Life Cycle of a Business From Birth to Death

Life Cycle of a Business All ventures, whether businesses or not-for- profit organizations, go through a life cycle Series of stages, starting at when the idea is conceived to when the business ceases to exist Often is graphed as a hill

Pre-Start Up Stage Preparations are made to launch the business Research is done, ideas are investigated Review your resources and consider how to best allocate them Test the markets response to your ideas Careful budgeting and planning are important This is the time when you create your venture plan!

Development Stage (Start-Up) Research and market testing is complete Arranged for any financing you will require The goal in this stage is to reach the BREAK- EVEN POINT This can take some time, depending on the amount of initial outlay a business needs to make This is normally done through good management practices

Rapid Growth Stage The business has passed the break-even point and is now making profit This may be the point where you bring in external “experts” to help grow the business Often you expand your product line, broaden your customer base or open new locations The ultimate goal here is to improve the profit / efficiency of your venture

Comfort Stage (Maturity) Now the venture is established and secure, normally growing but at a slow rate Enjoying the benefits of success The assets (things the business owns) are worth more than its liabilities (the debts the business has) Dangerous time if entrepreneur is doesn’t put the time and effort into improving and growing the business

Turnaround Stage (Decline) This stage means that the venture is in financial trouble Company is losing money, competitors are stealing customers, working capital has disappeared Normally leads to layoffs, restructuring, selling of non-productive assets, cancelling product lines, etc. Think of what the major car companies needed to do a couple years ago Often new management and consultants are brought in to help turn the company around

Rebirth or Death Depending on what your company does in the turn-around stage, the company will either die or be re-born Death Company goes bankrupt, sells off it’s assets to pay its creditors and ceases to exist $ goes to creditors first, then anything left over will go to shareholders/owners Rebirth Company establishes new revenue flows, increases working capital and re-enters the life cycle at the growth stage