Most business models go through a number of lifecycle stages. These stages determine how people should go about running the business. Young, immature business models should mainly focus on experimentation and exploration of customer needs. Older, mature business models will usually focus more on execution and the optimization of proven value streams. You can use this overview to evaluate the maturity of your business model.
Stage 1: Initiation
There is a founder or a co-founding team of the business, but the business is still just an idea, concept, or vision. The customer’s need for a solution (Problem/Solution Fit) is not yet validated. The available time and resources are mostly self-funded by the founder or budgeted by external managers.
Stage 2: Expedition
The business is now more than just an idea, concept, or founder’s vision. But it is not clear what is the core business or the value proposition. There are defined business model hypotheses that must be validated. The business has a startup culture. Repeatability and scalability of the business model are not confirmed. The business model is being tested with prototypes or MVPs.
Stage 3: Formation
The customer’s need for a solution (Problem/Solution Fit) is now validated. People are willing to pay to get their problems solved. There is a high-level strategy for the future of the business, but Product/Market Fit (customers loving the product or service) is not yet validated.
Stage 4: Validation
The business is focused on validating Product-Market fit. The startup works autonomously, and the available time and resources are not self-funded or externally budgeted anymore. Instead, the business is externally funded by angels, VCs, or a larger corporation. There are formal agreements for business owners and team members. The founder or founding team is 100% committed to the business.
Stage 5: Stabilization
Product/Market Fit (customers loving the product or service) is now validated. There is evidence of traction, retention, growth, or revenue. It is now clear what is the core business and the value proposition. The market appears to be large enough for a sustainable business. The product or service is focused (without having many flavors, colors, or variants), and the growth of sales is rising (or it is even exponential).
Stage 6: Acceleration
The business does not need to focus anymore on Product-Market fit. Repeatability and scalability of the business model are validated. There are no business model hypotheses anymore that need to be validated, and the business model needs no more testing with prototypes or MVPs. There are competitors with similar products and known market shares. The business stops having a startup culture, and it starts investing in new ideas, products, and services. The business has processes for sales, recruitment, and product quality, and there is a management team (which is different from the founding team).
Stage 7: Crystallization
The business is one of the market leaders. The business is profitable and financially self-supporting, and it needs no more external funding by angels, VCs, or a larger corporation. The growth of the business drops to linear growth. The business can create (somewhat reliable) revenue forecasts, and it has a focus on efficiency and cost-cutting.
Stage 8: Expansion
The product or service becomes unfocused with the introduction of many flavors, colors, or variants, and it becomes bloated with (too) many features. There is no founder or co-founding team of the business anymore, or they are not 100% committed to the business. Parts of the business are being sold off to other companies.
Stage 9: Conservation
The business model stops being validated, repeatable, or scaleable. Revenues and profits of the business are declining. The business stops having a high-level strategy for the future. It also stops investing in new ideas, products, and services. Many customers move to a newer or competing product or service.
Stage 10: Finish
The end-of-lifetime of the product or service is scheduled and near. The closure of the business is imminent.
So, which stage is your business in? Try the exercise or test below to find out!
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These 10 stages are described in more detail in chapter 2 of the book Startup, Scaleup, Screwup. Do you want to receive a free PDF of that chapter? Sign up here.