Startup Life Cycle in One Chart

Startup Life Cycle in One Chart

Small business startups go through a typical life cycle of three stages.  I’ve observed this startup lifecycle time and again. In fact, I have gone through it myself.

If we recognize the three stages, it’s the first step to getting through them successfully.

Before I go further, let me say I’m not talking about the standard development stages of a high growth startup. Venture capitalists and entrepreneurship professors often talk about this.  But they are thinking about the Facebooks, Googles and Ubers of the world.

I’m referring to small business startups — the ones you and I and millions of the rest of us start. Our small businesses have a life cycle, too.

And while the first and last stages are great, the middle stage is not always pretty.

Defining the Startup Life Cycle

It helps to understand a small business life cycle by reflecting on a law of physics: the first law of motion.

The first law of motion is a principle identified by Sir Issac Newton centuries ago. You’ve probably heard of Newton’s first law, paraphrased as:

“A body at rest tends to remain at rest. A body in motion tends to remain in motion. “

Sound familiar?  This is describing inertia and momentum.

In the simplest terms, when it comes to business:

Momentum = good

Inertia = bad

Inertia is a major obstacle to success in a small business startup.  It’s not helpful in any business. But it impacts startups and small businesses to a greater degree.

Why? It’s because we have fewer resources available to combat it.

After the initial rush of starting the business, we reach a point where we max out our resources. We’ve dug deep. We’ve squeezed out every last ounce of energy and resources.  And suddenly we have no more to give. We have no more money, no more people, no more time to put into our businesses.  Yes, we’ve used it all up.

Simply put, we get stuck. After the initial excitement of getting the business off the ground, we can’t seem to make forward progress. We can’t seem to get big things moving again.

Our businesses become like boulders chained to our ankles.  We push and we pull. That boulder budges a few feet but it doesn’t roll along the way we want.  If you are a hard charger or Type A personality, it gets frustrating.

Oh, we’re busy — we’re slammed.  We may be profitable and able to make payroll.  That’s not the issue.

Rather, everything starts to feel hard.  Growth doesn’t come as easily as we want it to.

We struggle to make forward progress in our business growth, profitability and success.  We feel mired down, like wading through mud.

That’s inertia we’re battling. In fact, inertia is a natural part of the startup life cycle.

As I said at the beginning of this article, most of us as entrepreneurs go through these three stages in starting and operating a small business.

Let’s walk through the three stages, so you know what to expect.  And if you are in one of the stages currently, see if the experience sounds familiar.

Startup Stage 1:  Launch

We start out with grand plans.  We entrepreneurs have big ideas and we’re bursting with energy at first.

After all, we’ve created something from nothing.  We’ve done more than most people will ever do. We took a leap, started a business and got it off the ground.

When I first started my business, I had so much energy I had difficulty channeling it.  I loved my business  so much!  I was ready to take on the world.

And if I was gone from my business, I couldn’t wait to get back.  I probably spent too many hours on it. But it was a labor of love.

Other entrepreneurs I’ve talked with describe a similar experience.  We’re all filled with excitement when we first start a business.  It’s almost like going through a manic episode (but in a positive way).  We’re focused and we’re on fire.

We’re all Davids ready to trounce Goliath!

Startup Stage 2:  Trough of Reality

While the launch phase is exciting, at some point we fall into … the Trough of Reality.

To describe this stage, I have to give a nod to the Gartner Hype Cycle.  The Hype Cycle is famous in business circles for describing the growth of new technologies.  After the initial peak of excitement and high expectations, at some point the new technology hits the “trough of disillusionment.”  That’s the point when:

  • Interest in the new technology starts to wane.
  • Expectations get scaled back.
  • Some producers of the technology fail.

It’s quite similar in a small business.  But in the case of business owners, it’s not so much disillusionment. It’s that we come face to face with reality.

The Trough of Reality is the point where we start to get customers. By this point we probably have employees or outsourced workers and services.

All our energy gets caught up in day-to-day work.  We are buried in minutiae.  We have bills to pay; a payroll to meet.

In short, we’re no longer just dreaming about a business. Now we have to operate it. Yikes!!!

Owners end up with a classic case of working IN the business when they should be working ON it.

My own business went through the Trough of Reality. There were several years where it seemed like we merely existed. Yes, we squeezed out a profit.

But as I look back, those years were a struggle. I did a lot of freelance writing and consulting work on the side to subsidize growing my digital publishing company.  Twelve hour days – heck 14 hour days — were nothing.

We survived, of course. After 15 years we’re still here — and thriving.  But back then I worried a lot. I wasn’t having fun. And it took all my energy.

Some businesses wallow in the Trough of Reality for years.  They manage to pay the bills, but growth is slow.

But even if you don’t want growth — let’s say you are a self-employed freelancer content to stay at a steady pace of work — your quality of life suffers. You may personally feel beaten down by business pressures.

Call it burnout, call it exhaustion, call it lack of motivation. You long to spend more time with family, or on hobbies or outside interests. Yet you just can’t work up much extra energy for your business or your life.

As owners, our businesses start to feel like that boulder chained to our ankle. And the boulder is barely moving.  It’s hard to get that boulder rolling along steadily again.

Startup Stage 3:  Momentum!

The good news is, there comes a stage where things turn around. It is when you feel like everything “clicks.”  Your business starts firing on all cylinders. Amazing things happen.

Business picks up. Sales roll in faster and more consistently. Revenue seems to take less effort to generate.

  • If you have a team, they are able to operate on their own. They start coming up with new ideas you never would have thought of.  Your people make more of the decisions. They achieve things without you being involved in every detail.
  • If you are a solo owner or freelancer, you develop systems that enable you to manage it all better. That word of mouth you developed through the first two stages of your business?  It now starts to generate sales steadily. You learn how to say no and focus your time to get the highest psychological and financial rewards.

At this stage of the small business life cycle, the owner can start taking longer vacations and holidays.

Your days feel more rewarding — less of a drag. You have more energy, or so it seems.

Your creativity peeks through once again. You experience renewed interest in a hobby or activity you used to love.

In short, you’ve broken through inertia. The boulder (i.e., the business you’ve built) now starts moving along of its own momentum.

How did you you do it?  By sticking with it. By continuing to come to work everyday.

You did it by making daily decisions. Perhaps you hired the right person here or there to help.  You discovered new tools to drive efficiency. You put systems and processes in place in your business.

Your offerings are now proven. And you’ve built up a customer base.

Most of all, you’ve learned valuable lessons. You know what to do and what not to do — the lessons of experience. That makes things easier and more rewarding.

The combined force of all these things helps break through inertia.

The momentum is back.

And it’s a wonderful feeling!

The Startup Lifecycle Makes You Stronger!

If you are currently in the Trough of Reality, you are not alone.  Others are at that stage with you.

That’s important to recognize.  It’s easier to get through a challenging time if you know it’s not unique to you.

Millions of your peers got through that phase of the startup lifecycle. They survived and thrived.  You too can get through it.  And when you do, you and your small business will emerge all the stronger for it.

Like the old saying by philosopher Friedrich Nietzsche, “That which does not kill us, makes us stronger.”

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Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.