The potential advantage, posed by the rise of SMEs, cannot be over-emphasised, as its expansion, has demonstrated its effectiveness, in reducing the rate of unemployment, as well as, changing the life, of an average citizen.
For instance, to fulfill this potential in a country like Nigeria, a significant number of successful SMEs and MSMEs, must be on the rise, as a major economic driver.
According to the Ministry of Industry, Trade and Investment, Nigeria has, more than, 37 million micro, small and medium-scale enterprises.
Altogether, they result in 84% of job provision in the country, contribute, not less than 48% of the Gross Domestic Product, GDP and also, up to 7% of the total goods and services that, the country exports.
Good numbers right? It appears to be, but there still exists, a great gap, in access, to finance.
A large percentage of these numbers, lack adequate funds, to kick-start their venture.
Why should this be considered a challenge? Many small businesses drop out on their journey, towards scaling, due to inadequate funding.
The average life span, for a small business, is around a decade and the business owner goes through stages of growth.
A fuel that can sustain this cycle is the availability of working capital to keep the businesses running.
SMEs tend to, constantly, push for growth and the provision of needed resources to drive their ventures.
They would require capital, execute their marketing efforts, purchase new equipment and possibly, buy stock for their business.
As stated earlier in the funding business cycle, an average of the 10-year plan is required.
The 10-year cycle can actually be in 3 funding phases, to create flexibility, on the capital required.
Below, are the 3 funding phases:
This is the Seed funding phase stage, of your small business and it is, actually, your first three years of starting up.
At this stage, quite a number of businesses, experience high failure.
The source of funding here, most probably, comes from family, friends, goodwill and the business owner’s personal savings.
As an early-stage business founder, chances are that you might have under-estimated the capital required, to kick-start your business.
With this amount of cash at your disposal, you do not exhaust all, unnecessarily.
To complement this, try to get your customer base established, create a significant presence in the market and most important of all, keep a keen eye on your cash flow.
This is the stage you are getting established and ready to build your venture.
Happens after the first three years and you probably now have well-paying customers.
This means more work on your table and a need to get more people onboard your team.
This will require that you will have to pay more, in salaries and probably fund new projects.
In this phase, you would have to make crucial decisions, on how and where, to spend your money, as well as, ranking well among your competitors.
At this stage, you need to be very careful with your financial decisions, as a miscalculated step, can run down your cash flow and send you out of business.
This is the expansion and growth stage, for any small business, it is well expected that you are now focused, on finding funding opportunities, for your business, after like seven years.
At this stage, you have an ecosystem that you can leverage, through partnership and joint venture.
The funding capital of small businesses, usually, differs by industry; therefore, it is, highly essential that you, as a business owner, look out for the right funders.
Beyond seeking an investor for your funding phases, you also need to look out for specific investors that can grant you access, to their networks and a pool of mentors, to help your business scale.
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