SURVIVE THIS CHALLENGE AND YOUR BUSINESS WILL GROW

Business development and the banks play a critical role in the healthy economy of a country.  On the one hand, the banks create capital to finance various activities and on the other hand, business makes the economy grow.

This creates the wealth that countries and the world require maintaining standards of living and feeding the billions of earth's ever-growing citizens.  When businesses grow they do so in answer to the demand for more goods and services and not solely for their own profit.  The role of the banks and other instruments of finance is a highly responsible one as it must ensure that it maintains a fine balance between over stimulating the economy or not doing enough to aid in growth.  For this reason, governments work in close cooperation with the banks and the business world to ensure that growth is kept at a steady pace to the advantage of all sectors of the population.

The interface of the relationship between funding and growth should be more bold and constructive. This role of financial institutions in the economy of a country is emphasized in the following quote by the editors from the book "Financial Studies and Economic Growth", Demurgüe-Kunt and Levine

".....the level of financial development exerts a large, positive impact on economic growth."

Why Business Need Finance to Grow?

Money leads to the competent channeling of funds to the economy to ensure the use of this money for the production of services and goods. No business can grow without money also referred to as capital. You have to invest money in products, machinery, equipment, and people to provide a service.  The money that comes in the form of an investment must be able to be sold at a higher price leading to the desired profits. Your investment must enable you to sell your product or service at a higher price. Productivity and motivation of staff are further aspects which may require the investment of funds. The opposite side of growth is stagnation. The demand for your product must increase continuously.  In developed countries, demand has subsided and productivity has reached high levels.  The result is that the demand for the funding of growth has declined.  This has reduced interest rates. The virtue of saving has now almost become a burden. 

Some of the reasons for funding mentioned above are more prevalent and almost universal for all business.  The following examples will suffice:

1. The purchase of equipment, staff salaries and space. Another example of this type of reason is re-financing existing assets to reduce monthly liabilities and loosening funds for current expenses.
2. Enough working capital is a must for the health of your business.Some people rely on own funding for this purpose or you can introduce new products which fit in with your present activities for the business.
3. As you grow there may be further requirements for capital.You may, for example, require more equipment like a delivery van. The purchase of assets with external funding may improve your planning because you will know exactly what future expenses it will add.

Where Does the Businessman Find Access to Money?

Banks and other sources of finance are usually willing to provide new or existing businesses with money for various purposes.  When the businessman wishes to approach a lending institution an excellent knowledge of his product or service is required. The bank will require convincing that enough clients are interested in your product so that over time, you can convert the funding into profit. Sometimes funding will only become available if the businessman is able to provide some form of security to ensure that the funding institution will receive their dues. Be prepared and informed to answer difficult questions about your intended business. Ensure that you are presentable so that an impression of competence can be observed by the lending institutions.

The following potential sources for financing your business can be considered when money is in short supply:

• The traditional fountain of funding is the banking institutions.
• In the event that you cannot provide the security for a loan that a bank may require, you may accept a partner to get your business off the ground or even to keep it on the go. There are many success stories where businesses have two or more associates. Some may bring knowledge and experience to the table while another may offer the necessary funds. 
• Other sources may be government assistance for new businesses, friends and family, the selling of shares in your business also referred to as equity, life insurance policies, funding available from the mortgage bond on your private property, or the leasing of machinery or equipment instead of the outright purchase thereof.

Whatever the source of funding may be, it also places your own personal finances at risk because for a time you may have to survive without the level of your existing income. Your private funds incidentally should be kept strictly separate from the money and accounts of your business.

Don't allow the lack of funding to be a stumbling block that you cannot overcome.

The Importance of a Business Plan

Whoever you may approach to help you with the funding of your business will depend on a good business plan to convince them of the viability of your business.  The plan will reveal when the first profits from your business can be expected, an important breakthrough for all the participants. You should stay focused on your original plan and the product that is the subject of your business plan. Be honest, patient and concentrate on your core product.

Be honest about the risks applicable to your business.  Sometimes it will go well and other times less well. Remain open to explain to your financiers what you think the problems are including negative cash flow and reasons why you had to deviate from your plan. Make suggestions on how the challenges can be overcome.  You may create a position of trust and respect and pave the way for future funding if you act in this way.

In reporting back to your financiers, it is important to further explain the position of your debtors, those people who owe the business money.  The more formal term for this is debt control. Manage your payments to fit in with the patterns of payments received from your debtors.  Send out monthly accounts and follow this up with a friendly telephone call or note to careless payers.    

Monthly accounts for your business will highlight any difficulties that you may encounter with different components of your plan e.g. repeating expenses which must be provided for. The plan will, in addition, contain a budget. All of these measures will ensure that you are on top of your business, knowing where you are and what can be expected.

Businessmen are often reluctant to draft a business plan despite its importance.  It enables you to analyze the viability of your business and restore progress.

The writer of the book "Working For Yourself" Joseph Anthony concludes that despite the many writings on the formats of business plans the basic components are the following:

• There should be an idea which forms the basis of your plan. This includes a basic statement about the purpose you are trying to achieve.  You can refer to this as your mission statement.
• Some detail must be provided about the product or service that you are presenting to the public as well as the use of it for the public.
• A full description of your clients, your competitors, viability, and conditions in the market.
• A full marketing plan on how you will be able to achieve the sales that you envisage.
• The physical requirements of your business, like products, machinery, equipment, space, suppliers and legal requirements.

Growth Strategies for Existing Businesses

Existing businesses don't have to settle for stagnation. Growth, even for established players, is not only possible but necessary in today's dynamic market. But where to begin? This article explores several key growth strategies to help existing businesses cultivate sustainable success:

1. Deepen Customer Relationships:

• Loyalty programs: Reward repeat customers for their patronage, fostering stronger bonds and encouraging continued engagement.
• Personalized experiences: Leverage data to tailor offerings and communication to individual customer preferences, fostering a sense of value and connection.
• Community building: Create online or offline forums where customers can interact, share experiences, and feel part of a community.

2. Expand Your Offerings:

• Product diversification: Develop new products or services that complement your existing offerings, targeting new customer segments or addressing evolving needs.
• Bundle your services: Create attractive packages that combine existing offerings, providing greater value and attracting new customers.
• Subscription models: Offer recurring access to products or services, generating predictable revenue and fostering long-term customer relationships.

3. Tap into New Markets:

• Geographic expansion: Enter new geographic markets, either online or offline, increasing your reach and customer base.
• Untapped demographics: Identify underserved customer segments within your existing market and tailor offerings to their unique needs.
• Internationalization: For businesses with the potential, consider entering international markets, opening up new avenues for growth.

4. Embrace Innovation and Technology:

• Digital transformation: Upgrade your online presence and leverage digital tools to streamline operations, improve customer experience, and gain valuable data insights.
• Automation: Implement automation tools to handle repetitive tasks, freeing up resources for growth initiatives and improving efficiency.
• Research and development: Invest in R&D to stay ahead of the curve, develop new technologies, and create innovative products or services.

5. Optimize Operations and Processes:

• Streamline workflows: Analyze and refine internal processes to eliminate inefficiencies and boost productivity.
• Talent development: Invest in training and development programs to enhance employee skills and performance, driving overall business growth.
• Performance measurement: Set clear goals and track key metrics to measure progress and identify areas for improvement.

The Risks of Business

The clear risk is that your business may be a failure which can hold dire consequences for you and your loved ones.  A careful balance between bad debtors, changing interest rates, crime, low sales, poor price determination, expensive assets, ineffective planning, and more is necessary to reduce the element of risk to an acceptable level. 

Conclusion

Considering the importance of funding for new and existing businesses, entrants to this market can move forward with confidence that there are many opportunities available for them to implement viable business plans.  The challenge goes beyond a personal level and extends to issues like responsibility to communities and improving life styles.