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The Seven Ages of a Business

Written By: Guest on August 23, 2016 No Comment

The seed stage

This is the very start of a business, when it’s no more than an idea that’s trying to gain marketplace acceptance.

At this stage a business needs to find its niche; this is a time when small amounts of money and time have to go a long way.

The business owner has to decide if their skills and experience match the niche, as well as work out ownership structure. Professional advice and business plans are vital now.

Investors and loans are the main sources of money – usually from friends, family, a day job and government grants.

The start-up stage

This is an exciting stage when the business exists as a legal entity – it’s providing goods or services to its first customers. It’s also moved into that fancy commercial property in Mayfair, but money is still in short supply and it’s vital to conserve resources.

It’s when a customer base develops, as well as a clear market presence and ethos. Money comes from friends and family still, but there’s also customers’ money.

The growth stage

The business has survived the start-up period, with increasing sales, a growing reputation and maybe new opportunities. It’s also the stage at which competitors start to feature more.

Increased sales and need for investment make a lot of demands on time and money, so this is when the business owner needs to learn to delegate and to employ more staff members.

Management becomes more formal and accounting needs to be stronger; money comes more from profits, banks and franchising options than from family.

The established stage

The business is more mature, with steady profits, loyal customers and an established way of working.

It’s tempting to relax and enjoy the profits, but there’s always something on the horizon, like competitors, changing tastes, changing tech and even the odd recession.

The business needs to improve productivity and products, as well as to fine-tune business practices and outsourcing. Money tends to come from profits, banks and government grants.

The expansion stage

This is when the business should expand into new markets and new distribution channels. Most small businesses look to grab a bigger market share and to find new revenue streams.

This stage needs a lot of planning and research and it’s safest to move into areas and sectors that complement the business’ existing capacity or abilities. There should be new products and services, or new markets and customers.

Money comes from partnerships, joint ventures, new investors and licensing, not so much from banks or government.

The decline stage

The economy may change, or market tastes may move on, and this can affect profits and sales. It’s a big challenge – there may be a negative cash flow for a while – and if the business can’t cope for long, it may be time to exit.

It’s a time to look for new opportunities, to reduce overheads and find other ways to conserve cash. Money sources are customers, the owners and suppliers.

The exit stage

This is when the business cashes out and reaps the benefit of the hard work, or when it simply folds.

Selling needs a realistic approach – the years of hard work might not be reflected in the valuation, which can be a shock.

A thorough valuation, as well as a review of business practices, competitors and management, can help to get a fair price. There also needs to be a business transition plan.

Money comes from the sale, so it needs to be handled by professionals.

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