Stages of business development

¶ … business development: The seven stages of the business life cycle

Much like a living organism, businesses go through a series of 'life stages.' This step-by-step pattern is called the business life cycle. Like a living organism, every business begins with what is known as the 'seed' stage of development. During the seed stage, the germination of the new business idea is just taking place in the creator's mind. The business must establish itself in the market, gain a sense of its likely target audience, and also establish its method of financing and organization. While some of these aspects of the business may change over the course of its lifecycle (for example, a sole or joint proprietorship might become an LLC or a publically-traded company), the business must still have a sense of its overall structure and how it will launch into the marketplace. An example of a business in the 'seed' phase might be seen when Bill Gates, the founder of the Microsoft Corporation, was just beginning to tinker with his early design for a personal computer, and trying to figure out how to launch it into the marketplace and find financing for his venture from banks, relatives, and investors.

During the start-up stage, when the business has its first customers and structure, the business must often balance its desire for expansion with its lack of ready cash. It must be careful not to over-extend itself at this time. Slow growth is often warranted: after all, even McDonald's, at the early stages of Roy Kroc's conceptualization of the fast food chain, only began with a few outlets, and a relatively limited menu. During the growth stage, the business can more easily expand its base of customers and the products or services it offers. When it has reached this stage the enterprise has a foundation on which to build. A good example of this might be that of a local, neighborhood restaurant (such as the California hamburger vendor in-and-Out or the regional hamburger franchise Sonic) that began as a single enterprise, but was later able to build its relatively small chain of restaurants into a brand and reach out beyond its core customer base.

During the established stage, the company has standard operating procedures, a regular customer base, and a reliable source of financing. Improvement and productivity is the goal, rather than just staying afloat. This is the life cycle phase of most 'mature' companies, such as Coca-Cola and Honda, for example. The business no longer has to struggle for either customers or credit.

At the expansion stage, a critical shift has occurred. In some ways, the business is 'back where it started' when it decides it needs to expand. Now it must regroup, and reconceive of its business model in a new and more ambitious fashion. Such was the case when the successful Internet search engine company Google first 'went public' and sold shares to the public. The company shifted from a highly successful enterprise to a dominating international behemoth soon afterwards.