Pretty much every business is looking to grow in some way and there are many tried-and-tested strategies for doing so. For those with physical premises, such as shops or restaurants, it might mean opening another site. For online-only businesses, it might mean expanding your product offering or exporting your existing line to new overseas markets. Businesses offering professional services such as accounting or legal firms might go on a big push to recruit more clients. It might involve all of the above or it might depend on the nature of your business.
There are challenges that you need to be aware of when it comes to pursuing growth. Big doesn’t always mean better. More clients and customers may mean more resource is needed and therefore extra costs. Cash flow can come under strain. Founding principles may conflict with the realities of expansion. These are all things that growing businesses have to face up to and prepare for.
Stephen Hand, Director of Invoice Finance & ABL at Lloyds Bank, is well versed in advising businesses who are facing these challenges. We spoke to Stephen to find out what you need to think about and how to meet the challenges that come with business growth.
What are typical indicators that a business is ready to grow?
The key point here is readiness. I would say the key indicators are when a business is at the point where everyone is stretched to capacity and beyond, you are receiving multiple enquiries that you are potentially going to have to turn away; and after you have sat down and put together a sound business plan and Management Information based on the level of growth you expect.
What are the key things a business will need to focus on when growing? Is there one thing you’d say is the most crucial?
I think it is hard to specify given how different the requirements are for each business. However ensuring they have the right people with the right skills, a well thought out business plan with defined targets backed by historical performance; and the number one for me, would, of course, be cash flow. Getting the balance right between paying creditors and being paid by debtors is key and will ensure your business doesn’t run out of cash as it looks to grow.
If you could suggest one thing to help growing businesses improve their cash flow, what would it be?
To fully understand its working capital cycle by having an outstanding finance person or department. Having a thorough understanding of its working capital cycle allows businesses to identify and maximise their cash flow potential, creating a solid foundation for growth.
How can financial organisations like Lloyds Bank support that growth?
We support businesses looking to grow by speaking with them on a regular basis, in a proactive manner. We also make sure we fully understand the plans that the business has, not only for now but also for the future, in addition to the track record that has gone before.
Furthermore, we have multiple tools at our disposal to highlight challenges/opportunities in a client’s working capital cycle. That covers everything from their best year’s cycle to what effect a new contract would have on their cash flow, and how to manage risk more effectively.
Lastly, we offer a range of different solutions that will help boost cash flow to enable growth. One such solution is Invoice Finance which allows businesses optimise cash flow by releasing value from their Invoices.
Lloyds Bank provides a range of commercial banking solutions for UK businesses to help meet the challenges of growth.
You can also get in touch directly by emailing Direct.firstname.lastname@example.org or calling 0800 077 8066 for a free, non–obligatory consultation.