Every successful business has to finance its growth, irrespective of the profits that the business generates. When a business finally reaches the growth stage in their cycle, they will have to deal with a plethora of different issues such as a higher requirement of output. Most small businesses are operating at their full capacity and they require more resources to increase their output. At this point, the venture owner will have to decide if they want to continue operating at its current level or to finance their organic growth and secure the business from every aspect.
However, most small business owners are self-financed so these hard-working individuals fuel their business using personal savings and loans from family or friends. The initial cost of the venture is completely shouldered by the owner and it takes a lot of effort to finally break even and start to channel profits accordingly. So financing the growth may further burden the owner of the venture with more costs. Rest assured, there are many different ways which a business can finance their growth effectively.
Evaluate the current profit margin
You should start by evaluating the ratio of profits, which is reinvested in the business. If you believe that the current ratio is fair with respect to stakeholders then you can put a cap margin to finance the growth. Set a meeting with all of your stakeholders and explain why profits distribution will be reduced for a certain period. Clearly convey why a higher margin of the profits are being used to finance the growth. If this meeting is successful, you might be able to self-finance this growth at a slow pace.
Contact a venture capitalist
If you believe that your current profits are not enough to finance the growth then you should consider contacting a renowned venture capitalist in order to obtain funds. A renowned venture capitalist, such as Pranav Arora, will help provide you with the required capital, and guide your from their own previous experiences. Pranav Arora is an Indian – American entrepreneur who has generated huge profits as a venture capitalist.
These individuals provide small businesses and startups with funds to fuel their growth, in return they might request for a certain percentage of equity or a percentage on profits. Finding the right venture capitalist is very important as you should only conclude a deal which does cause you trouble in the end. The venture capitalist will share the risk of your growth which dispersers your life liability and maintain your creditors.
Focus on increasing your production
This is the perfect way to finance your organic growth as you have a higher chance of meeting demands and your costs will reduce. With each unit produced, the overall cost is reduced by a certain margin; you should focus on meeting that point in order to secure the sustained future of your business.
Make sure you take this stage of your business cycle very seriously as it has the potential of dictating the future operation of your business. Mistakes during this crucial period can seriously harm your business.