In this article, we are going to take a look at the different stages of your business as they are defined by your need for funding.
Seed Stage
This is the very beginning of your business, and if everything goes right it is the time when you will most be in need of money.
You need to purchase the supplies required to run the business, advertising, some kind of income, create an inventory, and so on. The problem here, of course, is that you have no funds coming in to pay for all of your needs to grow your business.
You are at the highest risk point as far as investment that you can be and that means business funding might come fairly hard.
Fortunately, your funding needs are going to be lower at this point than in the future as well. You can probably fund through another income or from a loan or money borrowed from friends and family.
Startup Stage
Once you have created your business plan and purchased what you need to get going, the start up stage kicks in.
During the seed stage, you should have done some testing to find out just what the market is like for your product or service, and have some reliable information that you can take to potential investors.
Your risk rate is still high, but if you have gone through the right seed stage steps (drawing up a solid plan, testing the markets, defining your goals) and you have an idea that you know will work, sooner or later someone will take a chance on your idea.
First Stage
Congratulations! Your small business has a direction, a couple of employees, a viable product, and some solid customers. The first stage in the small business is very rewarding, because you start to see money coming in.
Not all of your funding is dependent on other people; you are bringing in some yourself. Your risk is not lowered a lot, but you need additional funding if you want to take your line to the next level.
The good news is that you now have evidence to back up your pitch to venture capitalists!
Second Stage
Now business has really started to boom, but you find that strangely you don’t have the cash on hand to meet your needs right away.
You know that your sales will grow for the fiscal year – problem is, you need money right now to pay employees or to increase the product line.
Again, you are at a lower risk; you have both a past and a future that prove your idea works. At this point, it is time to start thinking about shares and equity funding.
Mezzanine
All the bugs are worked out, and everyone in your business knows their place. At this stage you are almost as big as you can get and everyone is working towards the bottom line in an efficient and productive manner; you have employees, managers, and the list goes on.
Your funding needs are still there, but they are largely going to be short-term.
The final stage of your business’ growth is called the harvest stage. Everyone has worked hard and can now reap the benefits of their investment in your small business; it’s time to sell or offer public stocks in an IPO.
You’re not done and everything will need to be managed, but the startup process is now over and funding is entirely from revenue.
