For most businesses to achieve any significant level of growth, capital investment is required. The traditional approach is to borrow from the bank by way of overdraft or loan. Whilst this is still the preferred method today, there are other finance alternatives you can consider to raise capital however, I do not propose to cover them in this article. Instead, there are other ways to grow your business without the need for substantial capital investment, which may prove to be a far more profitable and be a lower risk alternative to borrowing money.
It is very easy to think as other business owners do – ‘In order to grow a business you need money / cashflow’. Yes, money is important to ensure the bills are paid on time but is not always essential for growth.
When growth is a major goal for a business, and capital investment is considered the best option, think about how the money is likely to be spent? Is the capital investment required for additional plant, machinery, people etc? What if you considered obtaining resources from another source?
Let’s give you an example which will provide you with a new way of thinking to grow your business.
Let’s say your business manufactures specific products to niche market. During development, a by-product or waste from the production process provides you with a new product which could be sold in a different market. You can develop this product further but initially it may be prudent to test it out to see if you have a great product to compete or out-perform the standard products available in the market.
Here’s what you can do…
- Find a distributor who already sells a complimentary product into this market. Establish a joint venture with them to distribute your goods for you – after all, it is a market they already know very well.
Find a company that has a sales force selling into the market, who could sell under an exclusivity agreement and/or limit to specific geographical areas depending on the nature of the market.- Find a company that can package, sell and drop ship direct to the end-user.
All of these are examples of joint venturing with a business that has already invested in the key resource you require. So you could be looking for a company who has already established distribution in an area, or has a well-trained sales force, or is able to package, sell and distribute as a turnkey solution.
I hope you can see the difference. Sometimes, it is far cheaper and easier to look for a company that already has the established resource that you require and a good reputation in that industry. This allows your company to continue doing what it does well and leave the additional requirements to a company you have vetted to ensure they also operate with the same qualities in mind.
Borrowing money to set up distribution into a market is a long-term investment. Without expertise, it is easy to make costly mistakes. Plus, if the market changes, then distribution can be a large, costly department in the business to close.
This is the same with a well-trained sales force too. Sales people need tools such as laptops, mobile phones, cars, etc and managing. Working with a company that has already established a sales infrastructure makes more sense and requires no upfront costs.
So far, I have only provided three ways in which your business can grow without borrowing from the bank. So, instead of growing on OPM (other people’s money), you should consider growing via OPR (other people’s resources). It may be you can apply this thought process to other resources like software, manufacturing plants, design expertise …the list goes on.
Of course, you can always flip this round the other way as well. Does your business have great resources in specific areas? Yes? – then why not look for companies that could use these resources and joint venture with them. This provides you with greater use of your skillset/training and provides an additional revenue stream at no additional cost – i.e. pure bottom line, revenue!
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There is no reason why a company cannot run more than one of these business growth ideas. The key is finding the right business partner(s).
Good luck.
