Online Business – How To Understand The 6 Stages Of An Home Business
Understanding where your home business fits on life cycle or stages will help you foresee upcoming challenges and give you the ability to make the best business decisions.
1. Seed Stage: The seed stage of your internet business life cycle is when your business is just a thought or an idea. This is the very conception or birth of a new business.
Challenge: Most seed stage companies will have to overcome the challenge of market acceptance and pursue one niche opportunity.
2. Start-Up Stage: Your home business is born and now exists legally. Products or services are in production and you have your first customers.
Challenge: If your home based business is in the start-up life cycle stage, it is likely you have overestimated money needs and the time to market. The main challenge is not to burn through what little cash you have. You need to learn what profitable needs your clients have and do a reality check to see if your business is on the right track.
3. Growth Stage: Your online business has made it through the toddler years and is now a child. Revenues and customers are increasing with many new opportunities and issues. Profits are strong, but competition is surfacing.
Focus: Growth life cycle businesses are focused on running the business in a more formal fashion to deal with the increased sales and customers. Better accounting and management systems will have to be set-up.
4. Established Stage: Your online business has now matured into a thriving company with a place in the market and loyal customers. Sales growth is not explosive but manageable. Business life has become more routine.
Challenge: It is far too easy to rest on your laurels during this life stage. You have worked hard and have earned a rest but the marketplace is relentless and competitive. Stay focused on the bigger picture. Issues like the economy, competitors or changing customer tastes can quickly end all you have work for.
Focus: An established life cycle company will be focused on improvement and productivity. To compete in an established market, you will require better business practices along with automation and outsourcing to improve productivity.
5. Expansion Stage: This life cycle is characterized by a new period of growth into new markets and distribution channels. This stage is often the choice of the small business owner to gain a larger market share and find new revenue and profit channels.
Challenge: Moving into new markets requires the planning and research of a seed or start-up stage business. Focus should be on businesses that complement your existing experience and capabilities. Moving into unrelated businesses can be disastrous.
Focus: Add new products or services to existing markets or expand existing business into new markets and customer types.
6. Exit Stage: This is the big opportunity for your home business to cash out on all the effort and years of hard work. Or it can mean shutting down the business.
Challenge: Selling a business requires your realistic valuation. It may have been years of hard work to build the company, but what is its real value in the current market place. If you decide to close your business, the challenge is to deal with the financial and psychological aspects of a business loss.
Focus: Get a proper valuation on your company. Look at your business operations, management and competitive barriers to make the company worth more to the buyer. Set-up legal buy-sell agreements along with a business transition plan.
Money Sources: Find a business valuation partner. Consult with your accountant and financial advisors for the best tax strategy to sell or close-out down business.
Each stage of the business life cycle may not occur in chronological order. Some businesses will be “built to flip”; quickly going from start-up to exit. Others will choose to avoid expansion and stay in the established stage.
Whether your business is a glowing success or a dismal failure depends on your ability to adapt to it’s changing life cycles. What you focus on and overcome today will change in the future.
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