Financial planning and management form an integral part of any business expansion strategy be it big or small. Financial management is not just about bookkeeping and balance auditing. Financials of a business prepare it and put it on survival mode during bad times and on the growth track in good times.
If you are considering to expand your business further, your financial planning must align with the business plan’s goals. It helps in analysing the scope of business better, identification of funding problems, achieving goals and measuring success. Sound financial management is the key difference between a sky-rocketing business and a falling one.
Top 10 Financial Advice to Expand Your Business
Here are some proven tips and advice for all types of businesses to climb the ladder of success, growth and value creation.
Accumulate Sufficient Capital
Like starting a business, the expansion also requires an adequate amount of capital availability.
The ideal practice would be to obtain at least ten per cent more capital than originally forecasted. It provides you with a financial cushion so that the business doesn’t have to suffer from critical capital shortfalls halting operations before or during the expansion phase.
Develop a Habit of Financial Forecasting
Business owners and other stakeholders must actively participate in financial forecasting before making a final decision on business expansion. It’s crucial to study market trends and analyse your financial position and business plan well in advance. It helps in nearly accurate forecasting for the business growth having cash flow and sales among the detrimental factors.
Furthermore, while preparing a financial forecast to determine capital needs; you must not underestimate the early-stage expenses. They must be given equal importance to that of revenue growth. Also, cash flow forecasting enables a business to overcome seasonal cash-flow fluctuations that might come into the picture during expansion.
Plan to Acquire a New Business
Acquisition of an existing and profitable business could fast-track the expansion plan and grow your company size overnight.
Before deciding on acquiring a company, first research whether its business goals align and complement yours’, what is the market capitalisation and financial condition. Find out how this acquisition will help grow your own business like access to new clients, diversification of product offerings and services etc.
Maintain the Ideal Credit Score
The success of a business economically depends heavily on its credit score. A good score could help you obtain money from financial institutions and invest it in your business for the expansion goal. Whereas, companies with bad credit find it difficult to win the trust of banks, suppliers, partners and investors.
The greater the credit score, the more the goodwill for the business in the market. Thus, you must think about boosting your score before seeking out capital for business expansion.
Look for Private Equity Investment
Private equity can be a great option to raise more capital for expansion than you can get through loans. Investors could help you scale your business further and lend financial support in contrary situations that usually arrive during the expansion phase.
Look for potential investors and research about how they influence the decision-making process after putting their money in a business. From the perspective of a business owner, an ideal investor should be solely interested in garnering highest returns on investments without indulging much in internal business operations.
Rethink Your Business Model
You can’t expand your business effectively enough without restructuring for the future. Prepare a business structure that could improve the tax-efficiency, cash-flow, sales plan, and operations according to the present and forecasted circumstances after expansion. This way, the company could achieve better loss management and profit capitalisation ways.
Take help from financial planners for better advice on various benefits like tax relief solutions, schemes, capital allowances, fundings etc. that could be availed for growth of the business.
Prepare a Sound Financial Growth Strategy
A proactive business plan is not enough to sustain a company’s profitability and growth when you think about expansion. A strong financial growth strategy should be there in place to complement the plan. It should be inclusive of potential investment opportunities, ways to achieve stable cash-flow and higher sales figures, and the timeline to achieve all financial goals set.
Also, a market segmentation strategy should be there to identify potential customers and obtain basic demographics such as age, gender, location etc. After finding out the target customers, you could orient your business expansion plans towards them, focusing on sales and marketing.
Focus on Capital Structure and Business Accounting
The capital structure of a business serves as the framework upon which plans of expansion and growth are built. Consult an accounting expert before expansion so that the most appropriate capital structure is deployed to manage expansion related expenses like salaries of newly hired employees, new facilities & equipment, new infrastructure, additional inventory etc.
It is vital to account for hidden costs and risks to avoid falling into a debt-trap. You should ensure the expansion to be profitable enough to maintain a positive cash-flow throughout.
Consider Partnership With Other Businesses
Partnering with other businesses is not a bad idea, both financially and strategically. It provides you with access to a whole new market segment and helps in risk-management since all money invested isn’t yours. But the real complexity is identifying a suitable partner for collaboration.
The best advice is to look for a company whose products, services, business planning and approach align with yours.
Insurance to the Rescue
Insurance is a much needed financial security especially, in the case of business expansion where large chunks of capital are at stake. It provides complete coverage over property damage, contract disputes or lawsuits.
Thus, you must put aside an insurance fund out of total capital forecasted for expanding the business.
Expanding a business demands a considerable amount of time, effort, working capital, planning and tough decisions. You have to decide which of the discussed tips are applicable for your business according to the market situation and in-hand resources.
Since finances are the soul of any business, it becomes crucial to manage them appropriately. Seeking help from accounting professionals and firms is the best way to tackle finances when planning to expand since a lot of variables are there to handle.