The document outlines the typical life cycle stages of a new business: 1) Invention - where opportunities are identified and intellectual property is protected. 2) Start-up - the most difficult stage to survive which requires a sound business plan. 3) Growth - where a business works to become profitable and compete in its market. 4) Maturity - when a stable business looks to expand or develop an exit strategy. 5) Harvest - the final stage where a business aims to profit from prior efforts or risks failure.

1. LU4 – Life Cycle Stages of a Business
SBDE212

2. OBJECTIVES
• Identify the life cycle stages of a new business
• Comment on the invention stage of a small business
• Discuss the importance of the start up stage of a small
business
• Describe the growth stage of a small business
• Distinguish between the maturity and harvest stages of a
small business

3. Life Cycle Stages of a Business
Click Mouse Reveal Next Phase
Stage1 INVENTION
Stage 2 START - UP
Stage 3 GROWTH
Stage 4 BREAKTHROUGH
Stage 5 MATURITY
Stage 6 HARVEST

4. INVENTION
• Creation or identification of
opportunity
• Safeguarding of intellectual property
• Product liability
• Market research

5. INVENTION - PROTECTION OF IP
Safeguarding of inventions, designs, know-how, skills and
names
According to the Patent Office, intellectual property rights
(IPR) allow people to:-
“own their creativity and innovation in
the same way they can own physical
property”

6. INVENTION - PROTECTION OF IP
4 main types of IP that business owners should
consider protecting in the early stages of business:-
• Trademarks – product or service as a brand that
allows it to be differentiated
• Patents – for new and improved products and
process that can be applied
• Copyright – for material such as music, films etc
• Designs – that specify appearance such as
shape, texture etc.

7. INVENTION - PROTECTION OF IP
Play Intellectual Property Rights in SA

8. INVENTION – MARKET RESEARCH OR PILOT STUDY
FOCUS GROUP – made up of a small
representative target market group
selected from a wider population brought
together for a limited amount of time
PILOT STUDY – or experiment is a
precursor to a full-scale launch, which is
particularly useful to ensure if all
operational parameters are in sync

9. INVENTIONS
Play inventions

10. INVENTION - PRODUCT LIABILITY
• Blame the designer or manufacturer for malfunction, loss,
injury to a person or damage to property
• Insurance products exist, e.g.. Product liability insurance
cover for damage or injury caused to another person or
business

11. START - UP
• For many this is the only stage that a small business may
experience! It is by far the most difficult to survive
• Without a sound business plan it is impossible to get a
business off the ground and running

12. START – UP - CHECKLIST
P68 Module Manual

13. START – UP - CRM
Customer Relationship Management
Research shows that it costs 5 x as much to get a purchase
from a new customer than from an existing one!
Establishing a customer base is expensive – THEREFORE
once you have gained a customer do not lose them.
Strategy to attract and retain customers is called CRM
Should capture 2 important elements, contact data and
performance data
Microsoft Outlook, Business Contact Manager, Dynamics
CRM

14. START – UP – CRM Database
P70 Module Manual

15. GROWTH STAGE
• Initial stage of planned losses until breakeven and then
increasing revenue
• How business managed and how able to compete in its
market place will determine survival
• Must be able to respond to changes in external
environment
• Internal environment will also be challenging, e.g.
cashflow, leadership etc.

16. GROWTH STAGE – GENERIC GROWTH
STRATEGIES
• Lifestyle or part time firms – provide sufficient profit to
supplement salary but is not usually sufficient to live on
• Traditional small business – smallest full time businesses with
one operating site. Provide sufficient income for owner and
family
• High performing small business – grow at rates of 10 – 15% per
year, adding employees and locations. High levels of
professionalism in order to maximise turnover & profitability
• High growth ventures – achieve growth rates of 25% or more.
Aim to become big businesses with external funding

17. BREAKTHROUGH STAGE
• All about expansion
• Business reaches point where there is sufficient revenue
to justify its existance
• Fixed and variable costs are covered
• Cash & good credit record can be used to raise finance
• Business hierarchy developed, delegate authority
• Acute cash problems can develop during periods of rapid
growth and also operational efficiencies. Very careful
management required

18. MATURITY STAGE
• Business stable enough to survive most unforeseen
circumstances
• Can pull through most market dips
• Owner very experienced and knowledgeable
• More extensive systems in place
• Owner may be looking for exit strategy

19. HARVEST STAGE
• Can get declining profits
• Take heavy losses and eventually fail or cease to operate
• Ideal goal for business owner is to harvest the effort they
have put in over the years
• All exit strategies are legally, financially and operationally
complex
• Must employ professionals to assist

20. HARVEST STAGE – WAYS TO
• Selling the firm
• Sales to strategic buyers
• Sales to financial buyers
• Sales to employees
• Releasing the firms cashflows to its owners
• Offering stock to the public – rare and very difficult
• Issuing a private placement of stock – capital raised from
private investors

21. INDIVIDUAL EXERCISE
Revision questions
P75 Module Manual

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