Owning and operating a business is a lot like riding a roller coaster in that the experience is filled with ups and downs and twists and turns from beginning to end.
While the terminology used to describe the phases sometimes differs, most business analysts agree that a business cycle generally encompasses four distinct segments. The first is the startup, followed by growth, maturity and renewal/decline/exit.
It’s known that organizational alignment is critical for any business to go from idea to fully-fledged company, but the reality is that departmental roles and responsibilities are subject to change throughout the business cycle. Today, we’ll look closer at those stops on the journey and how each department may not be on the same stage at the same time.
The seed in the business cycle, where concepts scribbled on paper or ideas shared over cocktails have started to come to life. During the startup phase, business owners (and what employees they do have) are looking to establish their existence by securing capital, developing a brand, landing customers, fine-tuning products or services, and generating the company’s first bit of revenue. Business ownership may be a marathon, but those that don’t come out of the gates hot are likely to not reach the finish line.
“All hands on deck” is the theme of the startup phase. On the same day that a startup CEO makes a coffee run, they might also meet with a potential investor. Teams are usually small in size, with everyone dutifully dedicated to doing whatever it takes to move the company forward—which is important since more than 20% of startups fail in the first year.
At this point in the business cycle, things are starting to click. The company has a legitimate brand to build on, products or services are in place, funding has been secured, and profits are coming in. The growth phase is also the first part of the business cycle where we start to see unique departments form with a narrower focus.
Depending on the business, it’s not uncommon for a sales team to take the lead during periods of growth. Early employees who excelled in multiple roles during the startup phase may be tapped to head up the sales department, given their extensive company knowledge and background. As the sales staff acts swiftly, other newly formed departments like human resources move at a slower pace, working deliberately to ensure a solid administration foundation is created. It’s here that employee HR policies are written and perfected.
Reaching the maturity phase is a monumental achievement for a business. By now, products and services have not only been refined, but new offerings have been added to the breadth of what the business does. Revenues are steady and predictable, employees are tenured, and the business may even be on the radar of a larger company eyeing it for acquisition.
The decisions leadership has to make in this phase are unlike any others they’ve made before, including selling the company or going back into growth mode by acquiring others. However, the maturity phase should also be used as a predictor for potential demise. For instance, HR leaders should be cognizant of high employee turnover, marketing may consider a new creative campaign to keep the brand fresh, and sales may institute new goals and bonus structures to maintain the team’s engagement. In the maturity phase, key workers have become the company’s lifeblood and are largely responsible for its continued success.
Regardless of how long a business remains at each of the first three phases, a renewal, decline or exit is inevitably the last phase of the business cycle. A renewal occurs when the business must reinvent itself or its offerings to stay relevant and ahead of competitors. For businesses that don’t evolve, a decline is unavoidable, followed by the closing of the business. But exiting the business isn’t always a bad thing—remember that the maturity phase can lead to acquisition, which can be lucrative for business owners and early employees.
Once the maturity phase is coming to a close, the decision must be made about which direction to take the business. While that typically comes from leadership, the actions of key workers can help inform that decision. Are employees dissatisfied? Do they continue to leave at an alarming rate? Are current customers unhappy working with them? Answers to those questions and a pulse check on revenue are generally good indicators of where a business should go from here.
The good news is that no matter what stage your business is in, you don’t have to go it alone. Clarke Executive Services Group offers consulting aimed at business performance optimization and business management.
Like a roller coaster, progressing through the business cycle can be exhilarating, yet daunting. We recommend that any companies evaluating their options take part in one of our business audits to institute some guardrails for the future..
Learn more about how our different audits can help steer the way for your business by contacting our team today.Tags: Business Cycle, Business Growth, Business Success Tips, Business Tips
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