How do you maximise capital, maintain growth momentum, and ensure long-term success?
Successful businesses have perfected the delicate balance between growth, profitability, and liquidity. They do so by maximising the business’ capital funding and, subsequently, safeguarding its financial health for the foreseeable future.
How you, as a business leader, choose to invest capital can vary significantly, depending on your business and industry.
In this article, we talk about how getting 3 things right first can drive growth strategies in the right direction and dictate how competitive your company will be in both the short- and long-term.
1) Plan out how you are going to spend your capital
Your business’ positive growth and long-term success rely heavily on how well you spend your cash and take all factors into account.
We all know that planning how you spend and what you will spend on involves three stages:
Stage 1: Figuring out what and where to allocate budget and what their funding requirements should be
Stage 2: Knowing when your business will reach breakeven and start seeing returns on your investments (e.g. ad spend)
Stage 3: Evaluating the results and letting the data inform your next best steps
But how do you get every stage right?
- Start by figuring out what your spending limit is for every development, upgrade, maintenance, or acquisition of existing and/or new resources/projects. To get the right answers, we recommend a bottom-up approach.
Tap into each department head. They have the best insights into how much the day-to-day operations cost and what additional needs to be met.
Doing so will help you realistically determine what is financially possible, what boosts long-term growth, how long each initiative should run for, and what the possible returns on every investment will be. More importantly, it helps you ensure there is a strong business case for the spend.
Next, carefully examine both your current and future financial circumstances. Let the data inform your numbers and then create a robust budget plan.
Finally, once the initiatives have run their respective timelines, assess the results. Were your valuations correct? Did your investments pay off? What went right and what went wrong?
These insights will then help you decide which initiatives to continue, improve, or cut altogether.
2) Be willing to fund learning curves
To build on #1, scale-ups must allocate funding for learning curves.
It is important to remember that as a business starts to scale, mistakes are common and — in fact — necessary for learning and innovation. In the real world, many scale-ups fail because they forget to acknowledge this fact.
That is why this reality needs to be taken into account when planning use of funds. Allocating budget for learning curves stops mistakes from turning into irreversible disasters.
However, we are not advocating for unlimited timelines or expenditures. Safeguards still need to be put in place, no matter how promising the initiatives.
In our line of work, we usually recommend the rapid release of additional budget the moment targets are met. (The keyword being “rapid” because long pauses usually blunt momentum.)
So, financially commit to the learning process that comes with growing pains. Review every move. Hold your teams accountable. Ask questions like “What lessons have we learned?” and “What are we doing differently based on these learnings?” Then adjust your strategy accordingly.
3) Make financial room for great talent
Human capital is where real power, superior performance, and competitive edge lie.
We point this out because even leading businesses can make the mistake of putting too much focus on long-term, fruitless, and expensive experiments (in search of that one winner) instead of onboarding top talents or empowering them to work their magic.
Game-changing ideas do not materialise out of thin air. And even if they did, they are nothing without amazing people with the skills and capabilities to translate them into successful products, services, and even new businesses.
As an example, we look to one of our most successful clients, CrowdProperty — the UK’s leading property project online lender.
CrowdProperty wanted to branch out into the Australian market and help SME property developers acquire the funding they need to build more homes. The challenge was that peer-to-peer lending was still a foreign concept in the country and they needed the help of a specialised team to break down barriers and gain a solid footing.
Through this partnership, we were able to install a highly capable team (including a CEO, a CMO, a Sales Manager, and an Investment Director) that allowed CrowdProperty to make exponential growth happen.
In just 6 months, their business was able to successfully build compelling investor assets, create a strong go-to-market plan, widen their investor network, and fundraise over $2 million in capital funding to become self-sufficient.
More importantly, they were able to launch in the Australian market on time and on budget.
Business growth challenges don’t end as soon as you acquire additional funding for your business. Ensuring you have a solid budget plan in place, make room for the learning process, and invest in specialised talent can increase your chances of breaking into bigger markets and securing the top spot in your industry for years to come.
The BeingIconic team has worked with numerous scale-ups and industries, much like CrowdProperty, in ensuring that capital is maximised and growth milestones are reached in a timely and strategic fashion.
Partner with us if you want us to do the same for you.