Getting funds for startups can be a great deal of work for young starters. And then afterwards, sustaining the business is yet another thing that can pose a serious challenge to business people. I’d like to tell you some ways of sourcing funds and managing your funds for your business thrive.
I have once written on why you should plan to just kick off and begin your business plans but one would wonder, how can I begin without getting the desired funds? We can all stand to reason this out. However, in the post on how to start up, I discussed why it is not only wrong but also disastrous to keep pushing your plans ahead until you probably get a billion dollars before you start. In other words, you wouldn’t want to wait till you get the huge sums that your business desires before you kick-start.
In this post, I’m going to share with you some potential sources of capital for your business. And just thereafter, you will go on to find out the secrets you need to know to grow and sustain your business. But just before then, I think it will be important for you to know the five stages of business growth.
5 Stages Of Business Growth
According to G&A Partners, there are five stages of business growth encountered in the course of any business establishment. These stages are as follows:
1. Development stage
This includes the initial stage of assessing if your business is worth developing or not. It also involves the formulation of a business plan when the business has been marked for success. Common questions that entrepreneurs ask at this stage include:
Does the business meet a need?
Will it be acceptable?
How can I establish a business structure?
Will it yield me any profit?
After these are passed, a business plan is formulated and then the next stage begins.
2. Start-up stage
This is often the most trying phase of every business establishments because of the huge requirements at this stage. The financial and material risks at this stage are extremely high and this is where many entrepreneurs pull out. Some of the challenges encountered here are:
How to raise capital
How to manage expectations from sales and cash reserves
Establishing customer base and market presence
Many entrepreneurs pull out at the start-up stage but many others do not even start-up at all. But the problem of not starting up at all was what I tried to address in this post. Having the willingness to begin as small as you can afford paves the way to understand better how to make it bigger.
3. Growth stage
Companies or businesses who made to the growth phase have overcome the challenges of the start-up phase. At this stage, the business is more stable and profits have increased greatly and the client base has also seen some upsurge but competition is still catching up. There is the need to scale up and if you must do so, you should focus first on fine-tuning your business model by identifying ways to improve operational efficiencies and improve profitability before thinking of expanding through inculcating methodologies such as sales and marketing models. In other words, you should analyse your strength and attain a higher profit and operational efficiencies before expansion. This is important to prevent the start-up challenges from recurring too seriously as you expand. Some of the challenges in this phase include:
How to deal with increasing customers and revenues
How to deal with the market competition
Increasing profit volume
4. Expansion stage
This stage witnesses massive expansion and profit and client-turnovers. More massive growth and increased distribution confer better stability on the business. However, competitions still abound. At this stage, you want to increase your profits to meet up with higher-earning companies and overcome competitions by employing other strategies like marketing, advertisement and promotions. That is to say, the business is doing well but there is a need to scale higher. It is important to scale higher because not deciding to do say may lead to your progressive decline and final exit. In other words, keep going higher or get knocked off the way.
5. Maturity stage
At maturity, the business that started up as an idea is now booming and more stable. It is now self-sustaining and does not need any external money for its running. But this last stage is not actually the best stage to leave your business. Profits are either stable or declining, customer and client-base are declining. You know that your business is at this stage when you notice that your profits are not increasing as much as they did in the earlier stages(Growth and expansion stages).
At maturity, the business is self-sustaining but profits may not be as much as they used to be. It may give way to a decline and exit from operation if not properly handled. Therefore, it is necessary to always go back to the drawing board and get your business back into the expansion stage. Entrepreneurs maintain their businesses in the expansion stage by diversifying the scale of activities.
But for a single-lined business, you must work ways to ensure that it does not stay too long in the maturity stage.
Stages of Business Growth
Now that we have talked about the stages of business growth, let’s see some potential sources of capital for your business.
Sources of Capital
Start-up would have been easy if the capital was always available. It’s difficult to start-up when funds are apparently inadequate but studies have been shown that starting up and succeeding with relatively small capitals guarantees greater success in the future of the business. This may be explained by the fact that you may have gathered enough experience to keep scaling higher over the years.
Some sources include but not limited to the following:
Loans are the standard means of securing funds for your business but they are often rarely used by many entrepreneurs due to several reasons.
Bank loans require collaterals that the entrepreneur may not have at the moment and this can be discouraging. Other times, entrepreneurs are scared to take the risks of getting loans for a business whose outcome, they are not sure of. They would ask themselves, “what if the business fails, how will I pay back my loan?”. This forces them to escape taking a loan by all means.
Sometimes, it is necessary to take some financial risks that you can handle bearing in mind that it is not always going to be a smooth ride to the top. This is the attitude of risk-taking I already talked about in a previous post.
Other less-risky sources like grants, venture capitals and business angels have at least one of the following requirements.
A good business plan
A stable location
Some items of the list above may be hard to acquire but at least having a very good business plan could sell for any interested venture angel or venture capitalists.
Registering your business with corporate affairs is a pre-requisite to get grants from most, if not all, government and public grants. Then, we also find that the corporate affairs commission(CAC) also have their own requirements before successful registration.
There are grants available for businesses within different sectors like agriculture (e.g, Bank of Agriculture Grants for Africans – Nigeria, PRIMA, etc), small scale businesses (Bank of Industry-BOI, private NGOs, here are some grants for small businesses in Nigeria).
You should start with what is within your reach as you plan to grow higher. Meeting the requirements for different grant organisations also translates to the growth of your business. So, it’s not a bad target anyways.
There is one common mistake that young entrepreneurs make that results in the sudden death of their business. I want to call it the simple secret you need to sustain your business. Many may have already known it but they do not know how to follow it yet. Here is comes…
The Simple Secret To Sustain Your Business
At startup, you are continually pumping resources into your business even when you are not making any gains. This is important especially when you know that it is worth investing in.
Successful entrepreneurs are satisfied when they see that their business is doing better bit by bit. So they are motivated to keep investing in it.
The simple secret of sustaining your business lies in your financial management. When your business has finally entered the growth stage, when you begin to get little profit returns, what happens next depends on how you handle these profits that starts coming into your purse.
There may be other private needs that you would want to settle with your profits but the best way to sustain your growing business is by taking it as a separate entity from your private needs.
You must find ways to convert your profits to new capital for your growing business, such that what you take out is as minimal as possible. As you keep doing this, a point comes when the little percentage that you take out becomes big enough to make you more comfortable in your own living. As an instance, if you take 5% of your profit for upkeep, it will be only a small amount when your profit is small but when your profits have been maximized, it translates to a bigger sum.
I am a medical doctor, a seasoned writer and passionate blogger. Thanks to many years of trials, failure, and near successes. I am the founder of Knowseeker and our content are geared towards enlightening and making you a better and happier audience.