a set of stages that outlines the typical growing and falling periods of a developing business.
Business Life Cycle Details
The business life cycle is a general set of stages through which every business goes through. It serves as a general metric for where the company currently is developmentally and aids business owners in making personalized decisions towards their current business situation. By being knowledgeable of the business life cycle, business owners can act proactively in response to their circumstances and make more informed decisions around its conduct.
There are five stages to the business cycle: startup, growth, maturity, decline, and renewal. The startup phase represents the very beginning stages of the business and leads into the growth stage. We characterize the growth stage by a more confident business outlook and establishment into the market. These two stages are typically the most dangerous for new businesses as many things have yet to be determined, but they also afford business owners significant room for creativity.
As the business continues to spend time in the growth stage, it will eventually reach the maturity stage, which we can define by general consistency in all aspects of the business. During this stage, business owners are at risk of being caught in the decline stage, where the company undergoes a gradual loss of new customers and a slow falloff of sales. With the right management, businesses can follow the decline stage with the renewal stage, which we can identify by a shift in the business's operations to meet the market's previously-mentioned changes in the market. By refocusing their business' efforts towards a changing market and further investing capital back into the business, business owners can allow their business to maintain its stability and continue to grow, further establishing themselves in the market.
Real-World Example of the Business Life Cycle
To apply the concept of the business cycle to real life, let's examine Chipotle. Starting in 1993, Chipotle originally was just a small Mexican restaurant, opened in a small street-corner building previously home to an ice-cream shop. During this time, Chipotle was in the startup stage. Over time, Chipotle started to become less like a small, local restaurant and more like a franchise, entering the growth stage.
As new restaurants continued to appear across the country and Chipotle continued to secure supply chains and new restaurant locations, the company began to mature. However, after three consecutive incidents of issues with food safety, Chipotle was faced with a massive decrease in revenues and an ever-worsening public image. During this time, Chipotle entered the decline stage, forcing the CEO of Chipotle to take proactive action to prevent further worsening of the situation.
Chipotle's renewal stage was marked by a stronger commitment to food safety and the most expensive marketing campaign in history, along with pivots to the online order market and the development of a delivery app. Through these changes, Chipotle was able to pick up growth once more the following year, eventually exceeding their pre-crisis profits.