We’ve all experienced a time when we needed more money than we had. But what does that look like as a business owner? We broke down events that spur the need for cash based on each stage of the small business lifecycle: from startup to growth and finally to mature. BTW, since this is a “cycle,” once you hit that mature phase and start to diversify, that could mean parts of your business hit the startup phase again. Funding Needs In The Start-Up Phase There’s a good and bad to being in the startup phase. First, the good: you’ll be able to easily identify the results of any investment you make. For example, if you spend a bunch of money on a website, you’ll have a shiny new website to admire. Then the bad: It may be harder to access financing at this phase, especially if your model, product, or service is unproven “I need to get people coming in.” If you’re relying on foot traffic (maybe you own a store in a mall or you’re a restaurant), part of your startup will be renovating your space, which can cost anywhere from $25K to a billion dollars. And you may find yourself in a pinch for money multiple times throughout the project because that’s how renovations go. But that’s the price of bringing your vision to life. “I need to get the word out.” Back to that website, you’ll need one and the messaging for it. You may want to consider building an email list and maybe making a few videos for your site and social media. And speaking of social media, you’ll probably want those channels set up too. A good search engine optimization strategy could help you bring in online traffic and make online sales. Depending on the talent you work with for all this and the kind of business you run, you’re probably looking at between $15K and $100K for all of this. And the longer you wait, the more time your competitors have to beat you to the punch. Funding Needs In The Growth Phase You’re growing – and that’s good. You’re wedged into a niche in the marketplace, have a little experience under your belt, and are looking at optimizing what you’re already doing. Now, the challenge: managing the opportunity cost of borrowing the money to take these steps because taking on debt may mean cutting back on other things. And it may feel riskier to borrow money at this stage than at the last one when you had far less to lose. “I need to jump on this. Pronto.” As your business grows and you make more of a name for yourself, you’ll start getting exposed to all kinds of opportunities. You’ll want to go for some, and some will cost money to pursue. But it takes money to make money. For example, let’s say you started talking to someone at a networking event about your app for the fashion industry, and, before you know it, they are inviting you to Milan to present it. Now you have to come up with a bunch of money to fly back and forth to Milan and buy way too many fancy dinners to close the deal. Another example could be a general contractor borrowing money now to pre-buy a ton of material before the prices rise and earning more profit from every subsequent job. A third could be the chance to acquire a competitor to increase your market share and take out a threat. “I need more balance.” At some point, you may find yourself feeling tapped out. You can’t work any harder for the money you’re making. You either need to make more or work less. Or you could do both by investing in talent or capabilities. On the talent side, for example, you could use the money to take business development off your plate by luring a proven rainmaker with a healthy signing bonus. Or you could use it to take the grunt work off your plate, like when an art director hires a junior designer. And the capabilities could be a digital tool like a Bloomberg terminal that runs finance people $24K a year for the most basic model, or it could be a piece of equipment like a $80K tractor that can seed a field twice as fast. Funding Needs In The Mature Phase Customers know you, like you, turn to you, and probably trust you, too. At this stage, you might think “hey, all’s well…I can coast for a bit.” But you also know that complacency could be the opportunity your competitors are waiting for. “I need to diversify or fortify my offering.” At some point, you may hit a ceiling in your market. You’ll either have all the customers or as many as you’re going to get. Now all you can do is lose market share to your competitors, so you can either invest in fortification(prevent competitors from getting to you) or diversification (start exploring new initiatives or a new market). If you’re an accountant, you could use a loan to attend law school at night and eventually market yourself as a full-service M&A consultant. That would be an example of diversifying. Fortifying would be a restaurant borrowing money to open another restaurant across the street with a different menu so no other restaurateur can move into your territory. Another related but common funding need at this stage is preservation. If a young-buck start-up shows up in your market, you may not need to outspend them to keep up, but you will have to out-innovate them because you know they’re coming in with fresh ideas. And that innovation might take some money. “I need to weather a storm that WILL NOT sink me.” An act of God not covered by insurance. Out-of-control inflation caused by outrageous supply issues. A messy divorce with your business partner or legal action against a client. The ramifications of a bad choice. If you’re in business long enough, you’re bound to run into something you didn’t see coming that will require some money. You’ll owe it to your staff, your clients, and yourself to get the money and fix the problem. Which Financing Options Are Available To Your Small Business? BTW, “funding” doesn’t always mean selling off part of your business or doing without while you bootstrap and self-fund your vision. You can also consider external financing solutions regardless of the stage of the business lifecycle. Use Lendio’s short, 15-minute, online application to find out what funding is available to your small business. Learn more here or start your application now. Disclaimer: The information provided in this blog post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. For advice specific to their situation, readers should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.