The Life (and Death) Cycle of Small Business

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Start-up, growth, plateau, (and often decline)

Entrepreneurs are often experts in their field. An entrepreneur has an idea or sees an opportunity and starts a business. If their plan is successful, their business grows and matures into a growing concern. Over the years, I’ve seen many small companies go through the cycle of start-up, growth, plateau, and often decline. Not all small companies will experience this cycle, but many of them do.

Start-up

Often the most challenging stage of any business is the start-up cycle. Taking that original idea or opportunity and turning it into a business is a challenging step. The entrepreneur is often working on their own and handling all of the activities in the company. These are the most stressful times for the new entrepreneur; they are spending a great deal of time, effort and money to get their business without any certainty of success. Without a proper business plan, this step is even more difficult.

Growth

If the company makes it through the start-up cycle, it often moves into the growth phase. Over time the business expands, taking on more work and adding employees. At some point, many entrepreneurs face the challenge of too much to do without sufficient resources. The cycle continues until they reach a critical mass where their company has outgrown the entrepreneur’s ability to manage their business effectively.

Plateau

Growth is an exciting phase of the business, but it doesn’t last forever. The plateau is the phase where the company has reached a critical mass and has outgrown the entrepreneur’s ability to manage the business effectively. Operating the business may seem routine, but the plateau is where growth and innovation stops.

The plateau occurs for different companies at different points, but in my experience, it is often when the company has between 5 and 20 employees. Some companies will remain there for years and sometimes decades. Having the company plateau is not necessarily a bad thing if the company is stable, and the entrepreneur feels comfortable with where their company’s performance.

Decline

With a lack of growth and innovation, the plateau can lead to the decline phase of the cycle. The decline is a result of complacency in the organization. Human nature is that we tend to repeat what worked in the past, hoping it will still work today. Unfortunately, the increasing pace of change in the business environment that worked in the past may not work now. All this leads to the company declining over time, with reduced sales, increased time and energy being spent trying to keep the company going with diminishing results.

The decline is often fatal for companies but doesn’t have to be. One famous example of business decline is Atari. Started in 1972, they dominated the video game market through the 1980s. The company almost disappeared in the 1990s and early 2000s in the face of intense competition from companies like Nintendo. Atari, like many companies, became complacent about their market domination. They continued to rely on their tried and true products while their competitors came out with new and better offerings. Surprising many video industry pundits, Atari has resurfaced as a force in the video game market with their new retro video games.

The cycle of start-up, growth, plateau, and decline aren’t your only options.

Contact Arbutus Management Consulting today so we can help you navigate the business cycle and pick the right strategy for where you are today and where you want to get too.  

References:

Atari https://www.wired.com/2012/06/atari-40th-anniversary/

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