Stages of Business Development

Stages of Business Development

The life cycle of a business, much like that of a human being, goes through many stages. Just as a
person is born, grows to maturity and dies, business entities pass through the same stages. Although
business experts disagree on the number of distinct stages in a business life cycle, they typically
agree on what occurs during each critical stage.
Start-Up Stage
The start-up phase represents the "birth" of the business. The entrepreneurs, much like expectant
parents, devote massive amounts of time, money and emotional investment in launching their new
venture. At this early stage, the owners use much of their energy to establish a sizable customer
base, purchase inventory, open bank accounts and hire employees. As with parenting, the start-up
phase brings many sleepless nights from a combination of worries about the future and expectations
for developmental milestones.
Growth Stage
After the start-up stage, a successful business often achieves a level of expanded capabilities. The
company establishes a reputation, encounters increased demand and stabilizes its business practices.
This growth phase has its share of both issues and opportunities. The company may require an
infusion of capital, either through taking on debt or selling off equity, to meet increased demand.
The company also usually encounters higher sales totals and better profit margins as it builds its
visibility in the market.
Maturity Stage
Just as a young person reaches adulthood, a prosperous business also reaches a more mature stage
during its life cycle. The increased capabilities encountered during the growth phase lead to the
company achieving a stable presence in its industry. At this stage, the owners no longer need to pour
their energy into every aspect of the company. They can choose either to stay with the business or
allow new management to take over its operations.
Decline Stage
Every year, thousands of businesses close their doors for the last time. The "death" of these
businesses can be attributed to many factors, including poor management, government regulation or
changes in the industry. During this stage, businesses often see declining sales, decreased profits or
steep losses. The company may fall out of favor with its customers, carry high debts or encounter
cash flow issues. Any of these issues can lead to the company's eventual decline and closure.
Advantages of Small-Business Ownership
 Independence. Entrepreneurs are their own bosses. They make the decisions. They choose
whom to do business with and what work they will do. They decide what hours to work, as
well as what to pay and whether to take vacations. For many entrepreneurs the freedom to
control their destiny is enough to outweigh the potential risks.
 Financial gain. Entrepreneurship offers a greater possibility of achieving significant
financial rewards than working for someone else. Owning your own business removes the
income restraint that exists in being someone else’s employee. Many entrepreneurs are
inspired by the mega-millionaire entrepreneurs we see today, such as Steve Jobs, Elon Musk,
Jeff Bezos, and Mark Zuckerberg.
 Control. It enables one to be involved in the total operation of the business, from concept to
design to creation, from sales to business operations to customer response. This ability to be
totally immersed in the business is very satisfying to entrepreneurs who are driven by passion
and creativity and possess a “vision” of what they aim to achieve. This level of involvement
allows the business owner to truly create something of their own.
 Prestige. It offers the status of being the person in charge. Some entrepreneurs are
attracted to the idea of being the boss. In addition, though, there is the prestige and pride of
ownership. When someone asks, “Who did this?” the entrepreneur can answer, “I did.”
 Equity. It gives an individual the opportunity to build equity, which can be kept, sold, or
passed on to the next generation. It’s not uncommon for entrepreneurs to own multiple
businesses throughout their life. They establish a company, run it for a while, and later sell it
to someone else. The income from this sale can then be used to finance the next venture. If
they’re not interested in selling the business, the goal may be to build something that can be
passed down to their children to help ensure their financial future. One thing is sure: In order
to fully reap the financial benefits of a business venture, you need to be the owner.
 Opportunity. Entrepreneurship creates an opportunity for a person to make a contribution.
Most new entrepreneurs help the local economy. A few—through their innovations—
contribute to society as a whole.
In addition, small businesses have certain advantages over large businesses. Flexibility, generally
lean staffing, and the ability to develop close relationships with customers are among the key
benefits of small businesses. The digital communication revolution has significantly lowered the
cost of reaching customers, and this has been a boon to small startups and big businesses alike.

Disadvantages of Small-Business Ownership

As the little boy said when he got off his first roller-coaster ride, “I like the ups but not the downs!”
Here are some of the downsides to owning a small business:
Time commitment. When someone opens a small business, it’s likely, at least in the beginning, that
they will have few employees. This leaves all of the duties and responsibilities to the owner. Small-
business owners report working more than eighty hours a week handling everything from
purchasing to banking to advertising. This time commitment can place a strain on family and friends
and add to the stress of launching a new business venture.
Risk. Even if the business has been structured to minimize the risk and liability to the owner, risk
can’t be completely eliminated. For instance, if an individual leaves a secure job to follow an
entrepreneurial dream and the business fails, this financial setback can be hard to overcome. Beyond
financial risk, entrepreneurs need to consider the risk from product liability, employee
disagreements, and regulatory requirements
Uncertainty. Even though the business may be successful at the start, external factors such as
downturns in the economy, new competitors entering the marketplace, or shifts in consumer demand
may stall the businesses growth. Even entrepreneurs who go through a comprehensive planning
process will never be able to anticipate all of the potential changes in the business environment.
Financial commitment. Even the smallest of business ventures requires a certain amount of capital
to start. For many people starting small businesses, their initial source of funding is personal
savings, investments, or retirement funds. Committing these types of funds to a business venture
makes them unavailable for personal or family needs. In most cases where a small business receives
start-up funding through a loan, the entrepreneur must secure the loan by pledging personal assets,
such as a home. Risking the equity in one’s home is a financial commitment not all entrepreneurs
are willing to make.
In spite of the potential disadvantages, most small-business owners are pleased with their decision
to start a business. A survey conducted by the Wall Street Journal and Cicco and Associates Inc.
indicates that small-business owners and top-level corporate executives agree overwhelmingly that
small-business owners “are more satisfied with their work than their corporate executive
counterparts.”[1]

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