I first came across the term a number of years ago when consultants stressed to me the importance of identifying where a business was in its life cycle. These consultants believed businesses and industries have a life cycle, and the key is identifying where the business is at that time. In the case of a business, its life cycle includes progressive identifiable stages, such as the “seed,” start-up, growth, established, etc.


The idea is, by identifying the stage it’s easier to predict the upcoming challenges and opportunities for the business. This is based on a belief that the knowledge gleaned from the prior likely common experiences of similar businesses when they were at the same stages formulates a solid basis for advice.


The next time I saw the term “life cycle” and the related term “live events” is in regard to financial planning. Planners would identify a client by his or her life stage, such as early earning, established earning, pre-retirement, and retirement, and that would determine major financial concerns and outlook. They would change over time, in large part based on where the individual was in their financial life cycle and the immediate high-ticket item that they were focusing on, such as buying a house, paying for children’s college education, or saving for retirement.


IRS is the latest to adopt this life cycle approach with regard to exempt organizations. On its Web site (irs.gov/charities/article/0,,id=169727,00.html), IRS provides materials covering the five stages in a tax-exempt organization's life cycle. They are:

1.     Starting out: Creating an organization under state law, acquiring an employer identification number, and identifying the appropriate federal tax classification.

2.     Applying for exemption:  Acquiring, completing, and submitting application forms; how the IRS processes applications; and getting help from the IRS during the application process.

3.     Required filings:  Annual exempt organization returns, unrelated business income tax filings, and other returns and reports that an organization may have to file.

4.     Ongoing compliance:  How an organization can avoid jeopardizing its tax-exempt status, disclosure requirements, employment taxes, and other ongoing compliance issues.

5.     Significant events:  Audits, private letter rulings, and termination procedures.


Life cycle pages are available for public charitiesprivate foundations, social welfare organizationslabor organizations, business leagues (trade associations), and agricultural/horticultural organizations.


There is something that I find particular fascinating about the approach of applying life cycles in different contexts. If done properly, it is a superb way for an advisor to identify with a client. It fosters a greater understanding of what is occurring, as well as the emotions that are being experienced, and allows advisors to make a very deep, empathetic connection with clients. 

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