Angel Investors Network Blog – The 7 Stages of Business Ownership

The 7 Stages of Business Ownership

The 7 Stages of Business Ownership

Building a business doesn’t happen overnight. You don’t build a business and then wait for it to grow. You start with a barely feasible idea and you nurture it, guiding it through several phases of evolution until it becomes almost unrecognizable. If you’re lucky, it will keep evolving until you start generating a substantial profit, and become stable enough to consider an exit strategy.

If you keep pressing, you’ll find that there are seven main “stages” of business ownership, each with its own challenges and opportunities. Learning more about these stages can help you plan for your business’s growth and give you key insights on which to build your organization.

1. The idea.

The idea stage is a bit more than just coming up with the original idea for your business, though it is that as well. Once you’ve got some solid business idea, the remainder of this phase is spent putting together all the pieces of how, exactly, you can pull this off. That means creating a thorough business plan you can use as the blueprint for your business, working out all the kinks you didn’t think about when you came up with that initial spark, compensating for the competition you anticipate, and figuring out how you’re going to finance everything.

2. The launch.

This phase marks the “official” start of your business, though you can still consider yourself an entrepreneur in the first phase. At this point, you’ll have all the resources you need to begin operations. You’ll find an office (if you need one), secure equipment (if you need it), and start looking for your first clients and customers. This is a hectic stage, but usually doesn’t carry any financial risks–you’ve secured enough funding to see you through this phase. The big problem lies in facing the first line of problems you didn’t anticipate in your business plan–and they will come up.

3. Survival.

The next stage is probably the most volatile, because it’s a make-or-break point for your business plan. You’ll start to run out of your initial funding, but it’s still too early to have any manageable flow of revenue. You’re likely changing things in your business daily, so your structure is volatile, and all the while you’re scrambling to pick up enough clients to keep you afloat. Your business will either learn to adapt quickly or burn out in a flash–it’s up to you and your team to decide which. Adaptation is the key to surviving the “survival” stage, and it isn’t easy.

4. Floating steady.

Though the process will be slow and gradual, eventually you’ll secure enough clients and revenue to pull yourself out of the survival phase. At this point, you’ll be able to float steadily, breaking even or making a profit on a predictable basis, and all your internal processes will start to stabilize. You’ll learn to count on your core team, your products will be consistent, and you’ll start to think that theoretically, your business could sustain itself forever–and if you let it, it just might. Some businesses stop at this phase and self-sustain indefinitely, and there’s nothing wrong with that unless you’re after something more.

5. Growth.

The growth phase involves acceleration beyond your floating steady setup, and though it can happen naturally through word-of-mouth and high client retention, it’s more likely that you’ll instill this growth through some effort of your own. You can achieve this in a number of ways, usually involving heavy leaning on your sales and marketing teams. The more you promote your business, and the better job you do at retaining your existing customers, the better your chance at scaling your business upward. However, be aware that with growth comes volatility–growing too quickly or too slowly can put too much pressure on your resources.

6. Evolution.

Generally speaking, as your business reaches a certain point of growth, it’s going to need to change in some drastic way to continue growing, or even to survive. For example, it may need to split into different companies, or it may need to acquire a new company to help it in some key area. It may need to branch out into different locations, or it may need to adopt a new model for some of its central processes. This evolution will be difficult, as your business has been consistent for some time, but it’s necessary to keep moving forward.

7. Exit.

Finally, at some point, you’ll reach the level you wanted to achieve, and it’ll be time for you to move on. That might mean selling the business, passing it to one of your team members or a family member, or simply retiring and letting someone else figure out what to do (though I don’t advise this).

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