Money To Grow

Posted on Aug 18, 2011 | 0 comments

It may seem obvious that business growth can only occur with financial support, however many businesses do not understand the importance of sound budgeting and financial planning for long term success.

One of the biggest impediments to growth is access to finances that will fuel the investments needed to support growth. Therefore it is important that a business obtains healthy and robust profit margins to prepare for any future expansions.

Once a firm has to invest in growth infrastructure they depend upon internally generated activities with high contribution margins. Without these, the firm will have to raise funds through the sale of equity or otherwise borrow funds.

Here are some key aspects of business growth that require funding.

1. Investment in new support systems With more data to process through increased transactions there must be sufficient finances to fund the necessary support systems. These include financial, logistics, quality control, human resources, customer relationships management, complaints handling and asset tracking. These new systems also require staff training which similarly costs money.

2. Increased training for staff The time it takes to train staff will have an affect on the cash flow of the business. This training will be necessary as new products or operating systems come into play with business growth. Furthermore, in adopting and/ or inventing new products for sale, new marketing operations will need to be implemented.

3. Competitive edge With new products or business movements, surplus cash can help firms to counter aggressive marketing, meet competitive product changes or undertake competitive pricing.

4. Time to assess The ability to absorb mistakes and revaluate what went wrong and what the solutions are can be the difference between complete failure and just a bump in the road. Rather than having to instantly cut back or take drastic action, the firm with a cash buffer can re-enter the market with a renewed approach.

Therefore, even without any immediate prospects of business growth it is wise that strategies are implemented from day one of business operations that account for the future. After all, growth does not come from standing still.

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