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Understanding Your Business Lifecycle

It’s fair to expect that your financial needs and priorities change throughout your life. In your 20s, for example, you probably weren’t doing any estate planning—more relevant concerns may have been paying off student loans or saving for your first home.

Your business is very much the same. Like people, businesses move through natural lifecycles, and your financial planning should reflect the stage your business is in.

Common stages of a business lifecycle

So what are the common stages of a business lifecycle?

New businesses

New businesses have been operating for 1-3 years and are still becoming established in the market. They generally have substantial debt, with less than $500,000 in annual revenue, and any profits are funneled right back into the company.

In these unpredictable early years, it’s key to ensure that your business—and the people who are critical to its success—are financially protected.

For the business

For business owners & executives

Growing businesses

Growing businesses have passed the 3-year mark. Their revenue streams and client base have gained some traction. Their expenses and reinvestment in the company are still substantial, but lessening—they may find themselves needing less debt financing.

Once your business has some momentum, it’s especially important to focus on attracting (and retaining) top talent—and positioning yourself and your key employees for long-term financial security.

For the business

For business owners & executives

Established businesses

Established businesses have been in operation for 10 years or more. Their revenue and cash flow are consistent. They have an established client base and management team, with fully operationalized relationship management and a clear business continuity plan.

When operations are running smoothly, it can be tempting to just stick with what’s working. But in an ever-changing economic landscape, it’s important to stay engaged and on top of financial contingencies.

For the business

For business owners & executives


Transitioning businesses are established in the market, with a strong management team, a solid client base, and consistent cash flow—but they’re shifting to new leadership or ownership. They’re looking to retain cash flow and sustain relationships through the transition.

In times of change, a strategic approach to your financial management is paramount, both to ensure a smooth transition for the business and to protect the best interests of the people involved.

For the business

For business owners & executives

Wherever your business is in its lifecycle, Principal® can help with an informal business valuation, buy-sell review, and expert guidance for your business planning and protection needs.

Contact your financial professional for more information and to start planning for your business’ lifecycle.