If you happen to own a startup and find yourself standing at a point where both direction and plan are out of focus, then we are glad to have you on our page today.
First things first, calm down. You are a business owner, an entrepreneur, and the current perplexity is nothing but one of the many hurdles that were written for you the day you took up this role. Yes, you chose the challenges.
But of course, because you can conquer them all. You’ve got it in you to direct fluctuating curves to stability. Be it in terms of finance or team growth.
Don’t believe us yet? The current situation makes it seem otherwise?
Well, okay. Let us demonstrate.
Read on ahead to acquaint yourself with a whole phenomenon and cycle upon which we base our claims.
Business Life Cycle – Something You Ought to Know
Okay, so here. The Business Cycle. Yes, that’s what we were talking about above.
A business cycle basically refers to economic activity over time. You can collect your data over time to sketch, monitor, and optimize this cycle. And even use a graph to represent this. The concept is very much similar to a human life cycle. As you read on, you will figure out how exactly.
Note that a business cycle does not represent but measure the ongoing activity. Now, what’s that supposed to mean? To put it simply, a business cycle does not comprise expected outcomes but obtained outcomes, which means you can set up goals for a certain stage. But only the time and output of your business will help you evaluate and know your business lifecycle.
With that said, let us consider the formal terms as well. It is the cycle of fluctuations in GDP or Gross Domestic Product over a certain time. It measures the natural growth rate, and one cycle may comprise a boom and contraction. The term boom refers to rapid economic growth, while contraction refers to recessed growth.
Stage One: The Root
The initial most stage refers to when you launch the brand, and the root starts to form. Thus, we like to call it The Root stage of your business. Since this is the launching stage, the sales are generally low, but also, increasing slowly and (hopefully) steadily.
The root stage is when you should focus on marketing your brand to the targeted consumers. Usually, businesses do so by projecting and advertising value propositions as well as their comparative advantages. It is also the stage when the sales revenue is very little compared to the investments. The startup is most likely to experience losses at this point. However, a regular cash flow to and fro the Capital and business is crucial to maintain. If, for example, you invest the entire Capital into the startup without experiencing any profits and gains, then your business is most likely to fail. Hence, a regular cash flow is essential between both junctions.
During this period, the key focus should remain on advertising the brand. You should remain involved in the development of the company and keep an open approach towards adaptability. Also, it is when you will interact with new people and constantly imply new strategies to sell your stuff. Take note that during this time, you will not have many employees and the workload will be more. Hence, the struggling root stage.
Stage Two: Planning
The next stage calls for Planning and bringing stability to your business. If your company survives the root stage, it will enter the Planning stage, where you will start seeing rapid sales growth. However, the revenue generated will help recover the initial investments, and the profits will remain low.
Eventually, when the sales boost, you will experience a point where there is neither profit nor loss. It is called the break-even point, after which your business will reach a point of sustainability. However, to ensure that sustainability sustains, it is essential to ensure a continuous Capital flow.
In this stage, you focus on the growth and stability of your business. While also, planning how to further develop your business so that it may enter the building stage. Currently, white-label businesses are successfully moving from one stage to another efficiently. That's because white label businesses do not invest in manufacturing.
They invest in marketing and selling a product or service that gets manufactured by another company that supports their business. Examples of such manufacturing companies include brands like Joy Organics, their white label CBD program allows their partners to gain profit from their products under their own private label. Hence, the efficient planning of such companies.
Stage Three: Building
The building stage is the third stage of your business cycle. It comes when your business has been in the market for a long time. At this stage, the sales and profits are slow but increased due to saturation in the market. Eventually, the profits start to decline, and you must build your business again with the help of enhanced Capital flow. The Building stage requires you to build and develop your brand.
Stage Four: Upgrading
By the time you reach stage four, you will feel everything running in sync. The long recruitment sessions and training sessions will occupy little to no time. Your staff and office may as well find a way to run in perfect harmony on its own. Now, you will have some time to focus on growth.
You can assess and analyze the weak areas of your current business structure and strengthen those areas. If all seems to be running just fine.
We would recommend you carefully plan your expansion. Do not spend or invest too recklessly with this. If you think, opting for a certain upgrade poses even the slightest threat to your building clientele and negatively impacts the quality of service or goods, then you shouldn’t. Instead, team up with the innovative minds in your crew and layout a safe plan to upgrade your business model to double the generated revenues.
Stage Five: Marking Boundaries
The last stage is all about knowing the limits of your goals. You have reached a certain target, but how long would you like to continue? Are you aiming for a figure? If so, then in what time frame would you like to achieve that? And what comes after that? You ought to figure the answer to all your questions and design an exit strategy.
Business Cycles Explained: Real Business Cycle Theory | Learn Liberty
Towards the end, let us remind you that first times can become a bit messy. If you are starting fresh, then you should know only 18 percent of first-timers have any chances of success. If you’ve had a business before this and failed at it, then there are chances you’d avoid the previous mistakes and adopt a better methodology from hereon. Good luck!