In Summary: The 5 Stages Of The Business Lifecycle

Every business passes through five distinct lifecycle stages and each is a factor in how buyers value your company.

Start-Up Stage: Because a start-up is difficult to value, buyers are rarely interested. It’s better to put off selling a start-up and take the time to grow sales.

Early Growth Stage: The business is operating at a break-even rate or slightly better. This stage can attract buyers who want access a new market and/or need to add products or services to their own.

Accelerated Development Stage: A rapidly growing company is prime for acquisition – you can justify higher profit projections and set a higher price. Buyers will look for one or more of the following:

  • A dramatic increase in sales and/or high profit margins.
  • Working capital and credit lines are about to be maxed out – an infusion of cash is needed to increase growth and market share.
  • Accelerated growth is beyond the abilities of management – an experienced team is needed to take it to the next level.

Maturity Stage: Sales and profit margins have leveled off. Management complacency is setting in. If the business is established in its market and has a solid earnings record in previous years, it can attract buyers willing to provide the capital and management it needs.

Declining Stage: There’s a continuous loss of sales, market share and skilled personnel. A company in this stage may attract a very rare buyer known as a Turn-Around Specialist.

Gokul Padmanabhan

Written by Gokul Padmanabhan

Gokul Padmanabhan has devoted the past 15 years to buying and selling businesses, much of that in the restoration industry. His partnership with Restoration Brokers of America strengthens his hands-on expertise with a national presence and infrastructure that is second to none.