functions from the moment it enters the market, so it’s time to uncover several methods that will help it grow.

How to grow your business quickly?

Growing a business is hard. After reaching some point in expanding your company, it can be a real challenge to find new ways of building your audience, increasing income, and producing more goods. So, in this section, we’ll share several ideas that will help both startups and established businesses reach new horizons.

• Hire talented marketing enthusiasts. Your team is fundamental to the success of the company since, at the very beginning, a business owner performs several roles. So, to reduce some workload and deal with more important tasks, you need to find people genuinely interested in your product. Your team may include both experienced specialists and marketing beginners, since the latter may have a great many fresh ideas, the implementation of which will be within the power of experienced employees.
• Work on customer retention. Since acquiring new customers is expensive, especially for startups that are on a tight budget, consider retaining existing clients. Your customers will not only come back for your product but promote it to their friends and colleagues. Develop a loyalty or affiliate program so that your clients will be interested in working with your brand. Implementing customer retention strategies will positively affect your income, word-of-mouth promotion, and loyalty.
• Build your sales funnel and pipeline. The sales funnel allows you to realize the way a lead goes through before converting into a client. Understanding the customer’s path allows you to find out your most successful strategies, the techniques bringing the best results, top-performing marketing acquisition channels, and reasons why you lose clients. As a result, you’ll be able to forecast sales, reduce costs, and encourage more repeat customers. The sales pipeline shows the status of the deal: lead generation, prospecting, qualification, contact, proposal, negotiations, and retention. It allows you to control the work of your sales reps and make informed decisions.
• Analyze your competitors. Consider conducting competitive intelligence research. It will help you uncover industry trends, get insights into clients’ expectations, predict competitors’ actions, analyze their weaknesses and strengths, and increase your income. This way, you’ll save money and invest in successful strategies.
• Make use of a customer relationship management system (CRM). With a CRM, you’ll be able to monitor all the customer interactions with your brand at each stage of their buyer journey. You’ll get a clear picture of closed deals and deals in progress. Besides, all the data about your customers will be stored in one place so you can access client cards anytime. It will be easier for your sales reps to contact customers, make personalized offers and work collaboratively. SendPulse provides a free CRM system to automate sales and communication with clients.
• Build an online presence. Online presence is vital for every brand nowadays since users spend hours on Facebook, Instagram, and Twitter daily. You can’t miss this chance to build brand awareness and recognition for free. Demonstrate your product, share cases, and testimonials, show some behind-the-scenes of your company, collect customer feedback, ask their opinion, post content regularly, run ads, and maintain brand consistency. This will result in high traffic, increased engagement, and an optimized marketing strategy.
• Run online and offline events. Webinars, conferences, and workshops help brands bring in new clients, communicate with the fans of their brand, share expertise and knowledge, collaborate with partners for more business opportunities, and boost brand awareness. Consider hosting regular events to grow your business effectively.

While the business life cycle contains sales, profit, and cash as financial metrics, the funding life cycle consists of sales, business risk, and debt funding as key financial indicators. The business risk cycle is inverse to the sales and debt funding cycle.

Phase One: Launch

At launch, when sales are the lowest, business risk is the highest. During this phase, it is impossible for a company to finance debt due to its unproven business model and uncertain ability to repay debt. As sales begin to increase slowly, the corporations’ ability to finance debt also increases.

Phase Two: Growth

As companies experience booming sales growth, business risks decrease, while their ability to raise debt increases. During the growth phase, companies start seeing a profit and positive cash flow, which evidences their ability to repay debt.

The corporations’ products or services have been proven to provide value in the marketplace. Companies at the growth stage seek more and more capital as they wish to expand their market reach and diversify their businesses.

Phase Three: Shake-out

During the shake-out phase, sales peak. The industry experiences steep growth, leading to fierce competition in the marketplace. However, as sales peak, the debt financing life cycle increases exponentially. Companies prove their successful positioning in the market, exhibiting their ability to repay debt. Business risk continues to decline.

Phase Four: Maturity

As corporations approach maturity, sales start to decline. However, unlike the earlier stages where the business risk cycle was inverse to the sales cycle, business risk moves in correlation with sales to the point where it carries no business risk. Due to the elimination of business risk, the most mature and stable businesses have the easiest access to debt capital.

Phase Five: Decline

In the final stage of the funding life cycle, sales begin to decline at an accelerating rate. This decline in sales portrays the companies’ inability to adapt to changing business environments and extend their life cycles.

Understanding the business life cycle is critical for investment bankers, corporate financial analysts, and other professionals in the financial services industry. You can benefit by checking out the additional information resources that CFI offers, such as those listed below.