How to finance my business? .On June 5, 2019 by admin
Here are the 5 phases in question
01. The phase of creation and development of the product (pre-marketing):
It includes all the expenses related to the start-up and testing that we do to develop products that a pool of customers will be willing to pay to consume. During this period, sales are zero and investment costs accumulate. According to one of the riches people, it is imperative to answer, before investing time and money in the development of a new product, the following 3 questions:
- Does the consumer really want this product?
- Can we do it effectively and efficiently?
- Will the product be profitable?
02. The launch phase: Our product is ready to sell, but nobody knows it. We must therefore develop a good marketing strategy to successfully market our product. At this stage, profits are low or non-existent because of the high costs incurred to promote the product and attract the target customers.
03. The growth phase: This is the period of rapid acceptance of the product and that of the substantial increase in profits. At this stage, it is important to have sufficient funds to be able to meet the demand (purchase of raw materials, employees, manufacturing, collection time of receivables, etc.). From the perspective where the demand for your products will not be linear, the more flexibility (variable costs vs. fixed costs) you can have in your manufacturing process, the better.
04. The maturity phase: Period of slowdown in sales. Profits are decreasing because to keep our sales, we need to invest more in marketing. It is important to renew with new products that will offset the decline in sales (return to phase 1).
05. The decline phase: This is the period during which sales and profits decline considerably. Companies that have not renewed will not survive. As you can see, each phase has its challenges. The most risky phases are the first two. Several companies or products will never go to phase 3.
The bank lends you money to help you make a profit
The premise of the commercial bank is that the bank lends you money to help you make a profit (the profit that allows you to repay your loans). That being said, the banker will be willing to advance funds gradually as his confidence increases towards the profitability of the project. That’s what leads me to talk about risk sharing. Risk sharing between the entrepreneur and the bank must be balanced. Phase 1 of a project is very intangible. Generally, the liquidity needs for this phase will come from the initial investment of the entrepreneur (the down payment) or the money of the loved ones (love money). The bank can agree to put a line of credit in place at this stage if it is secured by a strong bond (usually, it is a person who has $ 2 to get a $ 1 line of credit). Phase 2 must also be self-financed by the entrepreneur and / or venture capital. It is from the moment we have sales and / or contracts in hand that the banking doors open. Hoping to have you further enlightened on the subject.
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