Phases of the business cycle

The rhythms of the world are all around us, from the change in seasons throughout the year to the circadian rhythms many of us learned about all the way back in high school biology. And if you look closely enough, you’ll find these cycles in lots of other places, too – including in business.  

The business cycle is a lot like raising a child. Ideally, you’ve thought about this decision a lot before making the choice to pursue it. When you do decide to dive in, you’ll probably do lots of research about the phases of the business cycle and seek advice from experts, family and friends alike.

Finally, you get to witness the birth of your idea and nurture your company as it grows. In infancy, your company needs a lot of guidance, but just like a child, your goal is to help it thrive independently. But wait – not all children become well-adjusted. As your company progresses through the business cycle stages, it can either excel or hit a wall. If you’re prepared with the knowledge of each phase, you can begin a cycle of success that will propel your company into its golden years. Here’s what you need to know about each stage of the business cycle

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Infancy

Infancy is synonymous with the startup phase. Your company is brand new, and you’re likely playing a huge role in nearly every aspect of it. This is when you lay the foundation for what your company will be. It’s a very exciting time, but it is also filled with risk.  

During this business cycle stage, you’ll need to determine not only how to create cash flow that allows you to grow, but also who you are as a company. Your two most important tasks are to create your business map and to establish your brand identity.

stages of the business cycle

Your business map is the plan you’ll follow to take your business to the highest levels; it allows you to be flexible, but also have structure. Determining your brand identity is one of the biggest milestones on the path to a successful business. You need to know your mission and values before you can hone in on your brand’s true purpose, hire the right people and target the right audience, and all of these will affect whether you will have the financial resources you need to succeed.

Teen years

business cycle phases

The teen years are also called the growth stage. By this point in the phases of the business cycle, you’ve got a hold on things, but nothing is set in stone. Just like a teenager, your business might be growing at a massive pace. You are establishing your role in the marketplace, and turnover is decreasing. These are all positive signs, but you’ll need to watch out for growing pains.

Don’t mistake your skyrocketing growth for long-term success. During the teen years, you need to be vigilant, adaptable and always planning ahead. Build up your teams with strong leaders and spend time on company culture activities. Work on creating raving fan customers. The teen years are the time to invest in your employees and to ensure you are providing the highest value to your customers. This is the only way to ensure long-term, organic growth.

Adulthood

In adulthood, your business is starting to hit its stride. Day-to-day tasks are overseen by management, and the company can probably function without your direct input on a basic level. You’re seeing consistent growth, and are feeling stable financially. You may even be expanding into new markets. First, congratulations: This is the goal of any business owner, and adulthood is often the point where you’ll enact your exit strategy to cash out of the business.

However, many owners choose to reinvest at this point and try to take their company even higher. You’ve gained a great deal of experience not only in your industry, but as an entrepreneur. Now is the make or break time to determine what that experience can do for your brand. Do you want to acquire another company? Would a spin-off of your product be successful? Do you have enough brand recognition to enter a new market? At this stage of the business cycle, you must be vigilant about staying in touch with the market and with your customers. Complacency leads to bad business decisions in the adulthood phase.

business cycle stages

Aging gracefully

company experiencing the phases of the business cycle

The key to success throughout the many business cycle stages is knowing when to bow out gracefully. Have a clear exit strategy in place from the get-go, and recognize that you need to be able to leave the company for it to be successful. If you’re running an operation that requires you to be on-site every day, then you’re not running a business – you’re coming in daily for a job. Only when you can stand back and trust your team to carry out the everyday business, while having enough cash flow to remain financially free, can you truly call yourself a successful business owner.

There is a fourth business cycle stage: decline. Decline comes to your business when you lose sight of your vision. Your dreams are no longer reachable, and you lack the employees and customers supporting your brand to stay successful. Don’t let it get to this point. You have the potential to run an incredible company that succeeds for years to come. Stay true to your vision and find the internal and external support needed to achieve your goals.

Excel during all phases of the business cycle

Learn strategies to create long-lasting success for your company during every stage of the business cycle with Tony Robbins’ complimentary Seven Forces content series.