All companies go through different processes and different circumstances during their life, however, there is something they all have in common, and that is their life cycle. Just as all people have stages throughout their lives, companies also have their own life cycle. But what are these stages? Well, a company generally goes through these 6 stages: Birth, Growth, Maturity, Decline, Liquidation and Rebirth. Below we will explain in more depth what each stage is based on.
How long does each stage take in companies?
A very important point that we must clarify is that the stages through which a company goes through throughout its life cycle will vary for each one. Remember that there are companies that are doing better and worse, it also depends on the economic activity to which they are dedicated and the level of available capital that can be invested.
Therefore, the life cycle of a company does not have a fixed amount of time, but each company, depending on its development, may go through the different stages in the amount of time it requires.
In a way, the life cycle of a company can be compared to the life cycle of a person, where we all go through the same stages, but not at the same time.
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When we talk about the birth of a company, we refer to when it is legally constituted so that it can start its operations. At this stage the company has to take care of being able to grow economically, as well as obtain different types of financing so that it can remain stable and be able to apply different types of investment to enhance the company.
For a company that is in the birth stage, the main thing is to be able to capture potential customers, for this reason it should conduct different market research and implement different strategies applied to meet this objective.
Something that happens very commonly at this stage is to get stuck to the point that the company can not continue to function, for this reason you have to be very meticulous and be efficient when making important decisions to maximize results.
The second stage in the life cycle of a company is the growth stage, at this point the company should already be earning acceptable amounts of revenue so that it can put aside financing and stand on its own feet.
In addition, at this stage the company begins to have an increase in demand, of which there will already begin to be loyal customers who will contribute much to the growth of the brand.
Already at this point you can begin to think about an expansion, in the event that revenues are in a constant and high growth, as well as you can begin to hire staff to be responsible for the different processes and sectors of the company.
Another very important point when placing your company at this stage is that you will probably need to start delegating in order to focus on other objectives. Delegation is a key point, so you should make sure you have a highly qualified team, so your work will be more bearable and therefore you will be able to cover more needs of the company.
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Maturity is the most beneficial stage of a company, at this point you can say that it has reached its full potential. At this stage you are already in a privileged position within the market where you are, in addition to having an improved product and higher quality, so you begin to maximize your levels of efficiency and satisfaction to your customers.
The hardest thing about being in this stage? Staying in it, so you will have to implement different strategies that aim to keep your company stable. At this point you will have to pay close attention to your customers and the changes that occur in the market, since another of the most important tasks at this stage is to know how to adapt quickly to the different changes that may arise over time.
In maturity, the company should be at a point where it does not need much from other companies, there may be a partnership or a pact that benefits both, but in general, the company that is in maturity already has to be at a level where it can perform all its processes by itself, and does not need other companies to perform the production or sale of its product.
They are also constantly growing and expanding, so if in the previous step we said you were going to start delegating certain processes, in this stage you will start delegating almost everything. Likewise, the company will have a bureaucratic structure where important decisions will be made, so it’s not just you doing the decision making.
Growth at this level is slow, but as we mentioned, the important thing is to keep at it, plus having high degrees of efficiency and a very beneficial portfolio of customers, your prices will become more competitive, so that there is a peace and stability in the market.
Decline is something that all companies go through, some may go into decline very soon, while others manage to stay in the maturity stage for a long time, to such an extent that it seems that they will never go into decline.
Then, the decline is that stage where we are not going up, but we are going down, that is, the demand for our product and our customer base begins to decrease. Here we begin to experience different types of negative scenarios for the company.
Why does this happen? Well, the declines occur for different reasons, it may be because your company could not adapt to a change in the market, because the product quality declined, because different companies came to market with lower cost substitute products, etc.. There are many factors that affect a company to such an extent that it begins to enter the stage of decline.
At this stage it is common for the leaders and management of the company to decide to withdraw from the market, however, a decline can be studied, so that it can take off again. While this is very difficult, it is also possible, so studying the market very well and trying to reinvent yourself as a last resort can sometimes be positive.
Some last resort actions that companies in decline resort to is to massively reduce prices in an attempt to attract many customers, however, this sometimes translates as a problem in the market, because it would start a possible price war, which would cause a decrease in the profits of all companies.
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Liquidation occurs when you exhaust all economic resources as a last attempt to emerge, or as mentioned above, when you decide to exit the market and proceed to close your business.
At this stage you are no longer receiving income, you are simply in the process of closing the company for good. As the company has certain operating assets within it that will be unused after closing, everything is sold, this is called “liquidation of a company”.
The reason for selling everything is to get one last profit out of the company, to pay off debts, outstanding payroll, etc. The idea is that the company ceases operations without any accounts payable, so that it does not affect the management or the partners of the company.
When we talk about selling the operating assets of the company, we are referring to those that were necessary to carry out the different processes within it, such as machinery, furniture, desks, computers, televisions, cars, etc. After finishing the liquidation process, the company proceeds to close its operations definitively.
As we mentioned in the decline point, a company may resort to its last attempts to re-emerge in the market, in case it fails to do so, it goes to the liquidation stage, but if on the contrary the company manages to boost the brand again, it is called the renaissance stage.
In this stage, companies try to improve themselves, applying different processes, offering different goods and services or simply improving their quality.
Whatever the reason the company has been able to reach the renaissance stage, it is very important to keep innovating to keep customers satisfied.
Thus, we see that companies are “alive”, each one, depending on its performance over time, will live processes that make it grow or decline, that is why it is important to have a great capacity for management and strategic leadership so you can lead your company to a steady growth and keep it active and profitable for a long long time.
In TAS Consultancy we offer specialized and personalized consulting services to the needs of your company, so you can boost it and bring it to maturity, as well as keep it for as long as possible in the hands of our experts in tax, legal, administrative and accounting in Spain. Contact us by clicking on this link and make us your trusted partner.