Steps to grow your business
Funding - a critical part in setting up and growing your business
Unless you are fortunate enough to have more money than you could possibly need, funding forms a critical part in setting up and growing your own business. Take the popular TV series Dragon’s Den. If none of the contestants were to need funding the program simply wouldn’t exist. In a similar way, the private sector would not raise capital for new and existing business ventures, Facebook and Twitter would not have done an IPO, and the ministry of defence would not have applied for their annual budget. Whether we like it or not, funding is ever present in business and has been around for centuries.
Create a solid business plan and strategy
Funding can be one of the best ways to grow your business if you are in the position to take advantage. You must have a solid business plan that has been conservatively assessed. This ensures that you have a higher chance of success when you look to push your business forward. You also need to have a clear strategy as to how to pay the loan or funds back. This should be assessed from a conservative perspective (ideally a third party) to build some degree of flexibility into your plan. The last thing any growing business needs is a debt burden they cannot service which ultimately leads to their demise. It is not only SMEs that fall foul of this, but mega cap companies too. Lehman Brothers, Woolworths, Delta Airlines, the list goes on - but the principle stays the same. You won’t last long as a business (or as a solvent individual) if you borrow more than you can afford to pay back. However, if you have properly assessed the market, your position and ability to pay back the loan, then funding is the solution to accelerate growth and increase your profitability.
Fund raising options
When it comes to fund raising there are plenty of options. The larger companies IPO (Initial Public Offering), which means they take some or most of their business public, by selling shares to the general public. The shareholders then own a part of the business. Take the recent Royal Mail IPO as an example. Other larger companies issue debt. They then sell bonds that return interest to the holder in order to generate cash for business operations. In the private sector there are plenty of options too. Many start-ups borrow money from family or friends, which can work out very well if everyone is responsible and has a similar understanding of what is expected of them. However, this can easily turn sour, especially when everything does not go straight to plan. The lenders want their money back straight away. The borrower needs just a little more to finish off the project…the end result can be a disaster. Borrowing from a bank is another way to gain funding. This will involve making the bank comfortable with your business and its future operations. Most banks need to see some track record, in order to lend to their clients, so if you are trying to borrow money and you are not yet established the bank is unlikely to want to lend to you. If they do, they can demand a higher interest rate (after all they are taking a risk), which increases your expenses, or alternatively try to securitise the loan. Securitisation means that they can take collateral if you do not pay the money back. This type of loan can be highly risky as your private assets become involved in the loan.
Government grants and other initiatives are a great alternative when it comes to funding. It can sometimes be in the government’s interest to lend to small business. After all, this ensures that the private sector grows, and as your company does well it has a positive effect on the economy. You spend money on your business, you employ workers as it grows and you also pay taxes on any profits generated. The economy and country benefits if your business does well. It is for this reason that local councils, and other national organisations are trying to drive entrepreneurs and small businesses, by offering loans that do not come with extortionate interest rates. More recently, Start-Up loans, a government backed organisation has been lending and backing small businesses throughout the UK. They offer affordable loans to grow your business with moderate interest rates.
At Mum Plus Business we are highly enthusiastic of the business prospects available to start-up businesses. We help mothers from all ages, backgrounds and levels of experience to maximise their career potential through flexible alternatives. Our core service is free and offers members the ability to partner up across the country with other mums in order to setup a business in a particular sector and/or region. The chances of success when mothers work together improves drastically. Costs fall, creativity, motivation and confidence increases and a wider set of diversified skills is brought to the table.
Take a look at our free collaborate program for more information.