(FROM THE FINANCE DEPARTMENT’S POINT OF VIEW)

Meeting with company leaders to learn about their business and hearing about their plans for corporate growth is exciting! We really enjoy participating in that stage of the growing process.

However, we know that a company should have certain financial prerequisites before attempting to grow. We call this “growth from a position of strength”. Does your business have the following prerequisites?

Firm financial foundation

When we review and assess a company we look for three things. First, does the current business model generate positive operating cash flow? Is it enough to cover your investing and financing activities? There is no sense in trying to expand a company’s business if the existing model does not produce enough cash flow to sustain operations.

Second, is there a production and deliverance of accurate and timely financial reports? You will need to monitor your success quickly so that you can develop modifications to the process if necessary. Every day can be critical.

Finally, is the management team cohesive and collaborative? Is everyone working together to achieve the same goals? When managers are only pursuing their own goals instead of the corporate goals, there will be a “disconnect” in the operational progress of the company.

Forecasting model

Whenever a company plans to grow, an accurate forecasting model is a must. The benefits are clear.

• It will help you determine which strategic initiatives to implement first.
• It will help you determine the financing requirements.
• It will help you know if the results are better or worse than anticipated.

Strategic initiatives

Map out the exact events of implementing each initiative and their timing. Determine what everyone’s responsibilities are. Consider the operational requirements and the marketing needs. Know what the exact costs are of implementing each one in terms of both dollars and time and how long it will take to generate positive cash flow.

Adequate financing

The most common error made in growth plans is not having the financing required to achieve success. The upfront costs or the length of time it takes to generate positive cash flow almost always turn out to be more than originally thought, and then you may find yourself in a position of having to abandon the growth initiative. We highly recommend reviewing your growth plans with your existing investors and lenders in advance. They may have insights that will help you be successful. And, if you should need additional financing, they may be more willing to help.

These are just a few requisites that we suggest for corporate growth. Contact us if you have any questions or would like to add to this list!