9 Stages of a Business – by Mort Murphy & John Heenan

Defining the stages of the life cycle of a business is not new. However many of the descriptions have traditionally been presented from the large corporate point of view, which does not reflect the reality faced by small businesses. The following table gives the stages of a small business lifecycle.

9 Stages of a Small Business

1.    Concept

2.    Start-up

3.    Survival

4.    Stabilized

5.    Doing well according to outside appearances

6.    Doing great according to outside appearances

7.    Obviously has moved to the next level

8.    Maturity

9.    Succession

The small business lifecycle stages focus on the impact that the life of the business has on the life of the owners/managers. There are three additional stages in the small business lifecycle because of this. Let’s take a quick look at the stages.

1. Concept – This is definitely one of the most enjoyable stages. There is great fun and great enthusiasm. This is all about creating the vision.

2. Start-up – Trying to turn the vision into reality. The biggest challenges are trying to source funds and get it all together.

3. Survival – Outside finds have dried up. The business must quickly start generating cash by bringing in paying clients. Quiet desperation sets in – “I never knew it was going to be this tough.”

4. Stability – The business is generating enough cash to survive. The owners are earning a wage. Everything in the business depends on the owner. However, s/he is so relieved to have survived that s/he breathes a deep sigh of relief.

5. Doing well according to outside appearances – Business is thriving and sales are expanding. The owner is a “Hands-on” manager. S/he is drawing a good income; however s/he has no time to enjoy life. “If I stop the business stops, I feel like I am on a treadmill.”

6. Doing great according to outside appearances – Both sales and the business expand. The owner operates on a basis of management by “walking around”. Owner has a great standard or living. But if s/he is away for a week, the whole place is in turmoil. The owner is exasperated because of conflict of having to be in the business and not having the time to enjoy the lifestyle created. Quiet desperation undermines owner’s confidence, and they feel s/he can’t get out from under it.

7. Obviously has moved to the next level – Owners have got full-time management in place. Life is now rosy. They can enjoy the fruits of their labor. They can do what they love to do in the business or take time off if s/he wants. Only major responsibilities are providing vision to the business and providing direction to management.

8. Maturity – Owner can now retire – own himself/herself and not worry about the day to day running of the business. His/her only responsibility is to provide vision to the business. Free at last to do what s/he loves to do.

9. Succession – Owner has successfully passed on the business to the next generation of owners and is completely free of the business and has the wealth to enjoy the lifestyle s/he wants.

What do the 9 steps mean to owner managed businesses? There are a number of ways that owners can use this information in helping them run their businesses.

(a) Craft Vs Assembly – Many of the earlier stages are epitomized by the owner holding all control to himself/herself. This makes sense in the context that s/he is trying to realize his/her vision.
However is it only when the owner begins to take on board what Adam Smith said in the “Wealth of Nations”, that s/he begins to truly realize the vision and also to enjoy the business and the fruits of the business seem to have been the efforts of the division of labor.” Adam Smith said “the greatest improvement in the productive powers of labor and the greater part of the skill, dexterity and judgment with which it is anywhere directed, or applied,
When the owner moves over to the assembly method of achieving his/her vision they can achieve a masterpiece, just as Michelangelo did. When the Vatican decided a number of years ago to clean centuries of smoke and pollution from the Sistine Chapel ceiling they discovered something amazing. The painting had been “painted by numbers” or more specifically in this case, “painted by dots”, Michelangelo’s vision was achieved by assembly and business owners can do the same.

(b) Plan Better – Business owners, by recognizing the 9 stages can plan how to navigate their way through them more successfully and with less feeling of desperation. They will be better able to enjoy their business because of this.

(c) Be more ambitious – Many business owners reach the stabilized stage and stay there out of fear. It’s like sitting on a comfortable cliff edge – lucky to be there, but afraid to get back up and start climbing again. With an understanding of the 9 stages, they can build safety nets to support them as they start to climb and now the path is clearer.

(d) Better understand the kind of support that they need – By understanding the 9 stages the business owner can be more assertive in their demands of what they expect of business development support firms. If these firms don’t understand the 9 stages, they probably don’t understand the situation that business owners find themselves in.

Going forward every business owner can give himself/herself a much better advantage of being able to enjoy the life s/he wants and deserves by using these 9 stages of the lifecycle of a business as a guide to getting there.

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