Businesses rarely grow without a dedicated effort to make them do so; growth takes planning, time and money, and external business financing is a very common tool in this endeavour. There are a few different ways to use this tool though, and not all are created equal. Here’s what you need to know:
Start with a Plan
Possibly the single most important factor for a business’s growth is its plan for growth. It’s simply not enough to decide you want to expand your business – you need to know how, in detail. Specifically, you must:
- Determine your business goals and objectives.
- Identify and evaluate different methods for achieving these goals and objectives, making sure to calculate and compare the return on investment (ROI) of each.
- Select the paths to growth with the best ROI, ensuring that any investment of loan funds will increase profits at least enough to cover loan repayments.
- Create a detailed action plan to implement your chosen changes, and a budget based on planned investments, forecasted increases in revenue, cost savings, loan repayments, etc. Remember to include timelines; 12 months, 3 years and 5 years are commonly used milestones.
- Set your business goals and measure business performance against them, so you can manage growth throughout its progress; goals should be specific, measureable, attainable, relevant and time-sensitive (smart).
With a comprehensive plan in place, you can be sure that your business is best placed for maximum growth.
Areas to Focus on for Maximum Growth
There are many different routes to business growth, and every business needs to assess the potential of each. But whilst every business is unique, and so may benefit from a different combination of investment strategies, there are a few tried-and-tested ways to support sustainable business growth:
Marketing
If you spend nothing on any other part of your business, but invest in a successful marketing campaign, you will increase sales and grow profits. And a successful marketing campaign coupled with other changes, such as physical expansion or product changes, can yield significant returns. A good marketing campaign may use any number of tools (digital marketing, website improvements, promotional events, lead generation advertising, etc.) to boost brand awareness, find and attract new customers, expand market share, and increase customer loyalty. Research shows that the benchmark for a ‘good’ marketing campaign (across industries) in the UK is an ROI of 500%; a great campaign can yield an ROI of 1000%; and a campaign with an ROI of less than 200% is considered poor.
Infrastructure
Using loan funds to invest in your business’s infrastructure may not be a quick way toward growth, but it is an effective one. Whether it’s equipment, physical premises (renovation, expansion or purchase), or technology (point-of-sale system, software, website, etc.), improving your infrastructure can:
- Improve productivity and efficiency
- Increase capacity
- Improve customer experience
- Avoid unnecessary interruptions to operations due to old/faulty tools
- Provide a competitive edge
- Reduce costs and waste
- Position the business for future growth
All of which support growth. The exact ROI of any infrastructure investment depends on the area of investment, the exact investment made, the industry you operate in, and the infrastructure being replaced/upgraded – so it’s worth considering your business’s current position before deciding exactly where to invest. For example, if you know that your operations are currently very inefficient, investment in tools to increase efficiency may have a higher ROI than investment in property.
Development
Development means different things to different people, but to grow and sustain growth in any business you need to be aware of what it means in your industry and for you. It could mean developing new products or services; it could mean developing new business partnerships; it could mean developing processes to improve operations. But ongoing development of some kind is necessary for continued growth; without it, a business will stagnate. And all forms of development require investment.
So consider your business’s goals and objectives, in both the short and long-term. If you think product development is a fruitful area for growth, you will have to invest in market research, product testing, and new inventory purchases. If partnerships are the goal, then investment in acquisitions, relationship management, and personnel may be required. Each of these has their own pros, cons and ROIs (and most development initiatives have better long-term ROIs than short-term ones). Don’t try to focus on too many different areas at once; find development opportunities that marry well with other areas of business investment, so that your efforts complement and reinforce each other, rather than compete for space.
Other Ways to Grow Your Business
Of course, the above does not encompass all of the possible ways to invest in or grow a business. You might also want to consider:
- Hiring new staff and investing in staff training
- Using loan funds to mitigate business risks (e.g. emergencies, compliance, etc.)
- Improving cash flow management
- Strengthening inventory management
- Paying off high-interest debt to minimise impact on profit margin
You can find out more about British business loans, government grants and other forms of business funding on our blog. And if your business needs access to affordable, flexible financing, talk to Swiftfund today.