FUNDING OPTIONS
FOR SMEs
Let ' s take a closer look at the foundation and growth of a company . A small business goes through various stages in its life . Let ' s zoom out to look at a company from a distance , at what stage it is on a chart from level 0 to 100 .
The financial requirements to fuel the growth of a business varies in it ’ s journey from Level 0 to Level 100 . In the “ Startup ” world , there are primarily 3 stages which are more like milestones for a business to surpass . Let ’ s first look at the milestones in detail :
• 0 – 1 Journey . At this level , the business is at a very initial stage , at an idea / concept stage where the founder is figuring out the business model , the target market , finding a problem to solve . Founders run experiments to find the product-market fit . Figuring out the “ Product-Market Fit ” is a very very important milestone for the business . The business may or may not have a finished product in this stage . The product / s can be in a crude form or even a prototype .
• 1 – 10 Journey . At this level , the business has gained credible proof of Product-Market Fit . The business kicks into the next gear – “ The Scaling phase ”. Here , the main objective is to push the product / s far and wide , which allows , for example , 10 times more people now are aware of the business and its products , use and review the product . This leads to the network effect of wordof-mouth etc . In this stage , the business has to ramp up the operations to match the inventory requirement . One of the main milestones to achieve are streamlining the operations , figuring out the logistics and the sales channels . Also involves a higher spend on packaging , branding , advertising and other marketing expenses .
• 10 – 100 Journey . The Growth stage . At this level the business is running on auto-pilot mostly – the systems are in place , the business has carved out a share in the market and sales are growing consistently . This is where the business requires more funds to fuel the business ’ s growth , to switch gears from a linear growth to exponential growth . Businesses need to expand vertically and horizontally to reach this growth . Expansions and enhancements in products through continuous research and development , expand into new markets through licencing or exports .
Now let ’ s look at the financial requirements and sources available at each level :
• At the 0 – 1 Stage , the funds are mostly from the founders personal account , personal loans , loans from NBFCs ( Non-Banking Financial Institutions ), credit cards , etc . Today , there is another valuable source of funds ,
Page 8 | Kids India E-Magazine - June 2022