The whole process of starting and running a business is akin to an adventure. As we know from many stories heard and told, adventures are rife with uncertainties and risks. Thankfully, before starting their adventure, new entrepreneurs can refer to ready-made maps that chart out the paths businesses usually take. So let’s get prepared to embark on the business lifecycle adventure instead of blindly jumping in.

Every business goes through various stages of development in its life. These stages are characterized by different challenges that necessitate different approaches. Navigating each stage with the future in mind is particularly important because the decisions taken at one stage will have ramifications on the subsequent stages. No matter which stage the business is in, becoming familiar with the cycles of change helps business owners anticipate upcoming challenges.

While product development, product-market fit, funding, hiring, and marketing remain top of mind, information technology, the backbone upon which everything is built, is often neglected. This leads to the accrual of technical debt leading to IT systems becoming too complex to maintain and difficult to use.

In this article, we discuss the various stages of business growth and share insights to help make better business decisions, especially the decisions related to technology.

Business Lifecycle is the progress of a business through various phases over time. It shows the process of development of a business as it matures. The lifecycle is plotted on a graph with time as the horizontal axis and financial metrics such as sales, profit, or cash flow as the vertical axis.

Depending on the financing sources, the stages may differ a little. For example, the Launch stage may be preceded by a Seed stage in the case of funded startups. Additionally, the Maturity and Transition stages can be subdivided into smaller phases. So, the lifecycle can be broken down into anywhere between four and seven stages.

To understand the lifecycle and the role of information technology at various stages, it is sufficient to consider the four key stages of the business life cycle.

1. Launch Or Startup

Characteristics Of The Startup Phase

The launch or starting of a business is an exciting time. As the business is in a nascent stage, the entrepreneurs still need to put in a lot of work- a business plan needs to be developed and financial goals must be set. The time necessary to start a business often depends on the type of business, location, and funding required.

The startups tend to keep their teams lean unless they receive a lot of funding. So the hiring is usually slow. As the business gets off the ground, the focus shifts from the product or service to sales and marketing.

In the beginning, the sales volume is low, which means low revenue. At the same time, the initial startup costs are high. So it is normal for businesses to incur losses at this stage.

Key Challenges In The Startup Stage

The main challenges at the startup stage include building a customer base and securing funding. So, the startups need to focus heavily on marketing their product or service. Additionally, the product or service also needs to be tweaked based on the initial feedback received from early customers.

Role of IT In The Startup Stage

Startups usually do not have a dedicated IT person. The in-house IT expert is usually one of the co-founders or early hires who was probably hired to do something else but ends up dealing with the day-to-day IT issues. IT policy and documentation take a back seat since there is no one responsible for them.

Cybersecurity is also a huge challenge at this stage. Most startups use BYOD (Bring Your Own Device) policy, which has many security risks. Accountability has to be established for critical security measures such as keeping systems updated, asset management, and data backups since there are no processes in place yet.

Some technical debt will accumulate since decisions regarding hardware purchase and choice of software tools do not get due consideration. Entrepreneurs should be careful that the technical debt accumulated at this stage does not become too onerous.

2. Growth Stage

Characteristics Of The Growth Stage

In the growth stage, businesses experience rapid sales growth. The cash flow becomes positive and the business passes the break-even point. However, the profit level is not as high as the sales level because the profit cycle lags behind the sales. During this phase, the business model is fine-tuned and investments are made in infrastructure and product or service expansion.

Key Challenges In The Growth Stage

The business goes through significant changes during the growth phase. Departments and business functions are created and hierarchies are defined as the business grows. The business often expands into new distribution channels and markets.

To support the expansion, hiring and training also pick up the pace. So, there is a continued requirement for funding even though the cash flow is positive. Rapid growth and expansion will require investment in the form of either external investments in equity or debt.

Role of IT In The Growth Stage

In the growth stage, the role of IT starts to become conspicuous. The growth and expansion will need to be supported with infrastructure upgrades. A growing company often relocates into a new office space and invests in network redesign or upgrades. The IT team will have to plan and execute the office relocation, network design, and other projects. The IT team needs to ensure scalability so that any technology adopted is future-ready.

The role of IT is also prominent in employee onboarding and offboarding. If the business hires remote employees, then the IT department needs to develop a location agnostic solution for device deployment, onboarding, and offboarding in a remote environment.

Cybersecurity awareness training and education become a regular feature to avert the threats of cyber attacks. In addition, policies and documentation also gain focus, which is often driven by regulatory compliance requirements.

3. Maturity

Characteristics Of The Maturity Stage

In the early phase of the maturity stage, sales continue to grow but at a slower rate than in the growth stage. This decline in sales may be a result of market saturation or the entry of new competitors. As the business attains maturity, sales begin to slowly fall.

All of the investments made during the growth stage along with the expansion and hiring result in increased costs and consequently lower profits. Nevertheless, if the business has attained successful positioning in the market and the business risks are low, it will have easy access to debt.

Key Challenges In The Maturity Stage

With maturity comes a change in company culture. As the business grows in size. It will require a defined hierarchy and departmental structures. This means that the flat hierarchy and startup culture become obsolete, radically changing the company culture and is often characterized by employee retention challenges.

From a business sustainability point of view, the increasing market competition and changing business conditions impact the businesses often forcing them to reinvent themselves.

Role of IT In The Maturity Stage

As the business matures, the IT department also matures. Robust policies and processes are needed to support and secure the operations. And cybersecurity requires sustained efforts to ensure regulatory compliance.

The technology matrix becomes highly complex as each function will require its own technology stack. There will be a growing need for specialization within the IT department with dedicated verticals for IT helpdesk, systems and network engineering, and compliance.

This is also the stage where businesses need to make key decisions regarding IT management, including investment in training and development, digital leadership, vendor management, and more importantly, whether or not to outsource IT management and which verticals to outsource.

4. Transition

Characteristics Of The Transition Stage

Upon reaching maturity the lifecycle of a business can move in one of two ways- decline or renewal.

Decline

As we mentioned earlier, in the later stages of maturity, sales and consequently profit and cash flow all decline. Companies that are not able to adapt to the changing business environment lose their competitive advantage and ultimately exit the market.

Renewal

On the other hand, companies that are able to reposition themselves by investing in new technologies, products, features, or emerging markets, will be able to refresh and embark on yet another growth cycle.

Key Challenges In The Transition Stage

In the transitions stage, the sustainability and growth of the business are the primary concerns. Renewal of the growth cycle depends on adding new products or services, exponentially improving the existing ones, or moving into new markets. Each of these strategies requires thorough planning and meticulous execution.

Role of IT In The Transition Stage

By this stage, IT will have established itself as a core function and will have to play a leading role in supporting the renewal of products or services. For many companies, this will mean finding new avenues of digital transformation.

Security and compliance continue to be top priorities, especially if the company is considering exit strategies, acquisitions, mergers, or joint ventures. In addition to the financials, documentation, policies, and compliance audit reports need to be meticulously maintained as they will play an important role in these strategies.

Conclusion

Companies may go through several or all of the stages described above. To run their business successfully, entrepreneurs need to be able to anticipate the challenges and opportunities waiting for them at the different phases of the business lifecycle. Each stage brings new challenges that the entrepreneurs need to address to protect their businesses and take advantage of new opportunities to grow and improve.

While the external market conditions are out of hand, becoming familiar with when to expect changes can help business owners and managers to better navigate the business lifecycle. No matter the stage a business is in, it’s important to take stock of how the business is performing and do everything possible to stay sustainable and competitive.

Do you feel your business could manage growth better? Having a trusted and capable technology partner will help you anticipate upcoming challenges and make better business decisions. Reach out to us by clicking the button below to learn how we can help you leverage technology to grow your business more efficiently.

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