Banjo unpacks the SME business lifecycle to help you work out where your clients sit, and what alternative funding options they need to match their stage.

Virtually all SMEs have a predictable lifecycle, going through several defined stages as they develop, progress, then begin to dwindle. Every business undoubtedly varies depending on their product, service, and business culture, but the stages are common to most, even if the duration differs.

For a new SME, the first two years are the toughest, and have the highest failure rate (up to 60%). If a business overcomes the initial challenges and makes it into the third year, they’re usually poised to enter the growth stage.

The Growth Stage is typically defined by growing sales, normalising costs and some profits. Expenditure is needed at this point, to fully service that growth by investing in more stock, or more staff, or purchasing machinery and equipment.

The business may be:

  • starting a lucrative contract
  • expanding their footprint across additional premises
  • thinking about R&D to mature products or services
  • considering how seasonality is affecting them.

The cash conversion cycle in this phase is often longer, so cash flow lags revenue. Profits are probably being reinvested back into the business, so getting working capital funding is often critical in the Growth Stage.


  • What’s the impact on cash flow of growing your business?
  • How long is your cash conversion cycle (where you have more in outstanding invoices than cash in the bank)?
  • What cash buffer do you need to maintain to pay suppliers and operating expenses such as wages?
  • Are you pitching for or have you started working on a large contract? Have you thought about the funding you’ll need to resource the business for that contract? 
  • What resources – labour, materials, and equipment – are going to be required to maintain the current growth trajectory?
  • What are your biggest barriers to growth and how can funding be used to overcome these?
  • Are you keeping up to date with statutory payments?
  • Are you ready to open a new premise or expand your operations geographically?

For example, one of Banjo's clients is a fashion streetwear manufacturer, established for 13 years, who could see an appetite for their brand in the UK and USA. To service these international markets, they needed to manufacture six to 12 months ahead of each season so their product could be delivered in time. The problem: the lag between production and freight costs, and the payment of their customer invoices.

This manufacturer took out a working capital loan with Banjo, which enabled them to expand their business and start a credit history as they approached a more mature stage in their business.

The Maturity Stage is when the business has been active for around eight to 10 years. Their cash position is strong, they have steady but slower sales, declining costs, and growing profits. The business’ growth may be through acquisitions or new product lines that capitalise on their market experience. The owner may have a management team running the business, so it’s not as reliant on them personally anymore.

While the owner may be feeling more secure and comfortable in enjoying this stage, encourage them to stay alert for signs they need to make a change, such as regulatory shifts in their industry, or market or seasonal adjustments.


  • What areas of the business do you need to invest in to maximise efficiency and profitability?
  • Should you purchase the business premises you operate in to reduce costs and maximise tax efficiency?
  • Can you bring parts of your operation in-house to improve margins?
  • Are there new adjacent markets you can enter?

The Extension Stage usually sees declining sales, steady costs, and declining profits. Having been around for a while, they may have settled into ‘business as usual’ with sliding sales due to increased competition or changed market conditions. Many business owners enter the Extension Stage unaware.

This would be a time to invite them to take stock and ask themselves: has our business lost its relevance or sense of innovation? It’s a hard but important question to confront, and certainly needs to be handled gently. They may also need to restructure due to changing directorship and natural attrition.

To reinvigorate the business so that it remains a profitable asset that can be sold when they’re ready, there are a few options.


  • Have you considered diversifying into new product lines or services?
  • Is it time to rename or rebrand the business to re-engage with evolving markets?
  • Can you invest in new technology to help you to innovate?
  • Would acquiring one of your competitors help to consolidate your market position?

For business owners, solutions that have worked in a previous stage may not work in the current one, so as their broker you can help them to think outside the square to move their business forward.