The Business Life Cycle - and why you need to understand this!

Businesses are like humans.....

It has always been acknowledged that businesses are like living beings in that they have a life-cycle where they are born, grow, mature and then start to decline and potentially wither away to die! And I am sure we can all name organisations that looked like they could go on endlessly as they got ever more powerful, but over time lost their advantage and disappeared – a couple that spring to my mind immediately would be Blockbuster and Toys R Us.

And while the life-cycle follows a predictable pattern (and as it does for us humans) there are ‘impactors’ which can have a strong bearing on the health of your business and can be the cause of growth, decline or even its final demise – and these can be both ‘external’ or ‘internal’.

‘External impactors' are events that are pretty much out of our control but have a strong impact on our companies future; these can include economic recessions, wars and (very relevant today) global pandemics such as ‘Covid-19’; and as it is for us humans - this one has the power to severely injure, hurt or even kill off your business if not navigated correctly.

‘Internal impactors' are things that you do to impact your business, and these can also be both negative and positive. For you and I, we can positively impact our health by doing some exercise, cutting down alcohol and fatty foods, etc. Or, we can go the other way and over excess on things that we know are not good for us which will have negative effect on our health. And it is no different for businesses - you can do many things to improve the health and longevity of your company, its reputation and its finances; or you can do the opposite and not do the right things for a long term future.

Understanding this Business life-cycle and where you are in it is extremely important as the requirements, opportunities and threats (again both external and internal) will vary depending upon the stage of the cycle that your business is in. For example, threats to start-up organisations will vary from those in the mature stage. It is vital that the owners, directors, and management must review and change the goals, objectives, processes, and strategies to fit where they are in their development.

Periods of Change

It is generally accepted that at the end of each of these stages of a business’s life-cycle the company will enter a period of ‘change’ or ‘crisis’ and the businesses ability to handle these will determine its future. As a business grows and develops into the next stage of its existence, there are some well documented and proven issues that will develop and that require swift decisions and action, these are:

1) Growth through creativity – this can eventually lead to leadership problems. As the business grows more formalised processes and structures ‘must’ be put in place to allow the organisation to grow. If the Owner cannot or will not do this themselves, then they will need to bring in some help to ensure this happens.

2) Growth through direction - which can eventually lead to issues of autonomy. Someone other than the Owner/Directors must be given more authority for the business to move forward and quite often people at the top are reluctant to let go and delegate this ‘power’.

3) Growth through delegation - as this can eventually leads to arguments on control. This can happen when entrepreneurial employees (who quite often who are stimulating the company’s growth through ideas and innovation) clash with top management who feel they are losing control.

4) Growth through co-ordination – this seemingly positive step in a business’s growth can lead to unnecessary bureaucracy. Too much attention on formalising processes and structures such as product groups, planning processes, review forums, etc. can start to take over the day to day operation of the business and lead to a reduction in the innovation that drives the company.

5) Growth through collaboration – which can lead to a negative change in the culture of the organisation. This can happen when businesses get too large (sometimes too quickly) and become overly complex and lose their identity.

Impact and/or Opportunities for the SME

So, looking at SMEs for a moment and what the life-cycle means for the 5.9 million of them in the UK today. If we look at those owners and entrepreneurs who are in the early stages of their businesses, I believe that they are unlikely to be particularly interested with the life-cycle issues of decline and collapse. Instead they will be much more preoccupied with getting funding/investments/loans, customers on board, suppliers set up, etc. as they look to become a viable concern and move into the growth part of the cycle.

However, established SME Owners and Directors should be extremely interested in this, as if thought through properly (and with help as and when required) then they can prolong the positive stages (of growth and maturity) and push back the negative stages (of decline and death). These forward-thinking owners can look at the many ways of positively impacting their businesses health through new strategies, improved structures, relevant processes and controls, better employer engagement, new ideas, etc.

It is also critical that these established SME businesses should recognize their companies are always somewhere on this journey and its success will often be determined by adapting its strategies to solve these issues before (or as soon as) they arise. Please note that the described periods of change and growth impacts are real ……… and they will happen to your company. It is important to understand that reviewing and reflecting on your business is not a negative thing to do – instead it is a positive, proactive, and necessary step to grow and to scale. And even though everything might have been set up perfectly on Day 1, you must be aware of the changes that both ‘growth’ and ‘impactors’ will have on it.

And let us be honest for a moment, for most SME owners this will all be new and well outside of your comfort-zone! So, please do not be too proud or too afraid to ask for help - there is a huge amount of experience and expertise available to support and guide you through this process. Investing a small amount now to get this critical period in your company’s history right should be a priority; and by doing this and allowing your business to grow into the future will ensure a massive return on this outlay.

If you need any help or guidance to help you and your business set itself up for growth then please do not hesitate to contact me on julianpatel@clivedenhouseconsulting.co.uk at any-time. Please stay safe and stay positive..