How to Grow Your Business by The Accountant LLC - HTML preview

APPENDIX

Sources of capital to support your growth

Every growth plan requires resources. True, some businesses grow organically and over time they get bigger on their own. But if you’re reading this then we assume you are looking for faster growth and that will take your time, money and focus—with money often being the stumbling block.

Don’t underestimate how much it will cost to get your growth plans underway. Make sure you have enough reserves to implement your growth strategy successfully.

The most common sources of capital for small businesses are:

• Your own business, such as cash reserves in the business earmarked for growth
• Your own, personal cash
• Friends and family
• Loans of various types.

Do you know where to obtain additional financing for growth?

Obtaining financing is often a crucial step in business growth. An up-to-date business plan supporting your new goals will also ensure you’re well prepared when seeking finance. Additional sources of business finance to those listed above include:

• Share ownership or equity. A private part- ownership arrangement that shares the business profits with these investors. Similar schemes exist with employees to encourage increased productivity.
• Floating on the stock exchange. Companies can sell shares publicly on the stock market to raise money. Shareholders receive dividends or payments in return for ownership.
• Government funding. National and local governments provide funding and incentive schemes for various activities such as research and development, innovation and exporting.

Equity investment

Another option for capital is selling equity or ownership in your business in return for the cash to help you grow.

The most common sources of equity finance are:

• Angel investors. High net worth individuals who have funds to invest and are interested in your sector. They usually live in your area and are active investors that want to see their region grow and get a good return on their funds.
• Venture capitalists. Private companies that have a portfolio of businesses that they invest in if they see high growth potential. They are seldom interested in smaller deals.
• Corporate investors. Often large businesses have funds to buy into smaller businesses if the industry sector is complementary and they see potential for your business beyond the current customer/supplier relationship.
• A stock market listing. A possible option to look forward to when you have successfully grown your business past a certain size.

If you decide to accept equity finance, remember that often it is not the cash that makes the difference. Ask the investor what skills, contacts, knowledge, experience and assistance they can bring to your business over and above the money. Get expert advice from your lawyer, banker and accountant.

Develop your growth opportunity

Deciding to grow your business is one thing. Choosing a specific course of action – and successfully implementing it – is another. As a business owner, spend some time researching the best course of action. Avoid pursuing any strategy without careful consideration of the pros and cons.

Use the growth chart below to assess the advantages and disadvantages of each growth opportunity.

Don’t try and develop the final strategy on your own. Before you decide:

• Meet with key staff, business advisors or board members to brainstorm growth ideas
• Research businesses similar to yours to see if they offer different products or target different markets
• Subscribe to trade journals and magazines to spot trends and new technology
• Visit international trade shows and conferences to see first-hand what other businesses are doing.

Set growth targets

Set goals for your growth. The more specific the targets, the better placed you’ll be to measure them. For instance, “we’re aiming for 15% growth in our consumables section within the next 90 days” is better than “we’re aiming for significant growth in the next quarter.”

Seek advice

If you find your business has slowed down or is faltering, it’s time to seek advice about possible growth strategies. Some methods include:

• Obtaining advice from your trusted advisors, such as your lawyer, accountant, banker, or mentor
• Getting market research feedback from your customers, your suppliers and other stakeholders
• Speaking to business owners at business network meetings
• Meeting regularly with your business advisors and mentors
• Making sure you are regularly getting up-to- date information on your industry, research and development breakthroughs and particularly on what your competitors are doing.

Issues to watch

Growth, especially rapid growth, can bring challenges. For instance, you could run out of working capital, experience a cash-flow crisis or see your profits eroded by unexpected costs. Here are some of the traps