If it has been years since you started your own business, you undoubtedly can relive what you went through and realise that it has transformed dramatically over the years. A good number of businesses experience a life cycle with distinctive stages. It’s fascinating to observe the normal stages and learn what stage you are in presently so you can determine the best way to plan for your future.
Stage 1: Start up
Maybe you are employed in a company and always think you could do a better job and make yourself financially free. Or perhaps you just possess a keen business sense and are inspired to do things independently, so hand in your resignation and open your own business. If you’ve gone through this, or know of a person who has, you have knowledge of the fact that during the initial phases, it’s fairly simple to develop it. You are a newbie in the market and have something of value to offer, which on its own will lure in customers. In every occasion when you meet people, you mention that you have started up your own business and enquire if they know of someone who’d be interested in your product or service. Whenever the phone rings, you get it, hopeful that it is a prospective customer. You attend networking events to secure new projects. You start your business and you see it grow. Then comes Stage 2.
Stage 2: You are full of activities
This stage is when you cease doing the things your normally do when you were just starting. Every time the phone rings, you hesitate and stress a bit because it may be a customer calling to complain. You can’t go to networking events anymore because you’re too busy. You’ve ceased chasing after referrals, seeing that you already have your hands full with your present projects. And wonder of wonders, your growth rates go slack or stop. During this phase, you begin to feel discouraged and perhaps think it would have been in your best interest to continue working for someone else.
What you would also be aware of is the financial freedom that you wanted to achieve when you started your own business appears to be not happening as you expected. Yes, you may be making a decent amount of money, but it is rare for you to have the time to spend it. Stage 2 offers three options:
- Return to being a small operation to recover time for yourself
- Don’t take action and stay stressed and overworked
- Opt to expand and prepare for this by hiring more employees
A good number of businesses pick option 2, which in reality is the worst option. As Einstein said, “doing the same things over and over again is a great definition of insanity.”
Stage 3: Regulated growth
You choose growth if you pick option 3. Studies reveal that a small number of businesses go this route. It is common to see small businesses fail before the five year phase, and a very tiny percentage reach a turnover of $10 M. However, if you choose to grow, take note of the following important points:
- You have to be content with success, not perfection. Obviously, no one will be able to match your passion to your business, and you might think only a handful of people are capable of doing the work you put out. Learn to be satisfied with it because you can’t do everything by yourself.
- While growing, learn to accept that you need to employ people who are more capable than you are. You will need them to improve your business.
- Search for more helpful measures to grow. What do you need: new products or more customers or both? What’s better: remain in your local area or expand outside it?
- Hiring marketing specialists with experience on lead generation activities. You will not be able to sustain the growth of your business through personal relationships alone. A new marketing campaign is needed for your business to gain new customers.
Stage 4: The ‘next’ stage
This sounds ambiguous but there is a good explanation for this. The landscape in most industries is constantly changing. They experience change, set in motion by many factors including legislation, technology, environmental issues, new opportunities, and availability of offshore labour. Whether you enter Stage 4, or skip it and enter Stage 5, is determined by how you respond to change. This means that you have to be mindful of the changes occurring in your industry and be prepared to adjust to it. Be the first to capitalise on new opportunities. You can do this by having time to think – another reason you should employ capable people.
Stage 5: Deterioration
There’s a good chance your business will decline if you miss Stage 4. You will see your sales slow or drop. Getting new work will become harder and harder. You’re more nimble competitors adopting new technology will cause your prices to drop. You may experience hardships in attracting or keeping good staff as leading-edge competitors is luring them away.
How do these stages align with your business?
A huge number of businesses go through this stage without intending to. If you are running a solid business and you wish to escape a decline, do something now to determine what your Stage 4 may be and begin doing things differently to extend the life of your business.
Contact PJS Accountants to determine what you and your business needs. We offer a full range of services including accounting, taxation, business improvement, superannuation, business valuations, asset protection, succession planning and bookkeeping. We have over 30 years’ experience with local businesses in Capalaba, Cleveland and the Redlands. Our team will be at your disposal, ready for your call to assist you to stay in charge of all aspects of your business.