Business Development and the Business Cycle
The start-up phase is arguably the most critical; if new ventures flounder they normally don't make it. Usually this is a result of poor strategy and execution and this is why so many new businesses fail.
Once the business is established and supporting itself there is often a period of steady growth. This is due to newness, pricing, energy level, etc. If the strategy is correct this growth is natural and surprisingly easy. Many owners and managers get lulled into the impression they are so good it will always be easy...
A critical point is reached when this natural growth stalls. Many companies literally suddenly growing and continue business with their current markets. At this point ownership and management become very articulate at explaining why things cannot be improved. A comfort level is reached and a slow downward decline begins...
At some point this decline begins to be felt in ways such as cash flow problems and employee discontent. The dynamics that have brought the company to this point have changed. Owners that let their businesses decline are in essence buying back their own equity. The status quo simply erodes equity. At this point ownership has two options: sell or exit the company or redesign it to become competitive.
Sometimes hard decisions must be made. One of those is what to do with employees that have been loyal but no longer are appropriate. Management must take decisive action to reach a tipping point...
A reorganization or 'retooling' may bring growth and competitiveness back to the company. This will continue until another crisis point is reached. The ultimate measure of success is how the company deals with these opportunities and threats...
If you are the owner, it's your equity...
Jack D. Deal
