It has been said ‘Luck is where preparation meets opportunity’. The great businesses we are working with utilise finance to make their own luck and, regardless of their size, they have readied themselves to capitalise on opportunities.
Chris Slack is the Director and Founder of The Finance Consultancy
Whether it’s attracting new staff, sourcing new product lines, capital expenditure for a new tender or simply catering for delays with their supply chain, here are five steps that more profitable businesses have taken:
1. Reviewing the debt-to-equity structure
Deadwood shareholders in leadership roles that haven’t added value have been bought out. High interest debt is far cheaper than sharing equity in a growing business. This shouldn’t just be looked at as part of succession planning.
2. Reviewing payment terms
What terms do you provide for your customers, what terms do your suppliers give you? In some industries it’s a challenge simply sourcing appropriate levels of stock and the cost of a container from overseas has skyrocketed. If any discounting is offered for early or bulk payment, or if your payment terms are very strict and if all your clients aren’t paying on time, then you need to look at specialist funding and workshop through the opportunity costs, not just the financial cost.
3. Reviewing security
You DON’T need to have bricks and mortar to fund working capital – in fact many businesses are now stifling their future growth by having their working capital structured that way. The growth of the opportunities in your business can’t be held to ransom by the amount of security held in directors’ property. What equity exists in the business assets? How much now sits off the balance sheet? Large businesses require reporting to their lender every year as a minimum; this is the best time to look at security and not just pricing.
4. Adequately budgeting and planning around capital expenditure
Is the business regularly reviewing its existing equipment and fleet? What are the options for disposal of those assets not actively involved in the business? Are long-term assets being financed from short-term cash flow? Are the items needed available or does the business need to compete in the second hand market to acquire the assets required?
5. Regularly reviewing borrowing costs and structures
If your business is still growing then the wrong kind of debt at the right price can be as damaging as the right kind of debt at the wrong price! You need to ensure your accountants and advisers, internal and external to the business, are working closely with your banker or broker. The Finance Consultancy knows the best businesses working with the better brokers, advisers and consultants, look at these areas in order to be more aggressive and positive in the growth of their business.
If you want your business to grow, or you are already experiencing growing pains, then focus with your advisers and team around these areas – or add another expert in the mix.
This sponsored editorial is brought to you by The Finance Consultancy. For more information, please visit www.thefinanceconsultancy.com.au.
