Innovation
Issue No. 24 - August/September 2005
Fast growth strategies
by John Doughty
As mentioned in Going for Growth, the previous article in ‘in-business’, all organisms must grow (living, learning) or stagnate and wait to atrophy and die!
In business, to grow or not to grow is not an option; growth is the only strategy to apply. However, different approaches to growth get different results.
There are three types of growth available to a business. These can be categorised as growth supported from cash flow, by borrowing, or through equity placement.
Cash flow growth is, as the name suggests, business growth supported by reinvesting the cash coming into the business. Surplus cash (if you can generate it) is used to purchase more resources (people, supplies, market access, etc) as required for the business to grow.
This approach to business development is the steadiest, but often the slowest form of the growth strategies available to a business owner.
If you are in a business that cannot generate surplus cash at a particular point in its development, you may need to look to borrowing as the approach.
Borrowing money to boost business performance is a strategy that has been used for thousands of years. The easiest groups to obtain money from are family, friends and fools. These people lend money to entrepreneurs with various pay back criteria (and sometimes for no repayments). Be warned though, family and friends who do not have their expectations met by the business will rapidly distance themselves from the owner and/or work to recover what they expected.
If a bank is involved in the lending then assets the businesses have, or the business owner owns, are pledged against any non-repayment of the loan. This form of money can be quite expensive to the business especially if the cash flow generated during a growth period is unable to cover the loan repayments at the scheduled times and the bank forecloses on the loan.
These two approaches to growth are well within the understanding and abil...
