|
As you grow your business, one of the important challenges you will face is
the need for additional capital. Your business may need the infusion of new
cash to be able to expand and reach the next level. Or, you may need
additional money just to survive.
(article continued below ...)
However, getting new money may not be that easy. In fact, the search for
capital can be frustrating. Banks may turn down your request for business
loans for a thousand and one reasons. You may not have enough assets that
you could use as collateral. Your company may not be in business long enough
to establish a satisfactory credit rating.
If you have a viable business, good customers, and a business plan, there
are options to get the funds to grow and succeed. You can grow a company
without borrowing (or with minimum borrowing) through a number of ways
Here are 10 ways a small business can grow without incurring too much
debt
1. Examine your
cash flow.
If you are looking unearthed cash to expand, the first step is to check your
cash flow. Before you realize it, your receivables from slow-paying
customers may suffice to fund a new project or expansion of your business.
Too much receivables can cripple, if not kill, a business. After all, you
have already expended capital for labor, supplies, time, expertise, etc. for
products delivered or services rendered, while the customers are taking
their sweet time paying you. Tighten your payment policy and demand deposits
or cash upfront. As an incentive for quick payment, offer discounts. Keep up
with billing; track accounts that are past due, and diligently pursue
payment after 30 days.
2. Expand
through profits.
As your company grow, allocate profits primarily for products and services
that have proven to be profitable. When a particular line of products
succeed, expand sales in that line rather than expanding with other lines.
Consequently, operations and marketing will be more cost-effective,
maximizing your company's profits.
3. Accelerate
income.
You can increase your income in a number of ways. First, you can raise your
prices or increase fees; but do it in a way that you do not lose customers.
You can also explore adding complementary products or services that would
fit naturally into your present product mix. The key is to broaden the scope
of the business without incurring disproportionate expenses.
4. Decelerate
cash flow.
You may also want to preserve your capital by decelerating your cash flow.
You can hang-on to your cash flow through a number of ways. You can delay
payments to vendors: instead of paying immediately upon receipt of the bill,
postpone payment to the extent possible. You can even try to push the
envelope further by negotiating a 45 days payment cycle, or further if
possible. Review your terms with regular vendors and try to negotiate a more
beneficial term for you.
5. Form a
strategic marketing alliance.
A marketing alliance is a joint effort between your business and other
companies to mutually build awareness of the benefits of your respective
business products and/or services. In this fashion, you are able to gain
increased access to multiple services and even exchange customer bases. By
partnering with another business, your market suddenly expands without
spending a fortune on marketing and advertising, as you are able to market
to your partner's customer base. Income also increases as you earn a royalty
or share revenue from the other business' (your alliance partner's) sale of
its products and services to your customers.
6. Form a
strategic product alliance.
Entering into a product alliance with another business allows you to offer
your partner's products and services to your existing customers, while your
alliance partner sells your business's products and services to its
customers. As a result, you are able to expand your product line without any
of the costs associated with it - particularly manufacturing, product
distribution, investments in inventory, etc. You can even arrange to have
your partner drop ship their items that you've sold, thus saving you
after-sale expenses and time. Remember, however, that a strategic alliance
must be win-win in order to be sustainable and mutually beneficial.
7. Explore
non-debt financial solutions.
You can seek non-debt solutions to grow your business. Some of these include
accounts receivable funding/factoring, purchase order funding and equipment
leasing or leaseback. A factor buys your company's accounts receivable and
fronts you cash -- anywhere between 50 percent and 80 percent of the value
of your invoices; then collects your accounts receivable and gives you the
remainder owed, less a fee. If you are a retail merchant, you can explore
funding sources that will provide a cash advance for future credit card
purchases.
8. Branch out
to related products and services.
If you want to expand your product line or services, you can save on the
costs of marketing by choosing those that are related to your existing
field. This strategy will allow you to save on precious dollars on marketing
and operations. For example: if you are selling upscale clothes for baby
boys, you can add choose to add a new line of baby boy's shoes and market
them to your same customers. If you expand by adding a line of baby girls'
clothing, you would need to tap into an entirely different market and spend
tons of financial resources and time marketing to this new segment.
9. Streamline
operations. Take stock of
your non-income producing activities (e.g. internal operations such as
inventory management and bookkeeping). Make sure that these activities are
able to keep pace with the growth of your business. They may not directly
contribute to your profitability, but productivity in these areas can spell
a difference in your bottom line.
10. Work with
financial and business advisors. Seek
the guidance and expertise of financial and business advisers as you grow
your business. Without resorting to borrowing, ask them to help you map out
strategies to help increase profits, streamline internal operations,
increase the effectiveness of your marketing and guide your business as it
expands.
-- George Rodriguez is a staff writer for PowerHomebiz.com.
February 4, 2003
| 
