Seven Stages of Every Business

Every business goes through regular and periodic stages of growth and then decline. This pattern has traditionally been referred to as the business life-cycle. Les McKeown (CEO Predictable Success) knows how you can take your startup from days of struggle to scaled success during each of the seven critical stages.

The seven stages are:

early struggle,
fun,
whitewater,
predictable success,
treadmill,
the big rut, and
the death rattle.

Remember that 80% of businesses fail. If you want your startup to succeed, there is only one right strategy: stop being one as quickly as possible! Therefore, do everything you can to get out of the early struggle stage quickly. and move on towards predictable success.

The Seven Stages

Stage 1: Early Struggle is a stage where two-thirds of all startups won't make it through to the next stage. To avoid that outcome you need to, (1) make sure there is enough cash to keep going and, (2) clearly establish that there is a market for your product or service (product/market fit).

Stage 2: Fun is the stage when you find that profitable market and sell, sell, sell. However, this stage requires a Visionary to drive the business, and a ruthless Operator to deliver. Somehow things get done at this stage, even within unrealistic schedules. Your key focus moves from cash to sales, and the business builds exponentially in a time of rapid, second-stage growth. It’s in the Fun phase that the organization’s myths and legends are built, and the “Big Dogs” emerge.

Stage 3: White Water is the stage at which the Visionary and the Operator can no longer continue to improvise in what they are doing. The degree of complexity required reaches a tipping point. Systems and processes are required, and the Operator and Visionary are NOT the right people to implement these, and build consistency out of chaos. A Processor is needed: someone who lives by spreadsheets. The organization is becoming more complex and the emphasis needs to shift from sales to sustainable profitability. However, to achieve profitable growth you need to put in place consistent processes, policies and systems, which is often a harder task than imagined. Strong implementation actions are also needed, and actions to make them stick. This is an incredibly difficult stage, and Whitewater is a point where organizations and leaders often have an identity crisis, or begin to suffer a lack of confidence.

Stage 4: Predictable Success is the only stage during which a business can scale successfully. At this stage, the Visionary, Operator and Processor should work together seamlessly. This is the most critical stage in your organization’s growth. You need to set and consistently achieve your goals and objectives with a predictable and consistent degree of success. However, this is also the stage during which systems and processes are being increasingly scrutinized, and the checklist is starting to get more and more important (rather than the things the checklists are supposed to solve). At this stage there are often weak-signals suggesting a decline in creativity, risk taking and initiative. The Visionary may also start to question their motivation to continue. It is essential at this stage to quickly revert to the Predictable Success formula which got you this far, and not to begin a progression towards the Treadmill stage.

Stage 5: Treadmill is a common, though sub-optimal stage. At this point systems and processes begin to choke entrepreneurship, risk-taking, adventure and creativity. Most successful startups reach the Treadmill. At this point employees (and founders) are to some degree - just going through the motions. A great deal of energy is being expended at this point however, there is no forward momentum. Treadmill is characterized by too much emphasis on data, and not enough emphasis on actions. Good people begin to leave the startup at this stage (even the Visionary-founder).

Stage 6: The Big Rut! Once you're in The Rut there's no going back. It may last a very long time (though not always). High market share + Prolific revenue stream + Paternalistic management + Denial = Big Rut. At this stage processes and administrative procedures are more important than actions or results, and the organization loses its ability to be self-aware. Death is awaiting the startup.

Stage 7: Death...a final chance at life through bankruptcy or acquisition, before the organization dies in its present form.

Whether you are joining a startup or have been in one for some time, knowing which stage the business is at, can be important for your personal decision-making. For management, knowing the stage of development, can help them better influence decisions directed at improving the business. For employees, knowing the life-cycle stage can influence their decision to stay or leave a startup.

Related Best Practices

Resources

YouTube video by author Les McKeown.

Author

The author of this page is Dr. Gerard Danford.

Dr. Gerard Danford has 20 years experience as a business school academic in Scandinavia, USA, Europe, and Russia. He Specializes in strategy and international business. He has held Adjunct Professor positions previously in the USA and Latvia -- Teaching and organizing MBA, Masters and Executive Education level courses. He previously served as founder & CEO of an international business consultancy. He is Published in academic journals and conferences. Dr. Danford is passionate about Video-based Learning, Open Educational Resources and Project-based Learning. Dr. Danford is active on Quora.