We all know that in order to grow, you’ve got to spend money. The challenge is, where do you get it from?
If you think you’re ready to grow, think again. The signs may have been positive lately: revenues are up, you’re selling more services, and work in coming in faster than you know what to do with. Maybe it’s time to grow your team with new hires, or even increase your marketing budget. Whatever you decide, you want to make sure the foundations of your business are solid enough for the increase.
Growing isn’t just about increasing revenues but increasing capacity as well, all while maintaining the quality of service your customers expect. Neglecting the fact that you’ll need to know where you stand financially and if you can handle the increase, has previously destroyed countless businesses before. Businesses have overspent on marketing and hiring, without knowing how to boost revenue – soon to run out of money. Conversely, businesses that take on more business than they can handle often implode.
So, what’s the best plan to grow without access to more capital? Draw up a growth plan and fund it from inside your own business. Whatever you do, don’t max out your credit cards. Start looking for money any place you can.
One way is by factoring. Factoring is when a bank or finance company pays you for the invoices that you’ve already sent out. These invoices should have a return of 60 to 90 days, which at that time this particular factoring company can pay you a decent number of cents on the dollar. To find a company that’s right for you, research institutions that advertise in your industry’s trade magazines, that way you know that they’re familiar with your market.
Another way to get access to cash is to get an asset-based loan using inventory as collateral. A lender may find that your raw materials are more valuable, and lend you money against it. You can use the money to fund the production, using the proceeds from the finished product to pay off the loan. An unsecured loan, such as a Personal Line of Credit is also an option, but make sure you can repay what you’re taking out.
Depending on the type of business you have, you can optimize your liquidity in different ways. Such as persuading retailers to purchase your inventory up front at a discount, instead of paying you when they sell. You could even create an arrangement where a supplier only gets paid once you’ve been paid by your customers or retailers.
A different approach would be to see how your high-quality product can be manufactured at a fraction of the cost – that way it can be sold at a better margin. The relationship you build with your supplier can eventually give you better leverage to negotiate better terms in the long run.
In the end, it’s all about making sure every dollar you spend contributes to you becoming profitable. Nothing is more exhilarating than growing a successful business from scratch – wouldn’t you agree? You have to remember though that growing a successful business can take a lot longer than expected, and cost way more than you plan.
Ready to have a conversation? Email me at judi.otton@growth-cast.com
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