Start-up, Growth, Mature, Decline
In order to gain further benefit and insight from the results of our cash flow restatement we need to understand what a typical set of ‘good’ cash flows should look like.
The typical ‘good’ pattern of cash flows varies dramatically between different businesses. The most important reason for this variety is to do with where the business is in its life cycle.
In this section we look at the typical cash flows of a business at start-up, in the growth phase, the mature phase, and finally the decline phase. To make this section as useful as possible to the analyst I have included a short discussion of exactly what we mean by the terms start-up, growth, maturity and decline when applied to business analysis.
Later in the book there are separate chapters on each of the four phases. They go into more detail about various aspects of analysis relevant to that particular phase. All cash flow values quoted in the text from the examples represent thousands.
THE START-UP PHASE
When does business commence?
As any entrepreneur knows, there are a number of steps that precede the commencement of trade.
Most entrepreneurs start with an idea for a new product or service. They then research the viability of the idea, the initiatives required, assess the feasibility of operations, the business risks involved and develop a business plan. This part of the process can take years. Assuming the viability of the project looks good, the entrepreneur at some ...