The life cycle of business.
Having a profitable company is the end goal of many entrepreneurs. People start their company as an idea, and if they are successful, it grows and matures into a growing concern. However, companies have a life cycle with many challenges along the way.
Over the years, I’ve seen many small companies go through the cycle of startup, success, and failure. The company starts in a state of emergency, having to do something to survive, moves into a state of abundance where the company grows effortlessly and then move back to a state of emergency. Many of these companies start as a single person who is very good in their field, equipment operator, accountant, massage therapist, whatever it may be. At first, they struggle to get started, as they grow and take on more work they take on employees. The cycle continues until they reach a critical mass where their company has outgrown their ability to manage it effectively.
When the company was starting the entrepreneur did all the work, sales, providing the services or goods and bookkeeping, as the company becomes more successful, employees are added to handle the additional workload. The entrepreneur now has to manage the new employees as well as doing much of the company work they have always done. Sometimes their ability to manage their company does not keep up with the growth of the company. Many entrepreneurs fail to make the leap from hands-on in business (sales, services, etc.) to running the company. When this happens, the company plateaus as growth stops and starts to decline.
The emergency to abundance cycle is not unique to small businesses. This phenomenon affects large companies as well, although its usually for different reasons. One example is Atari, a pioneer in the video gaming industry. Atari became one of the largest video game producers in the world in the 1980s but lost market share to Nintendo and other innovative companies when they failed to capitalize on the changing gaming market. Atari still exists, but it is a shell of its former self.
Contact Arbutus Management Consulting so we can help you overcome the dangers of the plateau.
