• Business Life Cycle

  • What stage is your firm in its business life cycle?

    Businesses have varying capital needs, based on the timeline to profitability as they progress through various stages of development.  Michigan is strategically filling the stages of the business-development lifecycle with appropriate and adequate forms of capital.  For instance, technology-intensive firms, whose early developmental stages are typically longer than those of other firms, require more equity or risk capital to make it through what is known as “the valley of death.”  Firms that begin generating sales revenue sooner still need access to more traditional forms of capital to launch and grow their businesses. Match your current business position with the capital tools Michigan has available. 

    Business-Life-Cycle-with-programs

     

    Stage 1 Investigation 

    During this initial stage the innovator has a new product or technology advancement with seemingly positive market potential. However, the innovator has limited financial resources and business expertise to commercial the product. 

    • The product or technology needs a thorough assessment including defining the concept, identifying critical barriers, determining proper technology and evaluating its application.
    • A market needs assessment should include an industry overview which identifies competition, industry trends, risks, distribution channels, market barriers and pricing structure.
    • A business analysis should estimate commercial and profit potential while identifying professional and capital needs. 
     

    Stage 2 Feasibility

    The final design of the product is complete and an initial business plan is developed. The management team is incomplete and there are no product revenues.

    • A working model of the product is developed to test technical features, preliminary productibility, manufacturing assessment, safety and environmental features.
    • A marketing study should be conducted to identify and quantify market size, potential customers, volumes, prices, distribution and competitors.
    • An economic feasibility study should formulate financial assumptions, develop a pro forma income statement, identify seed capital sources and form an advisory team.  
     

    Stage 3 Development

    The company continues to develop the product prototype with the goal of completion. Significant expenses are incurred at this stage with no product-related revenues. This stage is usually the low point in the “valley of death.”

    • With the product prototype developed, materials and processes are identified, tests are conducted and development methods are implemented.
    • A marketing team is assembled; target markets are defined; market channels are selected and the product is field-tested.
    • A strategic business plan is developed that includes identifying the organizational structure and management team, finalizing intellectual property and deciding on venture capital or licensing agreements.
     

    Stage 4 Introduction

    The company has limited revenue while the product is being introduced to the market.

    • Production equipment should be selected and the process determined. A field support system should be designed and product features demonstrated.
    • Establish market relationships; conduct and analyze limited sales; survey customers and fine-tune marketing plan.
    • Secure first-stage financing; hire staff and execute contracts.
     

    Stage 5 Growth

    The company is in full production with the product and expanding distribution. Management is transitioning into a formal organization structure.

    • Construct facilities and establish quality control to ramp up production and finalize internal distribution system.
    • Analyze competitor response, assess customer and distributor satisfaction, expand distribution and refine product features.
    • Institute vision, mission and management policies; hire and train personnel; execute contracts and arrange financing.
     

    Stage 6 Maturity

    The company is well-established in the market place and must continually innovate to stay competitive.

    • Maximize production; warrantee service; implement training programs; establish after-market support and repairs.
    • Focus on market retention and establish a market scan to identify new products and markets.
    • Monitor product life cycle, business trends and technologies; invest profits; establish SWOT (strengths, weaknesses, opportunities, threats) process; innovate, innovate, innovate.