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Carefully Managed Growth is the watch phrase for businesses in 2017, according to alternative lender PDF Print E-mail
Wednesday, 04 January 2017
THE New Year is traditionally a time of optimism, resolutions, and vows to be more productive. And 2017 is no different for Britain’s small businesses, according to Boost Capital Managing Director, Alex Littner, despite ongoing upsets caused by last June’s Brexit vote. The SME community is going into January feeling buoyant, with many even planning to grow their enterprises in the next 12 months. But how can they do so against the uncertain economic backdrop, and with the minimum amount of risk to their operations?  

Unexpected optimism
Fundamentally, British small businesses are far more confident going into 2017 than anyone could have reasonably expected.

- More than eight out of ten SMEs in Britain expect their revenues to increase or at least stay the same in the year ahead, according to new research from Aldermore Bank.
- Almost 40 per cent of firms are planning to launch a new product or service in 2017.
- Vitally, 63 per cent of business owners are confident they can gain access to the necessary finance for investment.

It’s encouraging news, but not a little surprising given the disruption of the last year. Yet, two-thirds of firms surveyed by Aldermore said they believed Britain’s vote to leave the European Union would either have a positive effect on their organisation, or no effect at all. Those that are sunny about the UK’s prospects are hopeful British money will be invested here rather than Brussels, and that business will pick up once the country is out of Europe. About a third expects pressure from regulation to ease up.

Some of these expectations may seem overly optimistic – it’s still far from clear how long it will take to unpick Britain from the European web, after all. But, if companies are serious about growing in 2017, they need to plan properly to make their dreams reality.

What type of growth?
Firstly, consider what planned business growth will look like. Would it be increased sales? Are you using e-commerce to its full advantage? Maybe there’s an element of the business already performing well, and investing further could maximise this strength.

Might launching a new product or service attract more customers? Alternatively, extending or revamping premises could increase capacity, and bring higher revenues. Other bosses may be inspired by all the talk about exporting since Brexit, and seek out new markets. Taking on staff with skills the company currently lacks is another way to boost productivity. Or perhaps investing in new technology could improve efficiency.

The paths to achieving growth are many and varied. But, remember: it’s unwise to tackle expansion on too many fronts. Single out where you can make the biggest impact, and focus attention there. Once you’ve identified where to expend effort, consider the practical steps to get to your goal.

Researching opportunities
Analyse the market the business operates in, or the one into which you plan to expand. What are your rivals doing? Can you learn lessons from their successes and failures, then improve on their efforts? If the strategy is to introduce a new product, what’s the genuine demand for it in the target market? Consider whether profit growth is likely to be affected by seasonal factors, or if it should increase steadily, and amend the business’s cashflow forecast accordingly. Once you have a thoroughly researched business plan that accounts for all eventualities, set goals for the company – key performance indicators – that will be checked regularly to ensure everything is on track, and indicate if progress is genuinely being made.

The ability to forecast is everything, allowing a business to make an informed decision about how, when, and where to invest capital. Cashflow forecasting will also indicate if an unexpected financial shortfall is likely to arise, making it possible to arrange bridging capital if necessary. If you don’t have these types of analysis in place, your business is going into its new stage of development blind. Having a command of the company’s figures mean you can read the future, so establish processes to monitor what is happening in the business today – and predict what is looming ahead.

Paying for expansion
Much comes down to cash – how much is needed to invest in the business; how much the company has; and how much it can borrow if financial reserves won’t pay for the growth strategy. Don’t make the classic mistake of over-investing, then running out of money. Equally, it’s important not to hold on too tightly to the purse strings so the enterprise is starved of necessary finance. Having a strong relationship with an experienced accountant will help here, so seek professional advice to ensure you’re being sensible about how you use your money.

If outside finance is needed, be aware there’s far more choice than the bank as a source of capital. Talk to a commercial finance broker, or do your own research to discover types of available funding appropriate to your firm’s needs. Online comparison platforms, such as Funding Xchange and Funding Options, allow business owners to compare and contrast alternative finance deals in terms of cost and conditions. Whether it’s invoice finance, peer-to-peer lending, asset-based borrowing, or a short-term, unsecured loan of the sort we offer at Boost Capital, alternative providers have something for everyone these days. They also often have experience of working with businesses in similar circumstances, so can bring specialist knowledge to the situation.

Minimising risk
But, how to grow without causing potential damage to the existing business? As said previously, the amount invested is key. Too much, and the business runs out of ready cash. Too little, and it’s strangled by a lack of liquidity. Can you realistically forecast the business will maintain a steady bottom-line profit over the months and years to come? Having a good command of the business’s core financials hugely increases its long-term security.

Never expand at the expense of the existing operation. Many is the entrepreneur who has opened a second site based on the success of an original business, only to neglect the first in terms of time and money. Equally, introducing new product lines that aren’t complementary to the goods already sold, or for which there’s no real market is a recipe for disaster. Research, research, research – and be realistic about what you and the existing business can withstand in terms of time and financial pressures.

Might forming a partnership or alliance with another business be a way to scale up without making each company too vulnerable?

Even agreeing to promote each other’s products or services for a commission could boost sales. Merging with or buying up another company is another obvious way to grow, but clearly does bring its share of risk, so take as much professional advice as possible before pursuing this route.

Commenting on business planning as 2017 begins, Alex Littner advises, 'Think about where you want to be at the end of the year. Grasp the optimism the New Year brings, and turn it into positive action. With determination, diligence, and drive, your vision could become an exciting reality for your business before you know it.'
 
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