Chapter 3: Life Stages (Part 1)

Every human passes through certain stages of life viz. Childhood, teenager hood, Adulthood similarly a business also passes through stages.

As you can see in Fig 3.1 primarily there are four stages of any business. This cycle applies to all businesses, be it a road side food stall or any sophisticate IT startup. There might be a chance that a business skips middle two stages, but the first and last stage is always there. In this part we will discuss about first stage.

Introduction:

"The owner is the business, performs all the important tasks, and is the major supplier of energy, direction and capital"

      The Five Stages of Small Business Growth, by Neil C. Churchill and Virginia L. Lewis. Harvard Business Review.

At this stage the entrepreneur has to ensure the existence and survival of business. Focus is primarily on creating strong customer base. The very fresh example for this, Reliance Jio. They are distributing free sim card to everyone with least document verification and offering free data and voice calls for few months. At this stage business focuses on promotion. At this stage business may have to operate at very low profits or even loss. Business spends more money on marketing and promotion of business at this stage.

Sometimes between introduction and Growth stage there could be a struggle period when the entrepreneur might feel that his business won’t be able to survive any more. Primarily there could be following two problems causing this issue

1. Lack of resources
2. Not able to get customers

An entrepreneur needs to analyze these problems. Lack of resources could be due to two reasons. In the introduction stage an entrepreneur invests his/her own funds and these funds might be very limited. If this is the reason then the entrepreneur needs to seek outside assistance which could be in the form of loan from relatives, financial institution, investors or partner.

Business also generates funds by selling its product or service to customers. However if the business is not able get customers then it would impact cash flows which in turn would impact further operations of business. I’d like to call it “The Spiral Effect” (Fig 3.2), your product or service is sold to customers which will generate funds and these funds are utilized to acquire resources for further production. If the business is not able to get customers it could be due to product/service not getting promoted properly, in such case one will have to invest more in marketing. Another reason for not getting customers could be that there is something missing in the product/service. In such case an entrepreneur needs to understand what his/her product lacks.

• Is there similar product in market which is better in terms of features? – in this case include all the features which the competitor is providing and also include some additional features
• Customer is not willing to pay the price at which the product is being sold – Since the business is at the introduction stage it might not be able to produce its product or provide its services at a price which is at par or lower than its competitors. However at this stage business might have to bear losses by selling its product / service at a price lower than its competitors to attract new customers.