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Guide

How To Grow Your Business - Instead of Growing Out of Business

Business growth can result in rewards & opportunities for yourself & employees but can also pose many challenges. Here's how to carefully planning for growth.

Congratulations! You had a great idea and launched a successful business. But now you’ve hit a plateau and are wondering if you should take steps to grow your business beyond its current level.
 
Growth can be a double-edged sword for small and mid-sized businesses. Growth represents progress, and it’s certainly preferable to the alternatives: stagnation or decline. It can also result in rewards and new opportunities for yourself and your employees.
 
However, growth brings about many challenges of its own — especially on the financial side of the business. Companies that haven’t carefully planned for growth can literally grow themselves right out of business. This makes it critical to devise a strategic growth plan that details specifically how you’ll grow without jeopardizing your company’s finances and future.
 

Managing Cash Flow

“Successful small business growth is all about managing cash flow,” says Linda Aguilar, Cadence Bank Senior Vice President, Commercial Lending. “When customers ask me whether or not they should grow, the first thing I say is let’s sit down together and look at how growth will impact your cash flow.”
 
Aguilar points to three main things small business owners should carefully examine before launching a growth initiative: cash flow (as noted), debt and expenses. “Having too much debt relative to income and high fixed costs are other warning signs owners should take seriously before they decide to grow.”
 
One of Aguilar’s customers recently asked her if she thought it was a good time for them to grow and expand. “I suggested that we start by projecting the costs involved in the expansion and determining whether or not they could be covered by current cash flow,” Aguilar says. “If they can’t, then the expansion could jeopardize what is a very successful business.”

 

Growth Success Stories

Another one of Aguilar’s clients, a logistics company, is in the midst of a successful growth initiative. Aguilar says one of the biggest keys to their success was the extensive planning they did to lay a firm foundation before launching their growth plan. “For example, they streamlined their operations and procedures, diversified their client base and took steps to distinguish themselves from their competition.”
 
Customer diversification was especially important for this client: “They had a lot of customers in the oil and gas industry, which is experiencing a downturn right now,” says Aguilar. “But because they made the effort to broaden their customer base from both an industry and geographic perspective, this hasn’t hurt them.” The company is growing very nicely and is set up well for continued successful growth in the future.
 
Still another Cadence Bank client in the computer services business is also experiencing sustainable growth. Aguilar says a key to this company’s success was diversifying their service offerings.
 
“In addition to providing standard computer service and repair work, the company started offering cloud storage and backup services,” she says. “This generates recurring subscription revenue in addition to project revenue that provides a predictable increase to their monthly cash flow.”
 

 

Financing Your Growth

It’s not uncommon for growth companies to seek outside financing to help fund growth initiatives and keep cash flowing. Growth financing can take the form of debt or equity.
 
Term loans, construction loans, commercial mortgages, equipment leases and SBA loans are a few examples of business loans that can be used to help fund growth. Equity, meanwhile, is the sale of business ownership interests to outside investors in return for cash to fund growth. Private equity firms, venture capitalists and angel investors are the most common sources of equity financing.
 
Which type of growth financing is best for your business? Each has advantages and disadvantages. The choice is made by deciding which one is best for each company and the magnitude of the growth they are targeting.
 
Business growth can be good for everyone — owners and employees alike. The key is to grow your business without growing yourself out of business.
 
Cadence Bank’s specialized business bankers can help guide you as you grow your business. If you have more questions about growth strategies, please contact your Cadence Bank representative.
 
Also, for better cash flow management, ask your Cadence Banker about Total Access Banking, which offers a discounted, more predictable monthly service fee for the combined services you need for day-to-day banking efficiency.

 

 

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.


 



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