The 5 stages of the business life cycle
The 5 stages of a business life cycle are:
- Startup/launch
- Growth
- Shake-out
- Maturity
- Decline or renewal
Some businesses may find ways to extend the life cycle by innovating or adapting before decline sets in. Keep reading to learn more about what you can expect during each stage of the business life cycle:
Stage 1: Startup/launch
This is the beginning of the business journey, when ideas turn into action. During the seed stage of the business life cycle, the focus is on developing your product or service, testing your offering, and entering the market.
Key activities typically include:
- Finalising a business plan
- Registering the business and securing funding
- Building a minimum viable product (MVP)
- Setting up basic operations and systems
- Attracting early customers and gathering feedback
Common challenges during this stage include limited cash flow, lack of brand recognition, and the uncertainty of whether your business model will work. When you’re starting a business, it’s normal to operate at a loss while you invest heavily in setup costs, marketing, and customer acquisition.
Case study: Canva
When Canva launched in 2013, its co-founders Melanie Perkins, Cliff Obrecht, and Cameron Adams focused on solving a clear problem: making graphic design simple and accessible to everyone, not just professionals.
During its startup stage, Canva:
- Developed a minimum viable product that allowed users to easily create social media graphics, posters and presentations.
- Secured seed funding from local and international investors, including tech entrepreneur Bill Tai.
- Used customer feedback to continuously refine its product and user interface.
- Leveraged word-of-mouth marketing and freemium pricing to attract early adopters quickly.
The team worked tirelessly to build credibility and trust while testing and improving the platform—all key activities for a business in the launch phase.
Stage 2: Growth
The growth stage is where things start to take off. The business has found its product-market fit, customer demand is increasing, and revenue begins to climb. However, the business life cycle growth stage can bring with it new difficulties.
Key activities typically include:
- Expanding the team and refining roles
- Improving internal systems and processes
- Investing in marketing and customer acquisition
- Exploring new markets, products or distribution channels
- Monitoring cash flow closely and possibly seeking additional funding
Challenges while growing a business usually include managing cash flow, scaling operations efficiently, hiring the right people, and staying ahead of the competition. Without solid systems and structures in place, growth can quickly become overwhelming.
Case study: Afterpay
After launching in 2015, Afterpay entered its growth phase rapidly as consumers and retailers embraced its interest-free instalment model. The demand for its service skyrocketed, and the company needed to scale fast to keep up.
During this stage, Afterpay:
- Scaled its team and operations, growing from a local startup to a multi-national company within a few years.
- Expanded internationally, launching in New Zealand, the US, and the UK.
- Partnered with major retailers, both online and in-store, to boost adoption.
- Invested heavily in technology, compliance, and customer support systems to manage the growing volume of users and transactions.
- Secured capital through funding rounds and a stock market listing to fuel expansion.
This growth came with challenges—especially navigating regulation, managing risk, and staying ahead of competitors—but smart scaling and strong brand positioning helped them ride the wave.
Stage 3: Shake-out
The shake-out stage is where growth begins to slow, competition intensifies, and market saturation starts to set in. Sales may still be rising, but at a slower pace, and profit margins often come under pressure.
Key activities typically include:
- Streamlining operations to improve efficiency and reduce costs
- Differentiating the brand through innovation or customer experience
- Strengthening customer loyalty and retention strategies
- Analysing performance data to optimise products, pricing, and marketing
- Reassessing growth strategies to ensure long-term sustainability
This is often a turning point in which businesses must adapt and refine their approach to avoid stagnation and remain competitive. In terms of challenges, common issues include dealing with increased competition, managing rising operational costs, and identifying ways to maintain momentum. Weaker competitors may start to exit the market, while stronger players consolidate their position.
Case study: Menulog
Menulog was one of the early leaders in Australia’s food delivery market. It gained significant traction during its startup and growth stages, especially after its merger with EatNow in 2015 and acquisition by global giant Just Eat. However, by the early 2020s, the business entered a shake-out phase as the market became crowded and highly competitive.
Here are some of the difficulties Menulog experienced during this phase:
- Uber Eats and DoorDash aggressively entered the Australian market, leading to fierce price competition and pressure on market share.
- Menulog had to shift from its original marketplace model (partnering with restaurants that managed their own deliveries) to a full-service delivery model to keep up with competitors.
- Like other food delivery platforms, Menulog faced questions about long-term profitability, especially with rising delivery costs and thin margins.
- Menulog trialled innovations like integrating with convenience stores and adjusting driver employment models (like. advocating for minimum pay for gig workers)—signs of pivoting and differentiation in a maturing, saturated market.
This illustrates how shake-out stage businesses often need to adapt, streamline operations, or differentiate to survive in a consolidating market.
Stage 4: Maturity
In the maturity stage, a business has established a strong market position, consistent revenue, and a loyal customer base. Growth stabilises, and the focus shifts from rapid expansion to maintaining market share, improving efficiency, and sustaining profitability.
Key activities during the maturity phase include:
- Streamlining operations, automating workflows, and reducing overhead to protect margins.
- Investing in loyalty programs, customer service, and satisfaction metrics to keep existing clients engaged.
- Making incremental improvements or updates to remain competitive without overhauling the core offering.
- Exploring new demographics, regions, or verticals to tap into additional revenue.
- Refreshing the brand to stay relevant in a changing marketplace.
For businesses in this stage, there tend to be limited opportunities for major growth, since most potential customers have already been reached. There’s a risk of becoming stagnant or complacent, especially if the business relies too heavily on past success. During the maturity stage of the business life cycle, businesses must manage their costs tightly to maintain profitability.
Case study: Bunnings Warehouse
Bunnings, owned by Wesfarmers, is Australia’s leading home improvement and hardware retailer. After decades of expansion, Bunnings has reached a point of national market dominance, placing it firmly in the maturity stage of the business life cycle.
Here are some key indicators that Bunnings is in the maturity stage:
- Bunnings has over 280 stores across Australia and New Zealand, leaving little room for domestic store growth.
- The company continues to invest in supply chain optimisation and digital integration to reduce costs and improve service.
- It maintains strong brand loyalty through community engagement (such as DIY workshops and sausage sizzles) and consistently low prices.
- Rather than reinventing its offering, Bunnings continues to refine it—adding services like online ordering, click-and-collect, and trade support.
As a mature business, Bunnings faces slow growth, increasing online competition, and evolving customer expectations. Its focus now is on operational excellence, incremental innovation, and maintaining its leadership position.
Stage 5: Decline or renewal
In the final stage of the business life cycle, a company may face declining revenues, reduced market relevance, and shrinking margins. However, this stage doesn’t always lead to closure—businesses can choose renewal through reinvention, pivoting, or modernisation.
These are some challenges a company might face during the post maturity business life cycle stage:
- Consumer preferences may shift, or newer technologies and competitors may render the business offering outdated.
- The brand may feel stale or disconnected from modern audiences.
- Revenue decline can lead to budget cuts, downsizing, and operational inefficiencies.
- Skilled staff may leave for more innovative or stable companies.
If growth is steadily declining, the business might take these actions:
- Reduce expenses to extend business viability, often through layoffs or asset sales.
- Sell the business, merge with another company, or wind down operations.
- Scale back to the most profitable or in-demand offerings.
However, this stage can also bring about a new chapter for a business. Here are some of the key activities for a company during the renewal stage of the business life cycle:
- Rethinking how the business operates—like shifting to a subscription model, going digital, or pivoting to a new audience.
- Refreshing the brand to appeal to younger or more relevant markets.
- Investing in innovation to meet emerging customer needs.
- Modernising outdated systems or processes to improve competitiveness and efficiency.
Case study: David Jones
David Jones, one of Australia’s oldest department stores, has been navigating the decline/renewal phase in recent years due to changing consumer habits, the rise of online retail, and competition from nimble local and international brands.
Here are some of the renewal efforts David Jones has implemented:
- Investing in ecommerce and improving the online shopping experience.
- Closing underperforming locations and refurbishing key stores to create more boutique, experience-led environments.
- Targeting younger demographics through new product ranges and partnerships with emerging designers.
- The business was sold to Anchorage Capital Partners, signalling a renewed focus on restructuring and modernising the brand.
Today, David Jones is actively working to reverse its decline through strategic renewal efforts. This case study reflects a classic example of a legacy business choosing reinvention over exit.
