Starting a business involves a lot of intricacies, in business, you need money to make money, and at some stages, you may need lots of it. Interestingly, several challenges affect a business’s survival – from funding to competition, ever-changing customer needs, and a host of other things. If you want your business to survive some of the harsh realities in the business world, there are several things to consider.
Money is the bloodline of any business. So, it is not surprising that all businesses need funding at different stages to survive. However, being able to identify the stage where your business needs funding, and the extent of funding your business needs is pivotal to the survival of the business.
In some instances, injecting funds into your business doesn’t just ensure the survival of your business. It also helps the business thrive. This article highlights some telltale signs to help you identify when you need funding for your business.
1. Changing Shift in Customer Needs/Preferences
Every successful business is designed to solve a problem. However, due to the nature of human beings, some of the needs originally addressed by a business can change with time. Once you discover a seeming drift in your customers’ demands, you need to start working on the co-creation or modification of your product offering to suit your customers’ needs better.
For businesses in the growth phase, these modifications can come as a seeming need for expansion. And yes, it may require funding. The funding in these instances is required to cater for a vast array of costs ranging from expanding your space, exploring new markets, increasing human resources, or even extra advertising costs.
2. Risk Cushion
Effective planning is pivotal to succeeding in business. One very important part of business planning is ensuring that you have sufficient cushion for the risks associated with your business. Several processes and systems are involved in any business. This is why having some financial cushion can help you efficiently hand risky scenarios. Apart from risk management, having funds as a financial cushion for your business can also serve as leverage. This is because it allows you to effectively maximize any unprecedented opportunities that arise in running your business.
3. Sustain Competitive Edge
Innovation is primary to surviving as a business, especially if you have a lot of competition. Luckily, technology offers an array of innovative options to give your business the edge it needs to stay ahead of the competition. However, as the business continues to grow, you tend to get to a stage where exploring innovative technology options would require funding. At this point, being innovative is pivotal to staying relevant in your industry. Therefore, disbursing these funds to the appropriate quarters becomes essential to the survival of your business.
4. Evolving Business Ecosystem
Apart from evolving customer needs, it is also important to stay in touch with the realities of your business ecosystem. Apart from your competition, interact with other partners and pool resources to grow with the ecosystem. Adapting to the realities of the business ecosystem sometimes requires adopting new technological solutions that can sometimes be capital intensive.
5. Expanding Human Resources
Increasing your staff strength as a business owner is another process that often requires funding for businesses. However, it is important to ensure that you ensure the recruitment process’s efficiency to ensure the HR expansion investment is worthwhile. It is also important to ensure that the business can support any costs associated with getting new staff in the long-term, and any external funding required is only a short-term arrangement.
6. Efficient Cash Flow Management
Efficient cash flow management is the heartbeat of any business. Achieving success as a business requires having efficient cash flow management and monitoring systems. One of the perks of this is that you can make forecasts on arising financial issues way ahead and work towards them. Also, in the event of a negative cash flow due to seasonal changes, business cycles, or other reasons, you can make necessary fundraising arrangements to cater to these needs early enough.
Business Financing Options
There are several options to consider when trying to raise funds for your business. However, some of the popular options include:
- Loans from Traditional Financial Institutions
For several decades, business owners have taken loans from banks and related financial institutions to cater to their business needs. While this is a viable option for fundraising, it is advised to consider all terms and conditions involved in the loan arrangement before going ahead from the interest rates, payment structure, and timelines, amongst other things.
- Venture Capital
In recent times, venture capital has gained a reputation as a possible funding option for businesses. For startups, it might be more difficult to get venture capitalists to invest in your business. However, once you can effectively sell the idea, you are sure to find investors for your business. Like in handling finances with banks, it is also important to fully understand the contract terms before making any decision.
Some business owners also choose to crowdfund their finances. While this option is not always effective, it comes with low risks than other fundraising methods.
- Angel investors
Angel investors are also popular sources of funds for business owners. Although in most instances, the business owner might also need to sell the business idea to the investor before getting an investment.
Apart from these listed funding sources, there are some other sources of funding that business owners can explore. Some of these include Lines of credit, SBA guaranteed loans, donations, and gifts, etc.
In conclusion, funds are vital to the success of your business. Apart from the initial capital required to start a business, you might also be required to inject some funds into your business at certain periods to ensure that your business not only survives but thrives!
I hope you’ve been able to figure out what stage your business is at and read the telltale signs that it needs funding. If you need me to help you further, kindly reach out to me. Peace.