T H E B U S I N E S S L I F E C Y C L E

Every business starts with a launch. At this stage it is only a startup and experiences very high costs in marketing, stationary, rents, etc meanwhile it receives low income due to its novelty and limited market.

Then there is the period of growth. At this stage, the consistency in business and quality of goods and services as well as marketing has resulted in gaining a market and keeping the market as it trusts the product of the business.

Overtime, new businesses (most of whom are inspired by the business) come into the market, gaining a share in the market and already existing businesses in a similar competition rebrand and restructure and regain its lost market from the business. This leads to a shake-out stage, where the business faces stiff competition. Returns are still good as some customers or clients remain faithful.

The business then gets to a stage of maturity where it can grow no further, given the dispositions at the time.

After maturity, the business has no choice but to face a decline and it loses a huge market share to its competitors on a regular basis.

At launch, revenue is zero! Sales slowly increases over time and rapidly increases at growth, and later increases at a diminishing rate during shake-out. At maturity, revenue seems constant and then diminishes at decline.

Profit would be negative in the early days of the business at launch. Then it moves to a break even. After break even then profits gets to positive and increases at an increasing rate throughout the growth period and declines steadily from the shake-off stage trough maturity to the decline.

With the constant decline in profits, the business could be wound up if it gets to negative.

Now at the point where the business starts experiencing maturity, huge restructuring measures must be considered. Rebranding and reinvestment could salvage the business and extend its lifecycle.

Rebranding measures could be reinvesting in technology, adapting to changes in time and season and redefining the market.

Reinvestment could include internal restructuring such as increase in share capital or external corporate restructuring measures such as mergers and acquisitions.

By Barrister Tezo Abanda Daniel