Starting with the end in mind: planning your business lifecycle
All businesses go through a business lifecycle and it is important to know how you want your business, as well as yourself, to navigate this lifecycle. It is then important to visualise your business strategy through a business plan.
Business ownership is different to what it used to be, especially in certain digital industries, where businesses often have shorter lifecycles and ownership. Evaluating your goals as an individual and how they relate to your business will help you decide whether you will own your business for five years or twenty-five years.
Why plan your business lifecycle? Because having a clear idea of your goals with your life and business will shape certain aspects of your business plan, such as where you dedicate your efforts and funds. An awareness of where you are in the business cycle will also protect you from making any significant mistakes
1. Business life cycle: phase one
This is the most pivotal stage in the health and development of your business life cycle. You firstly need to decide what type of cycle you want to follow. Many entrepreneurs today will skip certain stages and plan their businesses to experience large and immediate growth before selling the business within the first 5-10 years. This path will require different skills and efforts from you, as you may need significant interest from investors to help drive short-term growth, increase cash-flow, and find potential buyers early in the process. In contrast to this business plan, you may want to develop a business more slowly so that it provides an income for you in the long-term. Knowing which path you want to go down will shape your business plan as well as the steps you take in the start-up/first phase of your business lifecycle.
2. Growth phase
As part of your business plan, envision how you will experience this growth phase. During the first few years of your business, your skills and role as owner will change. Most commonly, you will no longer focus your time and energy on procuring investors and making the seemingly endless adjustments to your business in its formative stages. Instead, your responsibilities will focus on management and finding people to take over your previous responsibilities. If you want the business to provide income to future generations, are there positions that your children may take early on to provide them with necessary skills? If so, include this in your business strategy.
3. Expansion phase
Are there areas in which you foresee your business entering or other areas in which you will personally want to expand your financial interests into? If so, how will this influence the development of your business?
Within your business plan, develop ideas and steps in which you will ensure that certain aspects of the business will function without your presence (in the case you are ill or on holiday) as well how they will respond to any foreseeable expansions of your business interests or even of what your business will do.
There is a chance during this latter stage of your business lifecycle that the year-on-year profits you begin to see may not experience the same level of growth. In this case, will you consider selling the business or will there be further room to expand the business? Your business plan may include these considerations, such as projected ways in which you may be able to continually expand.
Throughout the development of your business plan, consider how these stages will affect your business as it relates to its ownership, its management, and your own personal circumstances, including your family life.