The Lifecycle of Business

Pasquale Marinelli, owner of the Marinelli Bell Factory in Angone, Italy isn’t just the third, fourth or fifth generation to run his family’s business.  Marinelli Pontificia Fonderia di Campana is a company that has been in operation since 1040 A.D.  There is also evidence that bells produced in the year 1,000 were made by the Marinelli family before the business was formed.   Think about that for a minute.  Many businesses can’t survive a spat between a husband and wife, employee issues or a downturn in the economy.  Marinelli Bells have been designed, manufactured, packed and shipped to customers for a thousand years.  Even if each generation controlled the business for twenty five years, that is at least forty different configurations of ownership, management and business models that the company has had to endure to survive. 

Although Marinelli Bell has seemingly achieved business immortality, most businesses go through a normal birth to death lifecycle.  The conception phase of the business lifecycle can be the most exciting.  There is no failure in a business that exists only in the mind of the entrepreneur.  An idea for a business usually comes from some point of reference or experience of the hopeful future business owner.  Very often, businesses are started by restless or disgruntled employees who simply feel that they can do a better job of producing a product, providing a service or managing people than their current boss.  The born entrepreneur is a rare breed.  Once in a while there is the example of the kid who started mowing lawns at the age of 13 and twenty years later owns a successful landscaping company.  No matter the reason or situation that spawned the business idea, the concept or conception phase always has to take place before the wheels of action toward making the business become a reality can start turning.  The mind is the safest place for a business to exist.  There are no liability issues, regulatory controls, employee problems or taxes to pay on a business that is merely a thought.  The challenge for entrepreneurs starts the minute they relate the business idea to someone else… anyone else.  Similar to the response new couples get when they announce that they are trying to get pregnant, the future business owner experiences supporters, doubters and a whole lot of unsolicited suggestions as to how to start the business, what to call the business and how to run the business.  Going from business concept to grand opening happens in a similar time frame as the conception of a baby to its actual birth- nine months.  The reason this length of time makes sense is simple.  The business idea has to be processed and turned into a formal plan.  It needs financing, a location from which to operate, staff, inventory, etc.  Those things all take time.  If the idea continuously runs into brick walls, it fades and goes away after nine months and the business never happens.  

The birth of a business is also an exciting time just like the birth of a baby, and it marks the beginning of the realities of business ownership, both positive and negative.  Even the greatest business ideas had to be fed, changed and nurtured through their early months and years in order to become viable and self-sustaining.  Long days and sleepless nights often become the pattern of new business owners.  The danger of getting stuck in this phase of business development is real.  There is an unspoken question that will be asked of a new business owner in the first two years of operation.  Are you going to direct, control and change the business or is the business going to direct, change and control you?  Understanding the start-up phase and the requirements of a new business allows the new owner to have a specific plan and timeline for getting the business to the next level, which is self-sufficiency.

 

Once self-sufficiency has been achieved, the business is usually in the adolescent stage where it can function for the most part on its own, but can still not be left alone for extended periods of time.  This is followed by the rebellious teen years where the business has reached a level of success that affords the owners a decent lifestyle and excess profits.  The rebellion comes from employees who may feel like the owner is getting rich off of their hard work and dedication at an unfair rate.  This is a time when businesses run the risk of having employees leave to become direct competitors.  Like a teenager, they know how to do things better than the business owner and they want to test that theory.  Following the teen years comes adulthood where the business operates for a period of time with relatively few problems.  The final stage is the retirement of the founder/owner and the transition of the business to the next generation or the next owner.

 

Businesses that fail generally happen in the early stages before the business ever really gets off the ground and creates a culture.  The second most dangerous time is when the founder/owner wants to retire, but has not fully transitioned power to the next generation of owners.  This is why statistically less than 25% of businesses survive the second generation.  Each life stage of a business has unique characteristics that can be managed and leveraged to help the business achieve everlasting performance.  But, each stage also has pitfalls that can be the beginning of the end for the business.  What stage is your business in?