Growing your business is about finding great opportunities and capitalising on them. That could mean landing a big client, improving your product, diversifying your services, or engaging a new market. Whatever your growth strategy is, it inherently carries some financial risks. To scale up your operations, you might need more stock, more labour, more tools, more space, better procedures, and the money to pay for those things.

Not only is it difficult to get the funds needed to supply that infrastructure, it’s also nearly impossible to avoid some miscalculations along the way. There’s no real guarantee that a major new client will stick around long enough to pay off your investment, or that an improved product will improve sales enough to cover the cost of development.

If you’re not careful, you’ll run into cash flow issues that could cost you the growth you were hoping for as well as the stability you might be enjoying right now. Growing pains like this can get in the way of your business’ success, and cost you and your business months or years of time and effort to recover from. Unfortunately these kinds of risks aren’t avoidable, so entrepreneurs need to find tools and strategies to help them manage and protect themselves.

Get the right kinds of funding

Being able to take advantage of every good growth opportunity means being financially prepared. To keep your business’ financial risk as low as possible, it’s important to take on the right kind of debt. Taking out a regular secured or unsecured business loan can have disastrous consequences if the results don’t pan out and you’re unable to generate the profit needed to pay it off. Fortunately there are ways to hedge your bets…

Stock loans

If you need funds to acquire more stock in anticipation of a surge in product demand, stock loans are a much safer option than a traditional business loan or your normal line of credit. This is because stock loans are secured against the stock itself. Effectively, your lender retains ownership of the stock you buy, and can repossess some or all of it to recover their investment if you’re unable to repay the loan. This protects your existing assets, and greatly reduces the risk to your business.

Angel investors

One great way to get around the financial risk of a loan is to pursue investment instead. By accepting shares in your venture as compensation for their funds, they absorb the risk in exchange for a share in the business’ future success. When managed carefully, investors can be an enormously helpful resource that frees you to explore new options without jeopardising your current success.

Invoice financing

If you’re intent on not taking on any more debt, invoice financing might be the ideal option for you. Invoice financing is when you sell an outstanding invoice to a financial institution for most of its value. You’ll get paid immediately instead of weeks or months later, giving you the opportunity to leverage those funds immediately to pursue an opportunity.

Use multiple financial institutions

No matter whether a business takes on debt to grow, those growth phases won’t leave any room for error in your budget. If your financial options aren’t diversified, those times could leave you in a precarious position.

Even the biggest and best banks sometimes go out of service at unfortunate moments. In October, Australia’s biggest bank suffered 3 outages in a single week. An untimely cash flow interruption like this might interfere with your ability to pay wages or cover other crucial costs. To ensure that you have backup options when the bank just can’t help you, it’s a good idea to prepare backup resources with other institutions. You can use standby finance facilities, or untapped lines of credit to cover emergency costs at a moment’s notice.

Restructure with care

An inevitable symptom of growth is that your business’ structure and procedures will become outdated and ineffective for your changing needs. As a result you may need to restructure, which can lead to temporary internal morale and efficiency issues that naturally result from change. This, in turn, can impact service quality and cause delays for clients.

To prevent that growth from slowing or even reversing as a result of your attempt to accommodate it, you’ll need to restructure carefully and mindfully. It’s a good idea to speak to more experienced entrepreneurs about their experiences, and to read and educate yourself about how to manage major transitions. Most basically, it’s vitally important to…

Communicate well

Whenever possible, people need to know why changes are occurring, and how it will affect the company. Transitions will also be easier if workers have some time to absorb and understand any new procedures, or responsibilities before they’re actually required to implement them.

Be flexible

Every business is unique, and employees down in the trenches will have vitally important feedback that won’t be plainly obvious from the top. It’s important to gather that feedback actively, and to seriously consider opinions from every level of your organisation. This will help you tweak and optimise your structure and system for the future.

Taking steps to deal with your business’ growing pains is key to getting the full benefit from the growth opportunities that you choose to pursue. We work with all our clients to help them make their growth strategies a success. Give us a call today!