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It may seem obvious that business growth can only occur when there is money available for reinvestment.
However, many businesses do not consider this enough when budgeting and planning for their medium to long term goals. One of the biggest impediments to growth can be access to finances that will fuel the investments that are needed to support growth. Therefore, it is important that a business plan for any future expansions considers funding accordingly.
Businesses may need to raise funds through debt or equity in order to grow.
If a business is planning to fund investment in its own infrastructure, it will need appropriate levels of profit margins and cashflow. Without this, the business may need to raise funds through debt or equity in order to grow.
Here are some key aspects of business growth that may require funding:
- Capital investment and premises
Depending on the growth strategy, capital investment in new equipment may be required. Consideration should also be given to premises and whether a change or redevelopment of premises is required to meet the expansion goals. You may be looking to expand your business? To help with the decision-making process, review our blog - Expanding your business - what to consider.
- Investment in new support systems
With more data to process through increased transactions, there must be sufficient finances to fund the necessary support systems. These include financial, logistics, quality control, human resources, customer relationships management (CRM), complaints handling and asset tracking.
Within these systems, budgets are crucial to being able to grow your business without your overheads increasing at the same rate.
- Staff development
The time it takes to train staff will have an impact on the cashflow of the business. This training will be necessary if new products or operating systems come into play with business growth. Furthermore, new marketing operations may need to be implemented when adopting and inventing new products for sale.
- Buffering periods
The ability to absorb mistakes, evaluate what went wrong and identify solutions can mean the difference between complete failure and just a bump in the road. Rather than needing to cut back or take drastic action instantly, a business with a cash buffer can reposition in the market with a renewed approach. Therefore, even without any immediate prospects of business growth, it is wise to implement strategies that, from day one, allow for buffering. After all, business growth does not come from standing still.
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Disclaimer
The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.
