Published September 19, 2008

The Small Business Life Cycle: 5 Stages of Small Business

In the small business life cycle not every business will go through every stage, and not all small businesses will succeed as a result of these stages. However, they are proven stages or small business that are an important part of running a small business, whether from home or from a formal office.

Stage One

The first stage of any small business is obvious - establishment. At this stage, the business is being created, planned and the early days of its operations take place.

For some, this is the only stage that a small business may see, as it is by far one of the most difficult to survive. Many things can go wrong at this stage; thus, good business planning a crucial and necessary part of it.

Without a good business plan, it is impossible to get a small business off the ground, running and eventually moving through to the next stages of its life cycle.

Stage Two

The second stage of small business in the small business life cycle is the growth period.

During this stage, a business has an initial time of negative profit until it breaks even and begins to show increased revenues that allow it to truly grow. This is also the stage that the real test of a business comes into play.

How the business is managed and how it is able to compete within its designated market will determine whether it will survive, heading to the next stage - or whether it will decline and reach the last stage of its life.

Stage Three

The third stage of small business is about expansion. This is the point at which a business gets to the point where there is sufficient revenue being brought in so that there are no doubts of its survival and it can expand its horizons.

This includes taking on staff, expanding the office space of the business or even investing in equipment to deal with a larger base of clientele. This stage also entails producing more products if necessary.

Stage Four

The fourth stage of small or other business is about maturity.

The business is now stable enough to survive most unforeseen circumstances. It has enough backing, capital and support to ensure that even if the market becomes unstable, it can pull through.

This may be accomplished by rearranging its management plan, getting rid of one product to replace another or adding an additional product to an already existing product line.

However, if the market declines, it may survive, though its profits may take a temporary slide backwards.

Stage Five

In the small business life cycle the fifth stage of small business, is about decline. In fact, it is the easiest stage to reach for any business because it is the point where a starting business will fail.

An existing business, even a mature one, can decline in profits, take heavy losses and eventually either fail or cease operations to avoid further losses. As any small business owner can attest to, the stages of business are necessary and a normal part of the small business life cycle.