Introduction 5-Stage Business Lifecycle Essay
The business lifecycle is a series of stages that businesses go through all the way from the emergence stage to the take off stage where most of them decline. This is quite similar to the life of living organisms whose life starts with birth and ends at death. The stages involved are: emergence, startup, growth and establishment, expansion and finally the takeoff stage where most entrepreneurs exit the business.
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Understanding the business lifecycle helps a business owner anticipate for future events that could affect the business’s chances for survivor most importantly success. The preparedness that comes with this awareness is very necessary in keeping the business afloat as well as guarantying its success. This paper will focus of the five stages of a business lifecycle.
Question 1: The importance of recognizing the stage a startup is in
Recognizing the stage their startup is at is necessary in risk management. Taking on risks is necessary in the growth of any business. There is a popular saying that goes “With risk comes reward”. Entrepreneurs take risks with the anticipation that the success of their startup lays on the other side. This however is not entirely correct because some risks could lead to the detriment of the startup.
Knowing the stage that a startup is at helps an entrepreneur determine on whether to take on a risk or not. Risk evaluation involves the identification of the impact of each risk. This impact varies from one stage of business cycle to another. A business in the growth and establishment stage requires many resources to fund the growth.
Taking loans in necessary in this stage and less risky because of the substantial profits the business is making can pay off the debt. The debt risk at this point is worth taking. Hirai (2009) points out startups in growing markets attracts capital thus does not need to take debts. Such a firm taking on other risks at any stage such as operations risks would be quite reasonable.
The entrepreneur makes proper human resource decisions when they know the stage which their startup is at. Proper human resource decisions are very important to any business. As states in the case study, a company at the take off stage may change CEOs with an aim of bringing in one who can help negotiate the new challenges. Such a decision would be quite wrong if the company was in the expansion stage.
Even though businesses should constantly seek for new talents, those in the last two stages of a business lifecycle need more. Firms in the startup stage also need experienced staff. However, hiring workers who are too expensive is not wise at this stage.
The entrepreneur is able to make proper capital decisions. The management of a company would prefer to sell share at the takeoff stage. Alongside their need for capital for their activities, such a company would like to inject new blood in its ownership thus rejuvenating it. In the startup stage on the other hand, despite the need for startup capital, an investor may be shy for outside investment due to their desire to maintain control of the business.
Question 2: The purpose of dividing the life of a startup into stages
In my opinion, the purpose of the life cycle of a startup is to help entrepreneurs understand the life of their businesses. Most businesses lives are quite similar and pass though the 5 stages. Once an entrepreneur understands their business, the can tell what stage it is in. With this knowledge, they are in a position to make proper decisions. They also know what to anticipate at a given point in time. This enhances their preparedness and nothing gets them by surprise.
Question 3: Challenges faced by a business in each stage
Startups face different challenges in the various stages. In the emergency stage, the main challenge is coming up with a feasible business idea. This is an idea that is worth time and financial investment. Another challenge is obtaining the startup capital. The entrepreneur may lack the financial resources to actualize their business idea. This means they have an uphill task of looking for potential investors convincing them that the idea is worth investing in. Many brilliant business ideas die at this stage.
In the emergence stage, the main challenge is adapting to the market. Here the idea is no longer in the entrepreneurs head, but out to the world (clients and potential clients). They therefore should not only consider their ideas but of the customers too. Keeping the customers happy is vital at this stage because the firm is able to establish a maintain them and even attract new ones. The firms that fail in this are doomed to closure.
Despite the consistent source of income, the growth stage is quite challenging. Time management is the biggest challenge here. Dividing time among activities like revenue generation, customer care, competition and accommodating expansion is quite hectic for any entrepreneur. If they fail in this, they end up being confused and their productivity is greatly undermined.
In the expansion stage the challenge is avoiding both complacency and reckless risk taking at the same time. There is rapid growth at this stage and the entrepreneur may be tempted to relax. At such a state the business the start going down and there is a risk of closure. On the other hand, some may be tempted to take on risks that are reckless. This too is unhealthy to the business.
In the takeoff stage the challenge is to keep the business afloat. Here the business’s decline is quite evident. Most entrepreneurs cut their losses and shut down the business. The few fortunate ones manage to sell the business but at through away prices. This is quite frustrating to an entrepreneur who spent a lot of time building the business.
Solutions to these challenges
The entrepreneur should come up with not only brilliant but also feasible business ideas. This will come in handy while convincing investors put their fund in the business. Once the startup capital is obtained, the idea is ready for the next stage. To solve the problem of adaptability, the entrepreneur establishes a system where the customers can channel their view and that the applicable ones are put into work.
The entrepreneur should manage their time well. This will help them accomplish their tasks and avoid fatigue at the same time. They should also hire more workers if they can afford it. Constant innovation should be encouraged at all stages of the business life cycle to avoid complacency. A risk should be thoroughly vetted before being taken. To ensure that a business does not decline, a change in management is required after several years. The firm can also sell the shares to the public.
Question 3: A research and analysis of Q e-waste
Q e-waste is a company that deals with safe and ethical disposal as well as recycling of e-waste based in Doha Qatar. Mawatha (2013) describes e-waste includes both electrical as well as electronic equipment waste. It has been a threat to the whole world and has had harmful effect to the entire biota. Q e-waste identified this problem and has come up a very brilliant business idea. The idea was assessed by the Qatar Business Incubation Center and was seen as a feasible business idea.
The brilliance of this idea is due to its contribution to environmental conservation. Such an idea has the potential to capture the attention of numerous investors whose interest lies not on the making profit but on keeping the environment clean. The business is also quite lucrative due to the fund from the Qatar government, the United Nations Environmental Program (UNEP) among other agencies. Several investors have come up and are willing to provide the startup capital.
The company has started some of its activities. It has been collecting e-waste in Doha and will soon expand its reach to the rest of Qatar as well as the world. Some of the waste is repaired then sold to school for education purposes the rest is sold to recycling firm. Despite this activities Q e-waste has not been making profits for the period it has been running. The management however, is confident that this is bound to change soon.
It is evident that Q e-waste is in Stage 2 of lifecycle of a startup. The business idea is feasible this means that it cannot be in stage one. The firm has started operating and a stream has been coming in. However the company is not making profits this means it has not yet qualified yet for stage 3. It may remain at this stage for about 2 year but the company may grow gradually.
Question 4: Qat Cat Café
Qat Cat Café in stage 2 of the startup life cycle. This is because it is a feasible business idea that has been invested in. However the business has not yet matured (stage 4).
The first step to expanding any business is setting up strategies and putting your priorities right (EY, 2015). The Qat Cat Café’s management should also increase the number of services it provides for example it can start serving full-course meals. It can also open up branches all over Qatar. The partners can also hire an experienced manger that will help them tackle the new challenge of expansion.
They can monitor the progress of the expansion process regularly as well as seek advises from people who have succeeded in the industry. The firm should also come up with a new marketing plan that can help reach the larger target market.
- E.Y., (2015) Choosing the Right Way to Enter a Market: 7 Key Actions of Expanding a Private Business.
- Hirai, A. (2009). What Kills Startups?
- Mawatha, C. (2013) E-waste Management, and its Disposal And its Impact on The Environment: Introduction. Retrieved from www.environmentaljournal.org/3-5/ujert-3-5-1.pdf
- Q e-waste. (nd).Retrieved from http://www.qewaste.com/