Businesses experience a range of different people, processes, and product challenges. They progress through the business growth cycle, including;
- Cashflow and prioritizing scarce resources
- Supporting growth via new markets or new offerings and;
- Finance team capability to capitalize on profitable growth
CFOs are responsible for decisions about allocating resources to business units. It is where long-term value creation gets the thumbs-up or thumbs-down. During the last several years, the Center for Strategy, Execution, and Valuation in the Kellstadt Graduate School of Business at DePaul University has experimented with the applications of strategic life-cycle analysis. It integrates the life-cycle framework with the Return Driven Strategy framework. Also, it analyzes the long-term value-creating performance of companies.
Early Stage Business Growth Cycle – From Success to Stress
After some initial success, business owners have to deal with more staff, financial, and client issues than they’d like. Their business is becoming more complicated with multiple causes. Its effects behind each problem build frustration and lead to stress.
Growth Businesses – Profit doesn’t Equal Cash
As the business grows, business owners quickly become aware that improved profit does not equal improved cash. With increasing sales, cash is tied up in working capital via increased receivables and increased inventory levels. The business owner is forking out an ever-increasing salary bill as they ramp up resources to support growth and product development.
Business owners need to decide on the necessary infrastructures and investment requirements to enable more efficient growth as they explore new markets or develop new offerings.
Advanced Growth – Sustainable Growth vs Missed Opportunities
Done well, the business enjoys higher financial returns and the owner enjoys it. Moreover, as their staff become less reliant on them and play a more important role in the business. Done poorly, the business misses out on higher financial returns. Also, the business remains reliant on the owner and they’ve missed a golden opportunity.