Growing Pains: Why Every Business Needs a Growth Strategy
Setting up a business is hard, but growing your business can be even harder. Have you got a successful business and aren’t sure how to plan for growth? Read on for some expert advice on devising a growth strategy.
Sasha Kerins is a tax partner with Grant Thornton in Kildare. With over 16 years of experience in tax advisory roles, she has also advised businesses in areas including e-commerce and construction. We spoke to Sasha to get her expert opinion on devising a growth strategy for your business – and some of the pitfalls you need to watch out for when expanding.
Every Business Needs a Growth Strategy
“Strategy in business is really important from the point of view of focus. To identify what your strategy is, you’ll need a business plan in place. The business plan identifies the milestones that you need to hit to achieve that growth.
One of the key questions in any plan or strategy is: where are you adding value? What is the proposition of your business that’s going to differentiate it from everyone else out there? Asking those questions is a key element of any strategic process. That will identify where the growth is in the business, be it nationally, within Europe, or internationally.”
The Importance of a Constantly Evolving Business Plan
“The business plan should be a constantly evolving document. Remember, it’s both an operating tool that you can use internally within the business and a marketing aid externally - from a funding perspective when you go to talk to the bank, from a grant perspective when you go to talk to various different government bodies and from a third-party investor perspective.”
Factors to Consider When Growing Your Business
“When you have a strong existing sustainable business and you look at growth there are two important questions that you need to ask:”
- Where is the growth going to come from? If it’s a manufacturing business you may need to scale up production or outsource. You may need to take on new employees which has its own cost. With growth, is it going to add to your margin or are you going to have to sacrifice some of your existing margin to achieve it? There’s no point in growing the business for the sake of growing it if it’s not going to give added value and add profit to the bottom line.
- How is it going to be funded? Cash is key to all businesses. You need to consider whether you’re going to use existing cash within the business to fund the growth or use external providers. The real risk is that you could end up being in a position where you’ve used funds from the existing business or you can’t fund what you’ve planned to fund over the period.”
Preparing to Look for Growth Funding
“When you’re looking at external funding you need to consider what kind of external funding you want. Debt and equity are very different sources of funding from the point of view of what they mean to the business.”
With debt, there’s an existing upfront cost - you have to repay it with an associated interest cost on an agreed repayment plan. There are obviously some conditions that the funder will look to satisfy – your ability to fund those debt repayments, the cashflow in the businesses and the future growth projections. The numbers are very important from that perspective. With debt, they really have no interest in the business and they really have no direct say in the business and the ongoing business operations.
Equity is slightly different. Somebody puts in funding today and gets share capital or preference share capital. The business is getting a direct injection of cash today but with no direct requirement to make any agreed payments. However, you’re now giving up an element of your business to a third party. You will now have someone who has more of a say or more of an involvement in the activities of the business on an ongoing basis.”
Moving into New Markets
“An important consideration is what kind of a presence you need to have in that market in order to deliver your product or service. Are you sending salespeople over to that market to do a sales and marketing operation? Or do you need people in that territory delivering the service?
There will also be various different legal structures within that territory which you need to be aware of. How do they differ from an Irish perspective? What are the tax structures and employment laws within that territory? From the point of view of product – what may be the import regulations, the packaging, the customs, etc.? All that will impact on the delivery of the product or service.
From the point of view of growing and scaling, our government bodies – Enterprise Ireland and Bord Bia (on the food side) – have people and contacts in different territories who know the local markets. Take advantage of that knowledge and experience and use those people to understand what’s required in that particular territory.”
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