Sources of Funding for Each Stage of the Business Lifecycle

What do businesses and insects have in common? Not much really, except that both go through life cycle stages. Businesses need capital at many phases throughout their lifecycle and avenues to get funding vary greatly depending on where your company is along the journey.

Your Business Lifecycle

What do businesses and insects have in common? Not much really, except that both go through life cycle stages. Businesses need capital at many phases throughout their lifecycle and avenues to get funding vary greatly depending on where your company is along the journey. 

While businesses do not undergo metamorphosis as insects do, they do transition through several phases. These phases help owners determine how they should be running their companies. If you are just starting, your focus should be on exploring what customers need and want and then trying to capture them using data gathered from the research. More established businesses, on the other hand, focus more on maintaining their customers and getting new ones as well.

Of course, there are many other stages in between, and knowing what phase your business is in creates a big impact on your business strategies and operations. Around 90% of startups fail, and those failures are not due to bad luck but are often due to mistakes that could have been avoided.  Understanding where you are in the business lifecycle can help you stay on top of challenges and obstacles, as well as defy the odds.

The development or seed stage

At this stage, the founders only have the concept, vision, or idea. This is the time when you will have to test your ideas and see what works. Here, you need to research the industry, collect feedback from experts, customers, and even friends and family. This helps you find out whether your idea is feasible or not. If it is, then it will be worth pursuing. Since at this stage only you and your co-founders know about your ideas, it is often mostly self-funded. Other sources of funds are family and friends, or you can apply for government grants, loans, or dip into your lines of credit or credit cards.

The main challenge here is that since funds and time are limited, you should optimize the use of these resources for the best results. Your focus should be on matching skills and experience with the available opportunities.

Startup stage

Now that you know that the idea is viable, you can establish the business’ legal identity and initiate your startup. You need to know that, historically, the mistakes committed at the startup stage make a huge impact on the business in the years to come.

At the startup stage, you tweak your goods or services based on the feedback from your initial customers and the demand. Ultimately, you will know how to adjust your business model to increase sales and meet customer problems. Your focus should be on verifying your business cased models, building your customer base, gathering some testimonials, and building your niche.

Similar to the seed stage, funds are limited and will come from your pocket, family, friends, or government grants.

Growth stage

Now onto the fun part. You have made it past the seed and startup stages and are now in the growth stage. You should be generating a steady stream of income and getting new customers while looking forward to a slow and steady improvement in your profits. The profits should be able to help cover the operational expense as well as open up new doors for the company.

At this point, the business may be incurring either net losses or a small profit. The biggest challenge for you here is how to divide your time. Many things will start requiring your attention, including attending to customers and attracting new ones, facing your competitors, managing your operations, and dealing with your employees.

It is time to hire qualified talent with matching skill sets so that your business will fully realize its potential. As much as possible, you should be the one to handpick new hires during the recruitment process.

By now, you should be more comfortable in your role as the head of the company. Your team will be looking to you for guidance on how to take over the responsibilities that you previously handled yourself.

At this stage, sources of funds are banks, partnerships, grants, and profits.

Established stage

By this time, the business has become a successful company with loyal customers. Growth in sales is a bit more steady as you have now found your place in the market.

Despite the relative success you are experiencing, you must not let your guard down. The competition is fierce out there, and your competitors are always looking for your weaknesses. Keep your focus on the big picture, as several factors can abruptly end all that you have worked for. Competitors, economic fluctuations, and changing trends can all pose a threat. Your focus should be on improving your products and services.

Your funds can come from profits earned, financial institutions, investors, and government grants.

Expansion stage

In the expansion stage, life in the company will start feeling like a routine for you. Members of your staff are now able to handle the tasks you have delegated to them. The next logical step for you may be to expand.

Your business now enters new markets and stretches out to new locations. While this requires preparation and research, you already have the blueprint for rapid growth. 

Your focus when you are expanding should be on businesses that are similar to your existing one. A 10% market shift is often considered customary and the idea is to look at fringe cases and similar markets. Expanding to an altogether new area might prove disastrous. 

Sources of funds can be new investors, financial institutions, joint ventures, and partners. 


Most businesses do not stand the test of time. Sales, profits, and cash flow can decline. Your business may lose its competitive advantage and may soon enter its final stage. How long the company can stand will be your major challenge.  Evolving, using emerging technologies, and small shifts in your target market can make all the difference. 

At this stage, you may start looking for new opportunities. You will also start cutting costs to survive. 

The source of funds will be customers, suppliers, and yourself. 

Exit stage

Businesses do not last forever. There are two things you can do at this time: you can either sell or close it down for good. If you decide to sell, you should know the real value of your company and also that of the marketplace. 

Your focus now should be on proper valuation.

Wrap up

Sadly, 90% of startups fail in the early stages. Not all companies will experience each stage of the business lifecycle. Companies that do survive may experience them in different sequences and timelines.

Being aware of what stage you are in allows you to make more informed decisions and sound steps forward.  Also, knowing your current phase aids in predicting what is going to happen next so you can prepare your business and maximize your opportunities for success.

So what stage are you in?

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