Sustaining Your Small Business—a Life Cycle Approach

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Business ownership usually starts with the entrepreneur grabbing an opportunity—with its risk—and creating an organization to support entrance into the marketplace. But what about sustaining the business once it has been introduced?  How does one maintain the growth and “make it happen” over a long period of time?

First. We need to understand that small businesses—like products and services—have life cycles.  The speed and volatility of life cycles can vary tremendously, depending on the nature of the business, its location, and the products and services it offers, just to name a few.  Being articulate and discerning as to where your business fits in this continuum will help you sustain growth and make your business succeed in the long haul.

First position—start-up. When your business is in this stage, you are creating, planning, and launching the first weeks of operation.  Sadly, this and the final step sometimes are the only stages a business ever sees.  This is because this first step is the toughest one to live through.  In many cases the use of a sound, well-written business plan is the deciding factor in moving beyond start-up.

Second position—growth. During growth, sales are increasing at an increasing rate. During this time period, the business (if it’s working as planned), should finally reach breakeven.  Also, as suggested by its name, this stage should start producing real, visible growth.  How that growth is managed will be the crucial part of the process from here on out.  For positive long-term results, this is the stage that needs to be managed most carefully.

Third position—expansion. By the time a business arrives at this stage, survival is, happily, no longer the chief motivator.  It will have become clear that the business is in a sufficiently safe place for some new directions.  Usually, this will involve the expansion of personnel, double-checking which functions need to be outsourced, new products and services, and new marketing avenues.

Fourth position—maturity. If you’ve studied product life cycle, you’ve learned a concept similar to this one.  The good news is that the business is stable at this point; it is sustainable and strengthened against most of the negatives that could happen.  However, the golden days of the growth period are past.  Future growth will depend on new innovations and changes in products, service, or both.

Fifth position—decline. Notice that a failing business can go directly to this point from the first step.  This is the step to avoid, by innovating, being tuned into your competition, and being ever aware of changes in customers and their behavior.  Even when experiencing decline caused by the marketplace, you can decide whether or not that decline is going to control you.  In many cases, you will be able to choose your own final brush strokes.

Let’s go back and revisit “growth,” the second position, and “expansion,” the third.  Why do so many small business owners do a poor job managing growth and expansion?  One reason is the many entrepreneurs are spending an undue amount of time dealing with internal problems and “putting out fires.”  An entrepreneur without sufficient training and experience will often “retreat,” falling into a position that is inside his or her own “comfort zone.”

For example, a new business owner who had been in accounting before taking the plunge found his comfort zone in the accounting function and ended up spending inappropriate amounts of time of that function even though he had a perfectly competent accountant on staff.  Another reason is fear of growth and expansion.  For many people, a larger company is a frightening concept—though ironically exciting at the same time.  In a future article, we will deal with the many ways to stimulate and manage growth and expansion.

How much time will it take to travel through these steps?  As mentioned above, the answer to that question depends on the amount of competition, the nature of the products and services offered, strength of marketing—along with many other variables, such as the economy. Your challenge is to stretch out that time spent in growth, expansion, and maturity as much as you possibly can.

Take a close look at your company. What stage of the life cycle is it in?  If it’s still in “growth,” keep it growing. If it’s in expansion, make certain that your own planning will be taking it on the right road to expansion. Also—don’t ever become complacent.  Your business is like a child.  It needs direction and planning if it is to reach a useful maturity.

Lowell Lamberton is professor of business at Central Oregon Community College.  For more information, feel free to contact Professor Lamberton at 541-383-7714 or by e-mail at llamberton@cocc.edu

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