By Gary and Nancy Hallett
Most businesses, like their owners, follow a life cycle that patterns a beginning; followed by a season of growth, optimism and profitability; leading often to a period of peak performance. It’s the ensuing years when things tend to fade and the business is sold, merged with another company or too often, it’s simply closed. For some, the life cycle is rich and extends many years. For others, optimism is brief and the end arrives quickly.
Knowing your position in the Business Life Cycle can make all the difference between exiting with maximum reward and exiting with just the shirt on your back. Let’s look at 7 Phases all business owners should understand;
Idea – Excitement rules and you know your idea will succeed. It’s risky but you know great reward almost always comes with some level of risk and sacrifice.
Start-up – Your confidence is rewarded as the business generates its first revenues, customer reviews are favorable and your brand is recognized. Optimism replaces risk/fear.
Acceptance – Internal optimism is confirmed in the marketplace as the business grows and you strive to reach break even. Selling your business at this point only makes sense if you don’t like what you’re doing or you have no other choice. If it’s a financial issue, your completed business plan and excellent financial record-keeping can mean the difference between getting needed financial help or going bust.
Growth – All systems are a go now. Business is growing and long hours are the norm. Opportunities seem endless. This is an excellent time to have a valuation completed on your business so that you know what it is worth and can set a marker for future comparisons.
Established – The business is thriving, producing routine and expected results. Annual valuations are important at this juncture because they set the stage for exit or succession planning dialogue. This is an optimal time to sell, though you’ll be tempted to stay another five to 10 years.
Maturing – As the business matures, results aren’t as consistent as they used to be. Competition is tough and you’re faced with critical decisions about capital investment. You spend more time thinking about the future and when to sell. This might be your last chance to take action that will reward your efforts before it’s too late.
Decline – At this point in the life cycle, the business has passed peak performance and is in decline. Your decision now is whether to rebuild or to exit. Your own personal situation will drive that decision. Regardless, it’s imperative that you act now.
Most business owners will have a general idea where they are in the life cycle, and recognize many of the markers from where they’ve been. Take a moment to pinpoint where you are on the Business Life Cycle chart and use it to map an exit strategy that will maximize the selling price of your business.
Gateway Business Brokers LLC is owned by Gary & Nancy Hallett in Atlantic Beach Fl. Their team has owned, operated bought and sold businesses ranging in value from $50,000 to several million over a 30 year period. They assist business owners in the preparation and sale of their business and buyers in finding the right business to purchase. They can be reached at info@gwbusinessbrokers.com or (904) 372-9157
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