Tag Archives | Life Cycle

Product Life Cycle Stages

See also:
Product Life Cycle
Company Life Cycle
Why You Need a New Pricing Strategy
Increasing Pricing on Products

What is the Product Life Cycle?

A product life cycle includes stages the product experiences throughout its lifetime – from conception of the idea to the decline and abandonment of the product. Some products experience longer life cycles than others; however, all products go through the product life cycle stages.

Product Life Cycle Stages

What are the product life cycle stages? They are introduction, growth, maturity, and decline. Some may add other stages in between the four listed, including research and development, abandonment, and revitalization.

Introduction

The introduction stage is often preceded by a research and development stage. For the purposes of the product life cycle stages, we will start from when the product is first introduced to the marketplace. This stage is by far the most expensive stage in a product’s life cycle. Sales are typically slow, so a company may be bleeding cash until the product hits the next stage.

Pricing and promotion are critical in this stage of a product’s life. If it is not priced profitably or promoted effectively, then the product will arrive at the decline stage much quicker than anticipated.


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Growth

The next stage is the growth stage, where the company ramps up its sales and profits. The company will now be able to take advantage of economies of scale, profit margins, and increased profitability. Companies typically reinvest in this stage to grow the potential.

As the product gains more market share, increases distribution, etc., it will be ever important to scale the manufacturing and distribution effectively. A company needs to have an effective supply chain and logistics process to grow supply to the increasing demand. The worst thing that a company can experience in the growth stage is not being able to keep up with demand. Remember, growth impacts a company’s cash flow.

Maturity

In the maturity stage of the product life cycle, a company will start broadening the product’s audience, use, and availability. It is now able to maintain a consistent market share. A company will also continue to increase its production and logistics as demand continues to grow. The product becomes more popular during this stage. As a result, a company needs to be more careful in what marketing.

For example, when the iPhone was first released, many early-adopters acquired that technology. It took a few more years for it to become one of the most popular smart phone brands. As the product matures and continues to gain popularity, Apple continues to release newer, better, and greater models for a higher price.

Decline

Demand will eventually decline for a variety of reasons. Some of those reasons may include that there is a better product on the market or there is no need for that product anymore. This decline stage ends in total abandonment. A company usually has three options during this decline stage. Those include:

  1. Offer the product at a reduced price
  2. Add new feature or revamp the product
  3. Allow it to continue to decline, resulting in the elimination or abandonment of the product

If the company decides to take option 3, then the entire product line is discontinued. Furthermore, they will liquidate any remaining inventory for that product.

What Stage Your Product Is In

So, what stage is your product in? As a financial leader, it is important to know what stage your product is in because it impacts profitability and the company’s value. If you are in one of the first 3 stages, then it’s time to check your pricing for your products. Are you pricing them to result in profit every single time? If you are not sure, then download the free Pricing for Profit Inspection Guide to learn how to price profitably.

Product Life Cycle Stages, Product Life Cycle

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Product Life Cycle Stages, Product Life Cycle

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The Sacred Cow: Lack of Succession Planning

We have all heard the term, “The Sacred Cow”. Here is how I apply it to the business world… I am in my 28th year of working as a professional after graduating from college. I have been privileged to work in large private companies, small private companies, and large publicly traded companies. In addition, I have made the transition from accounting/finance to operations. I have also consulted for companies in a variety of industries, size, and complexity in the last 6 years. And I run into this one thing constantly – the lack of succession planning.

Sacred Cow

The Sacred Cow

After all these years and great experiences, I still see companies that have “Sacred Cows”. That is that employee who has been in the company 20 years and knows everything and everyone. He has outlived reductions in force, down turns in the economy, is still there after 2 new ownership changes. It’s that guy no one can touch because he is a “Sacred Cow”.

Unfortunately, these Sacred Cows are oftentimes not always that good. They come with some baggage. I have seen many of these Sacred Cows. Oftentimes, they are bullies. They are the ones that are often insubordinate. Although they are the ones that get stuff done, it is done at the cost of moral – always threatening the company that on their next temper tantrum they are “quitting”. Usually, they are overpaid.

Perpetual Life of the Business

A business is created within the confines of a legal entity mostly for continuity of perpetual life. That is one of the main characteristics of a Corporation. Therefore, the business continues no matter who is CEO, CFO, or COO or if there any changes in shareholders. But the business will continue because it “has a life of its own”.  As a matter of fact, that is also how you add value to the business. If that is the case, then how do companies allow Sacred Cows to exist? I see it over and over again. Owners of companies say something like…

“If we terminate him, then how are is going to run the operation?”

“But he is our key sales person and he knows all the clients personally.”

“No one else knows what he knows.”

If your business faces any of these situations, then it is your own fault.  No business should be built around a single or two key people. It’s a lack of succession planning! Some exceptions to this rule are small startups or pre-revenue entrepreneurial companies.

The business relies on the leadership to point out the Sacred Cows and destroy the potential of them holding your company hostage. Know what your CEO wants and needs help with with our How to be a Wingman guide. This whitepaper walks you through the relationship between CEO and CFO.

Examples of a Sacred Cow

I have an example that I lived through in my career. (More stories available upon request).

Petrochemical Company – The Lead Supervisor

There is a petrochemical company that had been around over 20 years and was very successful at different levels. The operators worked on three different shifts with each shift having their own supervisor. But the “Lead Supervisor” – the one that all operators and supervisors reported to – was a gentlemen that had been in that position many years. He had a personal relationship with the President and his wife. He was also the one that made hiring decisions out in the plant and control room. Most subordinates feared him. And management played his game because he “knew where every valve was”.

This guy was the Sacred Cow, but he was nothing more than a prima donna bully. There were many other HR issues, but you get the picture.

Since I am one that believes that no company should depend heavily on one person and the company should never be held hostage, I terminated this Sacred Cow the day I was promoted to President of the organization. I terminated him for being insubordinate and for holding the company hostage with demands of more pay or he would quit. I also terminated him for being a cancer in the organization.

Shock waves throughout the organization, rumors of failure spread, and we are going down in everyone’s mind. In reality, we did not skip a beat. It has been 10 years, and I hear the company is doing great.

As the financial leader, it was my duty to protect the health of my company, support the leadership team, and protect the shareholders. Learn more about how you can become the wingman to your CEO with our How to be a Wingman guide.

Client – Fear of Sacred Cow

I recently saw a large client with a similar issue. Now, we are dealing with a management team that fears the Sacred Cow. It is the fault of prior management for allowing this to happen. As the acting financial leader of the company, I am putting up mechanisms to prevent the development of future Sacred Cows.

Lack of Succession Planning

What the Sacred Cow comes down to is a lack of succession planning. There is no plan in place to continue operations without that person (or the position).

Avoid the sacred cow by guiding your CEO in the direction of the company. Access our How to be a Wingman guide here.

Avoid the Sacred Cow (Lack of Succession Planning)

So how do you avoid these pitfalls? There are three things to focus on as well as steps to avoid the sacred cow.

Sales Person That Has All the Key Customers

One example of a Sacred Cow in your business is the sales person that has all the key customers. First, insist that you attend some key customer meetings. You have every right to ask for detailed documentation of the key customers, relationships, meetings, and the pipeline of business. Finally, develop a relationship with those key customers. Do not let one person hold all the cards.

Key Person in Field Runs the Operation

Another example of a Sacred Cow is the key person in the field that runs the operation. Make sure you have a number 2 person that is just as good; they just don’t have the title… Yet. In addition, every key person in management should drive a succession plan. In order to have that happen, the company should have a succession plan in place for its leaders from the CEO on down. Someone can have direct reports under the Sacred Cow in operations. Furthermore, this does not mean that the Sacred Cow controls everything. Have the subordinates that run key areas document their day-to-day functions. Finally, develop a relationship with those key subordinates. Talk to them about training and potentially moving into bigger roles in the future.

The Sacred CFO Cow

The last example is the Sacred CFO Cow. Have a strong Controller that reports to the CFO. Have the CFO document key functions. In addition, the CEO should know those key contacts – legal, banker, insurance, etc. Develop a strong team underneath the CFO to prevent the CFO from becoming the Sacred CFO Cow.  It never hurts to continue networking and meet professionals that you may want to hire one day.

Do Not Allow Sacred Cows to Form

The objective is to not allow Sacred Cows to be born in the first place. We know that they take control and abuse it. But if you do have Sacred Cows in your organization, then you need to deal with it. Build out the number 2 and number 3 person. Every company should also build a succession plan for key employees. And most importantly, do not allow your company to be held hostage by anyone due lack of succession planning! Be the trusted advisor your CEO needs and access the How to be a Wingman guide.

Sacred Cow, Lack of Succession Planning

Sacred Cow, Lack of Succession Planning

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Are You Wearing Too Many Hats?

Do you sometimes feel that the value you bring to your company is worth more than your salary?  In the business world, often expectations exceed compensation, especially with financial leaders. What does the role of a CFO actually look like?

Before we dive deeper, it’s important to ask some questions:

Are you the person that your CEO contacts to “fix the problem”?

Have you been told to figure it out even if you don’t know how to fix it?

Are you responsible for learning the skills to fix that problem?

If you answered “yes” to any of the above questions, you may be someone who is “wearing too many hats.”

Wearing Too Many Hats

Often, CFOs will find themselves wearing too many hats due to problems within the company.  The CEO’s solution is usually to generate more volume, but resources don’t generally increase proportionately.  Most of the time, this means that the CFO takes on more responsibilities in response.

This isn’t always a good thing. Sometimes the company depends so heavily on the CFO, that the CFO feels unappreciated or that he/she deserves more money or esteem.

This past Friday, I moderated a panel of 3 financial leaders in various industries to discuss the issue of wearing too many hats. I’ve put together a summary of what issues were raised among our panelists as well as the Houston CPA Society’s Conference attendants.  The discussion was so interesting and enlightening, we’re dedicating the next few blog posts to the highlights of what the panelists shared.

Life Cycle of a CFO

At the heart of this juggling routine is what we call “the life cycle of a CFO“.

too many hats

The notion that CFOs had a “life cycle” came to me through observation over 25+ years of consulting with entrepreneurs and their companies. This cycle is comprised of 4 stages: a problem arises, cleanup occurs, new duties are assigned, and the CFO burns out or looks for greener pastures.

Problem

The life cycle of a CFO begins with a problem within a company. The company has grown beyond the capabilities and skills of the current employees. To solve these problems, the company hires a CFO on the team (either temporarily or permanently).

Clean Up

From there, the CFO cleans up the company’s financial processes and gets the systems up to speed. The problem is fixed – so now what?

Often, the CFO finds himself/herself filling time and justifying their existence once a problem is resolved.

New Job Duties

The CFO will pick up new job duties, help out other departments, etc. It’s only a matter of time until the CFO realizes that his or value is worth more. The real question becomes how to add value as a CFO.

At this point, the CFO is wearing the janitor hat, the insurance agent hat, the HR hat, the banker hat and the CFO hat (and possibly others depending upon how good/willing they are).

You can probably guess what happens next.

Say Bye-Bye!

So the CFO leaves, either for a more challenging position or, if they’re too stressed out with multiple duties, settle for something less. Most companies won’t rush in to fill the void left in their wake, and so the cycle begins anew…

What Hats Do You Wear?

As I mentioned, I recently moderated a panel discussion at the Houston CPA Society’s CFO/Controller Conference. During this session, I asked the panel many questions including what hats they wore within their companies, and how that posed challenges in their work experience.

Determining your Role

One panelist, Derek, mentioned that he had to balance both operational and financial roles in his company. They hired Derek to handle both of these roles. This illustrates how the role of a CFO has evolved over the past 25 years. As the role of a CFO changes, the relationship between the CEO and CFO changes.


Learn more about how to guide your CEO as a trusted advisor by downloading your free guide on How to be a Wingman.


Derek mentioned that the job was particularly difficult because he had no definitive role or expectations. He found it challenging that he didn’t know how the typical day is, what reports were required, or where to find the information to solve these issues.

Determining his daily role within the company become a task in itself. Especially as he stepped into higher levels of financial leadership, there were more moving parts that hadn’t been defined.

Finally, he concluded that delegation was the hardest because he was bogged down in cleanup.  He felt like a janitor; going behind people and literally cleaning up their messes. Delegation is extremely important as a financial leader.  In Derek’s words, “Delegation was important to me to further my role in the company, and to take on multiple other jobs.”

“The Job Man”

The next panelist, John, had a different situation than Derek. John is the CFO of an engineering firm. Rather than working an operational job, John calls himself “The Job Man.” He receives all the jobs that nobody else wants.

John looked at this from a positive standpoint. In order to continue working as a valued asset to the company, you must learn not to say no. In this ideology, there is nothing in your realm that you cannot do. This stance is interesting; not everyone is usually as optimistic.

If there is a problem left unaddressed, it will grow into something uncontrollable. John commented that he prefers that the issue is resolved so he can go on with his business. Take action; address it; knock it out.  John’s thoughts, “I’m the one that gets all the jobs that nobody else wants.  You’ve got to learn not to say no.”

How high can you stack the hats?

Paul, the third panelist, mentioned a great point: in any small to medium sized company, you’re always going to stack hats. The questions is, how high can you stack them before they fall (or your neck snaps under their weight)? 

Upon hiring a CFO, a company interviews to see what you can bring to the table (i.e. the right amount of relationships with banks, the IT skills required to be a financial leader in the company, knowledge of your financials).  You’re sharing everything in your bag of tricks not realizing that they are listening most attentively.  How can you be surprised when they take you up on your special skills?

Despite your amazing skill set, you can’t do it all.  So to keep the hats from crashing down, which hat would you give up?

The Most Important Hat

No matter what hats you wear in your company, the most important hat is wingman to your CEO.  Business owners care more about the value you help them bring to their company and your financial leadership than they do compliance and caution.

To extend the life of a CFO, it crucial for the CEO and CFO to partner together.  As a CFO, you are in the unique position to understand all that is necessary to keep moving the company forward.

Conclusion of Part I

Our panelists highlighted the importance of determining your role, taking action to learn new skills, and focusing your skills within the company.  While you may sometimes feel like you’ll topple over under the weight of all the hats you wear, remember to focus on what’s really important – having your CEO’s back.

Next week, get the panelists take on what millennials bring to the table!

If you’re interested in becoming the trusted advisor your CEO needs, download your free How to be a Wingman guide here.

wearing too many hats, Life Cycle of a CFO

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Product Life Cycle

Product Life Cycle Definition

A product life cycle, defined is the period from when a product goes through its initial specifications and research to the withdrawal of that product from the market. There are five product life cycle stages.

Product Life Cycle Meaning

The product cycle stages are as follows:

Research and Development

This is the phase where market research as well as the design plans for a product are initiated. Patents are established for the product during this phase to protect the product from competition. Production facilities might also be developed during this stage so that mass production can take place. The company might also establish its logistics for raw material suppliers and retailer customers.

Introduction and Growth

Here the company starts its advertising campaign as the product is sent out into the market. The pricing and promotion of this product are essential during this phase to ensure the product’s success.

Maturity

In this product life cycle the company will increase its production and logistics network according to demand. A company will also broaden the audience that it is promoting to as the product becomes more popular during this product cycle.

Decline

As the product loses popularity a company has generally three options. The first choice is for the company to offer the product at a reduced price. The second is for a company to add new features or revamp the style of the product. The decline stage is the last option. Eventually, this stage will move into the elimination of the product or the abandonment stage.

Abandonment

Here the entire product line is discontinued. A company liquidates all of the remaining inventory. If the product contained special facilities, then the company will liquidate those as well. Then, realize the salvage value for all equipment. This stage represents the complete end of that product and everything associated.


If you’re interested in becoming the trusted advisor your CEO needs, then download your free How to be a Wingman guide here.

Product Life Cycle

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Product Life Cycle

See Also:
Business Cycle
Cash Cycle
Company Life Cycle
Operating Cycle Analysis
Accounting Cycle

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Company Life Cycle

See Also:
Dispersion
Capitalization
Market Positioning
Limited Partnership
Mergers and Acquisitions
Product Life Cycle

Company Life Cycle Definition

Broadly speaking, companies progress through a predictable series of phases called the company life cycle. The life cycle starts with the startup phase, moves into the rapid growth phase, followed by the maturity phase, and finally the last phase is decline. Furthermore, the duration of the individual stages varies widely across industries and differs between individual companies. As a result, the phases differ in terms of characteristics related to profitability and financing needs.

Stages of the Company Life Cycle

The startup phase is the first phase in the company life cycle. Companies in this stage are typically losing money, developing products, and struggling to secure a position in the marketplace.

Then the next phase in the company life cycle is the rapid growth phase. In this phase the company begins to generate profits. This phase is also characterized by rapid expansion and an increased need for and dependence upon outside financing to sustain the rapid growth.

The third phase is maturity. In this phase, growth and expansion is slow. Therefore, the need for outside sources of capital subsides. The company is generating enough profits and cash flows to invest in all available projects.

The final stage is decline. During this phase the company remains profitable but sales decline. The company has more cash than it needs for all available corporate projects.

Company Life Cycle Phases

The following includes the company life cycle phases:

1. Startup
2. Rapid Growth
3. Maturity
4. Decline

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company life cycle

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company life cycle

Source:

Higgins, Robert C. “Analysis for Financial Management”, McGraw-Hill Irwin, New York, NY, 2007.

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