Growing a Small Business: The Financial Support You Need at Different Stages
🕐 Read Time 5 Minutes
As a small business owner, you are (by no official definition) a unicorn! Your business origin story is unique, your leadership style is unlike others, and you solve problems and handle challenges in your own way.
So while we don’t want to discredit your uniqueness, we do want to point your attention to a common small business life cycle that most entrepreneurs experience. Knowing these stages can help you prepare for upcoming challenges, face current struggles, and be equipped with knowledge and skills for the future.
Being an entrepreneur has a lot of similarities to raising a child. First, there’s a conception and eventually, there’s a successful departure from the nest. And in between? A whole lot of growth, mess, learning, and financial support!
Growing a Small Business
Your business growth depends on completing various stages in the small business life cycle. And similar to raising a child, it takes a lot of effort and support. Check out these four stages to see the financial support your business needs at various stages.
1. Conception and Birth: Your Business Is Born
2. Toddlerhood: Survival Mode (And a Million Questions)
3. Elementary/Middle School Years: Business Growth and Expansion
4. All Grown Up: Business Maturity and Exit
1. Conception and Birth: Your Business Is Born
This stage of your business is arguably the hardest because how you choose to structure and fund your business can affect how you operate your business for years to come.
First, you need small business capital to fund your start-up costs, these funds typically come from:
Your own savings (self-funding)
Investors (friends, family, venture capitalists)
Crowdfunding
Loans
During this delicate stage, it’s important to be cautious and conservative with your spending because, like a newborn baby, your business is completely dependent and delicate. During this stage, you will be giving a lot and taking back very little. Your business will require direct supervision and there will be very few formal systems in place.
If you’re looking to secure funding from someone outside of yourself and crowdfunding (which is often gifted money), you’ll need to have comprehensive business and financial statements ready. These could include:
Your business plan
Market research data
Projected income statements
Cash flow projections
A breakdown of how you plan to use the borrowed capital
These documents need to be as accurate as possible in order to build trust and rapport with investors, banks, and other financial parties that may be interested in helping you fund your business.
2. Toddlerhood: Survival Mode (And a Million Questions)
Once your business is up and running, it can be in a survival stage for several months or sometimes even years. This stage narrows in on operations and figuring out where to pivot, when necessary. Similar to a toddler, your business will still require your supervision during this time but there might be some more formal systems starting to take place.
You’ll also find yourself facing a million questions in this stage such as:
“Where should I spend most of my time and energy?”
“Do I need to bring on an assistant?”
“Am I using the right marketing strategies?”
“Is it time for an accountant?”
“Should I expand my services?”
As your business grows and learns to walk and talk on its own, you’ll need to ensure your finances are in order. You’ll need to make sure you have:
Working capital to cover your day-to-day expenses, overhead costs, insurance, and debt repayments.
Funds to compensate yourself and any employees.
Money for marketing and customer-generating activities.
An emergency fund for slow times or unexpected expenses.
Funds for professional support (business coaches, accountants, legal support, etc.).
Money for these expenses should come from the revenue your business generates, but depending on the stage, it may still be from the initial investments from personal savings, lines of credit, small business loans, investors, or friends/family.
3. Elementary to High School Years: Business Growth and Expansion
Exiting the survival stage and entering the growth and expansion stage is a thrilling time for your business! Perhaps you’re expanding into different markets, growing your team, evolving your services and offerings, or even just experiencing an exciting time of increased revenue.
Similar to raising a child from elementary to high school, your involvement in their day-to-day is shifting from direct care to an advisory role. As your business becomes more independent, you may find yourself spending more time looking at high-level matters of the business rather than the nitty-gritty operations.
During the growth and expansion stage, you’ll want to set aside working capital for:
Increasing your operational expenses and hiring more employees.
Expanding your services.
Opening new locations.
Increasing your marketing efforts.
New technology and business resources to help smooth operations.
Partnering with other businesses.
4. All Grown Up: Business Maturity and Exit
It may be hard to imagine now, but there will come a time when your business is mature and able to run smoothly without you. In the maturity stage, you’ll start to shift your focus to staying competitive in ever-changing markets, continuing to smooth out operations, implement systems, cut costs, and continually increase your revenue, profitability, and success.
How much you decide to stay involved will be completely up to you—you may find yourself wanting to exit and move on to retirement or another business idea or you may want to still keep up with the day-to-day operations.
Similar to launching a child from your home, the success and independence your business finds will largely depend on the work you’ve put in over the years. But of course, there will always be outside factors that you can’t predict.
The required financial support in this stage of your business will be quite different than before. As your business matures and you plan your exit, you’ll want to consider:
A business valuation if you plan on selling your business any time soon—this will show buyers the market value of your business.
The tax implications of your business—a trained certified accountant can help you with your specific business tax strategies.
Estate planning and your retirement plan—especially if you’re planning on a large portion of your retirement income coming from your business.
Find the Support Your Business Needs with Financial Fitness Coaching
At Financial Fitness Coaching, we help small business owners discover the tools and resources they need to successfully move through the stages of the small business life cycle. By mastering your business’ cash flow, increasing your confidence as an entrepreneur, and maximizing your profits, you can work toward finding financial success in your business.
To see how we can help you and your business, send us an email at info@financialfitnesscoaching.com or simply schedule a free 20-minute Discovery Call on our calendar.