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THE BUSINESS LIFE CYCLE
All businesses go through stages of development. There is a Development Stage where little profit is made. Then the Growth and Maturity Stages where both sales and profit increase. Finally, the business may Decline.
Understanding where a franchise company is in their life cycle will aid your decision making. Most franchisees find the opportunity to be greatest early in the Growth Stage.
The business life cycle curve includes the following:
1. Development Stage: The business has its first customers. Sales increase slowly.
2. Growth Stage: Revenues and customers are increasing with many new opportunities and issues. Profits are strong, but competition is surfacing.
3. Maturity Stage: The business has now matured into a successful company with a place in the market and loyal customers. Sales growth is not explosive but manageable. Business life has become more routine.
4. Decline Stage: Changes in the economy, society or market conditions decrease sales and profits.
The length of the life cycle varies greatly depending on the type of business and its ability to adapt to a changing marketplace.
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