busines life cycle

Business Life Cycle and Necessary Tools

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Almost everyone has heard at least something about the “business life cycle“. As for a human being, it begins with the birth of a company, continues with growth, and then maturity. However, unlike someone’s normal way of life, a company does not have an average age for how many years it can survive. With the right tools and strategic planning, companies tend to live long (the world’s oldest company, Congo Gumi, was founded in 578). It is true that the final stage usually is the sale of the company, but even after that, the company’s economic activity continues.

Different tools are most appropriate at every stage of a business. While they are certainly not set in stone, a brand new business idea would probably not benefit from an in-depth cost-benefit analysis. However, for an already mature company, it can be very useful to develop a business plan for a new product.

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Business Plan
A business plan is a document that shows details on how a business (a new product line/new business line/start-up) – defines its goals and how it should achieve its goals. The business plan sets out the company’s guide in terms of its operations, finances, and sales. Often, young entrepreneurs postpone the development of a business plan because they believe that it is only necessary to attract funding. Although it is really difficult to sell an idea without a business plan, it is also necessary for the entrepreneur himself, because it allows assessing the risks, opportunities, and viability of the company.

Pitch Deck
A pitch deck is a brief presentation, often created using PowerPoint, Keynote or Prezi, used to provide your audience with a quick overview of your business plan. You will usually use your pitch deck during face-to-face or online meetings with potential investors, customers, partners, and co-founders. Creating a business plan together with a pitch deck is a must for all start-ups, new product lines or business lines.

Financial Planning and Analysis
Without financial control, the company will quickly start wasting resources on unnecessary things and unprofitable projects. The justification that “financial planning is not for my company” is also superfluous, as a well-designed financial plan allows us to look at the company’s processes “from the top-down”. At this stage, the company is advised to think about:

  • a budget that allows effective management and seeing the impact of operational activities on financial results;
  • a profitability analysis that reveals whether all departments are operating at a profit or which department is pulling the business down;
  • cost analysis, which evaluates the price at which it is recommended to sell products;
  • analysis of investment projects, which is necessary to understand which project is better to invest in;
  • a cash flow plan that helps you manage cash to settle with all suppliers;

These tools do not have to be implemented all at once, but as a company grows and develops, owners or financial managers are likely to begin to feel the need to keep track of a number of parameters.

Financial Modeling
Financial modeling services are most needed by companies that plan to manage or already manage larger resources. Usually, the financial model is associated with several departments, systems, or is used when it is necessary to perform complex calculations that determine the direction of business development. The financial model is a dynamic financial plan that provides for automatic changes depending on different business aspects. With the help of such model, companies can timely forecast various development scenarios and see the impact of financial results. In general, the model takes into account not only internal factors but also external risks, such as a sharp rise in raw material prices or insufficient sales. A typical financial model includes profit or loss statements, balance sheet and cash flow projections, as well as ancillary calculation tables (current assets forecasts, loan repayment schedule, depreciation forecasts, motivation system, and others).

Business Valuation
Company valuation helps to answer the simple question of “How much is my company worth / How much do my parts of the company cost?”. Company valuation can be used to determine the fair value of a company for a variety of reasons, including sales value, determination of partner ownership, tax changes. It is mainly used to be able to determine the optimal price for the sale of a company or unit, as well as to attract additional financing against equity shares.

Financial Training
The AG Capital team has gained extensive experience in the field of financial consulting for more than 10 years. The team has worked with companies in almost all industries, advising companies on financial modeling, corporate finance topics, valuations, business financing, and asset management. Often, companies have demanded not only our services but also financial litreacy development training for employees. Currently, our team often organizes professional training for private and public companies in various sectors on the following topics:

Financial Training

Apply for a free consultation to learn more about these financial tools and plan your business’ finances by contacting us at andrew@agcapitalcfo.com

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