An entrepreneur’s journey is one full of varying experiences both happy and sad ones. However the greatest experience that each entrepreneur yearns to go through is to see their business move from being a small start-up in their backyards to a fully-fledged regional business conglomerate. The experience is both fulfilling and exciting, but one that requires patient and a lot of focus at each level as you grow your enterprise from a sole proprietorship into a limited liability empire.
As your business grows from one stage to the other, the demands that it has are different and its systems keep maturing over time. In addition, the finances needed to keep the business running and growing also keep increasing over time as your business moves from one growth stage to another. Sources of funding for your business will therefore evolve over time as you grow too.
1. Seed Stage
At this stage, as an entrepreneur you will be focused more on testing your business idea to see its viability. You will also be involved in a lot of market research to try and validate existence of a market gap that you want to fill using your new product or service.
In addition, you will be focused on planning how the business operations will look like as well as determining the ownership of the business.
Finances needed at this stage will most likely be your own savings, grants from donors or borrowing from family and friends.
Related: 10 Tips for Finding Seed Funding
2. Start-up Stage
Once you are done with testing your idea and validating the existence of a market gap that you want to fill, you will move to the start-up stage where you shall be focused on establishing your own customer base. With your product ready, your focus now shifts to looking for potential buyers and early adopters.
At this stage you will also be more concerned about customer feedback about your product so that you go back to make changes as necessary and return a polished product to the market.
With a ready product to give to the market, your suppliers can now start offering you credit financing; while you can also capitalise on pre-orders from you customers in order to generate a positive cash flow for your start-up. Other sources of funding at this stage would be crowd funding, sweat capital, incubators, accelerators and angel investors.
3. Growth Stage
After tweaking your product to fit the market demand, you will start experiencing high demand for your product or service. This is a clear sign that you have moved up to the growth stage of your business where you will now face rapid growth.
As the entrepreneur leading the business, you now have to start thinking about how to deal with market competition as competitors invade your territory. With high demand and increased production, you will also need to focus on improving your business systems and hiring more employees in order to serve your customers satisfactorily.
At this level venture capitalists will start looking for you if you are on high growth path. In addition you will find it easy to access financing from banks including getting the best business credit cards there is in the market.
Related: Doing Your Finance On The Fly
The growth stage is followed by an expansion stage whereby your business now moves to different geographical locations. This is considered to be partly as a result of moving to capture new territories that have not been ventured into; but also a strategy to move away from completion in saturated markets.
With stiff competition in the market and little room to expand, your business will eventually reach maturity and the only option on the table will be product diversification. You will also be more focused on cost cutting and trying to get maximise your thin profit margins.
At early stages of this level you will find private equity firms interested in buying a stake in your company.
As you grow more mature you will be more focused on both vertical and horizontal mergers and acquisitions as a strategy to be more competitive and have control along the value chain in your industry.
Finally, once the business is well established in the value chain, you will want to exit the market and retire from actively owing and running it. At this stage you will most likely spend much of your time on road shows looking for external investors to acquire your business or you might need to consider an Initial Public Offering (IPO) and completely exit the company.