Stages of a Startup Business: From Ideation to Implementation


Building a business doesn’t happen overnight. Additionally, you don’t build a business and then wait for it to automatically grow. You start with barely a feasible idea and you nurture it, guide it through several stages of evolution until it becomes an established business.


During the growth of a small business, a startup company will go through different stages, in what we call phases. Any business, whether a startup or an established one, must pass or has passed through a business life cycle. A business life cycle is a progression of a business and its phases over time.


There are different stages in a business life cycle and each stage presents its own challenges. Understanding what phase you are in business can make a huge difference in the strategic planning and operations of your business.

In our last guide, we looked at how angel funding works. This guide looks at the seven different stages in the business life cycle to help entrepreneurs have a better understanding of the stage they are in, challenges they are most likely to face and how to navigate their way through to a successful future.

Let’s get started!

Seed Stage

The seed stage of a business is the beginning of a business life cycle. It represents a time when your brilliant idea is just a thought. Your idea will require a series of testing to ascertain how good it can be to become a business.

To test your business idea, you will be required to conduct research regarding the industry you are getting yourself into, and gather vital feedback to help you make key decisions regarding your upcoming business.

Challenge

The main challenge businesses will face at the seed stage is to overcome the challenge of market acceptance and pursue a profitable niche. They may be strained on their resources and may lack sufficient money to conduct appropriate market research.

At this stage, it is important for a business to focus on matching business opportunities with skills, passion, and experiences. It is also important to determine the right business ownership structure, perform appropriate planning and get professional experts and advisors to work for you.

What to Manage

manage
Image by Ernesto Eslava

In the seed stage, you will learn that the completion of a business plan is the biggest success factor for most emerging companies. You need to evaluate the cash needs your business will require in the next 18 months.

In order to launch a successful company, you will need to have visionary managers who have good business experience and can change business models to adapt to rapid market evolution. Market research will be key to keeping you in pace with the demands of the market. Have a solid visionary business plan and stick to a proven business model.

Startup Stage

With the startup stage, your business is born and now exists legally. Products and services are in production and you have your first customers.

This stage means you have finished developing the products and services needed and your business has got off the ground to begin marketing and selling.

This stage involves twerking your products and services and paying key attention to the demands of your customers. You may need to reinvent your business model to ensure profitability as well as meeting customer expectations.

Challenge

The main challenge you may face at this stage is that there is a likelihood you have overestimated the capital needs as well as time to market your business. You will be struggling not to burn through the little cash you have.

You will need to learn key needs of the market and your customers, to ensure you are offering just the right thing to save on costs and maximize profits. You will face the challenge of establishing the right customer base and market presence.

What to Manage

As far as management is concerned, you should put all your energy into your project. Time to hit the market is very essential. You need to play it in your mind that 25 percent of businesses do not reach their 5th anniversary.

Your budget needs to be revised because more cash might be needed than it is actually available. Unpredictable circumstances will often affect plans and business models. If more cash is needed, banks will be the last option. Stick to rounds of funding from ventures.

Key services that would be required at this stage include; support and coaching of CEO and board of directors, having a strategic business and marketing plans, and assistance in negotiating for ways to raise funds for the company.

Growth Stage

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Image by Jerry Kimbrell

Your business has withstood the initial stages of the business life cycle and now it is at the growth stage. The growth stage could also be referred to as the survival stage. The business is constantly generating revenue and adding new customers.

The recurring revenues your business generates will help to pay for your operating expenses and could as well be used to generate new business opportunities. At this stage, your business could be operating at a net loss, but do not panic.

You will need to fine-tune your business model and adopt proven methodologies, customer acquisition models, sales and marketing models, all geared towards expanding your business and sustaining stable revenue sources.

Challenge

The biggest challenge you will have to deal with is managing a constant range of issues that require a lot of time and energy. Effective management is key to making it at the growth stage. As the owner of a business, you will need to learn how to effectively delegate to get things moving in the right manner.

What to Manage

Most successful business persons are masters in finding knowledgeable brains that are competent to be entrusted with various aspects of a business. You will need to surround yourself with a bright team that can actualize your vision.

One of the key things you will need at the growth stage is to stay ahead of the competition. Innovation will be needed for you to come up with sustainable products and services. Your sales and marketing need to be well aligned.

You will need to develop an innovative team tasked with reinventing the wheel and accelerating business growth. You will need to revisit your strategies and evaluate if they can sustain your business in the foreseeable future. Any external help to create synergies, such as mergers and acquisitions will be needed.

Established Stage

At this stage, your business has now fully grown into a lucrative venture with an established place in the market and with a loyal following. Growth of sales may not be explosive, but it is predictable and manageable. Business life at this time becomes a routine.

This stage requires constant improvement and productivity. You will need to stay focused. To compete in any established market, you will need to stick to better business practices, automate tasks and outsource to improve productivity.

Challenge

At this stage, the main challenge is for you to stay focused on the big picture. You have worked so hard to get to this stage and keeping yourself on the path you crafted is key to success. You need to stay focused on issues that affect the whole business such as economic aspects, competitors and changing customer demands.

What to Manage

It may be difficult as a CEO to accepting the fact that though you might have been successful in bringing a business up to this point, you need to reassess whether your original project is still optimal to satisfy customer needs.

You will also need to verify if your operating model is still efficient to maximize productivity and long term developments. You may need to rethink your model. Your company will have changed significantly due to business volumes involved.

As a CEO, you will need a lot of courage to accept advice you get from peers that you may need to think outside the box, even when everything worked well for you. The help from peers will demonstrate how rapidly you can get to the next level of success.

Expansion Stage

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Image by falco

A business life cycle is not complete without an expansion phase. The expansion period is characterized by a new period of growth into new markets and distribution channels. This is usually the best choice for business owners to gain a larger market share and find new revenues.

Challenges

The main challenge in this stage is to move into new markets. This requires a lot of planning and research, especially at the seed stage. You should place a keen focus on businesses that compliment your existing experience as well as capabilities, as moving to businesses you are not good at can be disastrous.

What to Manage

You need to place a key focus on new products and services to existing markets as this will help you with the expansion you dearly need. Regardless of the success, you get in your home country, it doesn’t mean you can replicate the same to expand to new countries and regions without a hitch.

You need to learn from the mistakes of others to shorten the time it takes to find expansion challenges and solutions you can provide while addressing international markets. Consider the impact that the size and nature of your business can have on international business.

Decline Stage

Years over years, sales tend to be very stable, but competition remains very fierce. Eventually, sales will start to fall off and a decision needs to be reached if you need to reinvent the wheel, expand or exit the company.

Challenge

The biggest challenge you will face is making a decision on how long the business can support negative cash flow. It may be time to move back to the expansion stage and reconsider your whole business. It may be time to quick altogether as well.

What to Manage

The maturity stage of a business is a key stage in the life of a business. It will need the highest level of capital should your company want to go further. It is a stage where CEOs need a lot of advice from the captains of the industry. There are a lot of decisions to be made as well.

Exit Stage

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Image by Robin Higgins

The existing stage presents a big opportunity for your company to capitalize on big cash out on l the efforts and hard work you have put over the years. It can mean closing down a business and exiting unceremoniously as well.

Challenge

The key challenge here is getting a realistic valuation of your business. It may have taken years of hard work to build your business, but what really matters is the real market value of your business.

In case you decide to close your business, you will have to deal with the financial and psychological aspects of business loss. You need to remain focused to get a proper valuation of your company.

What to Manage

Most business owners overestimate their companies. Family businesses with a charismatic owner are normally hit the most because these owners are not prepared to hand over their businesses to other parties. The key thing here is to look at aspects such as business operations, management, and competitive barriers to increase the worthiness of your company to potential buyers.

Reasons Why Most Business Fail

Building a successful business takes a lot of passion, planning, getting your team right, testing your idea and getting sufficient funding. You may succeed to start a business, but the most important thing you need is sustainability.

There are key reasons many businesses fail and we should look at some of these reasons. They include the following;

Ineffective Leadership

Leaders are not necessarily born; they are made through experience. 70 percent of entrepreneurs believe they hold the future of their company in their hands. It is not enough for a company to have leaders who are just good at leadership, but they lack strategy.

New business owners mostly lack relevant business and management expertise in many areas including finance, selling, purchasing, production, hiring among others. If you are a business owner and lack effective leadership and management skills, it’s important you can a team that can deliver through your guidance.

Lack of Proper Planning

Anyone who has ever been in charge of anything successful knows the sheer amount of hard work and planning that is required to get everything right. It is important for small businesses to be properly constituted with an efficient business plan.

You need to include all the key components of a business plan such as business description, market analysis, management team, financial projections, sales and marketing aspects, strategies etc and have a clear definition of what you want to achieve.

Lack of long-lasting Value

Companies succeed because they offer exceptional long-lasting value in the delivery of their goods and services. A company will fail to succeed the moment it starts to under-deliver. Many small businesses get too excited about earning their first treasure and forget the work they need to put forth to ensure they deliver value at all times.

Failure to Understand the Target Market

Good planning and market research is key to achieving success in your business. You should never base your business on assumptions. You must be able to project the wants and needs of your customers and deliver them according to their expectations.

It is not always about giving your customers something unique, it’s about understanding their needs well and offering a long-lasting value at any given time.

Reliance on a Single Customer

Practically, all businesses experience a small start. When you hit the right buttons and your business is doing well, you should never lose track of what brought you into business in the first place. You should never be fooled into thinking your products and services will always work for that one happy customer.

When you hit your first client, you should never rest at that point. Work yourself up to get other potential clients and expand your options for revenue. Diversification is key as is what you will need to be in business for long.

Lack of Personal Growth

Personal growth involves aspects such as being creative, getting inspiration from new sources, reading a lot of resources and basically investing in yourself. You need to attend seminars, meet new people, welcome new professionals and always be on a learning curve.

Having looked at the 7 major stages of growth of a business, it is important you understand them well to evaluate which stage your business may be at. Having a good understanding of these stages can help you know the challenges ahead and anticipations you are likely to face. That way, you will be better placed not to fail.

Alberto Venditti

Alberto has more than a decade of concept & production expertise in engaging with clients and end-users for both the entertainment and the advertising industry, marrying his passion for strategy with years of field research in user experience and a solid academic background in Psychology.

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Stages of a Startup Business: From Ideation to Implementation