As a startup, taking out a business loan may be your first plan of action for financing business growth. But there are excellent reasons to consider other options for finding capital to expand your business. For one, it can be very difficult for a small business to secure financing, especially in the early days. You’ll need to prove to a lender that you aren’t a high risk, with financial documentation that shows your company has been profitable for a few years. When you take out a loan, you’ll need to consistently make payments toward the principal, interest, or both, depending on your agreement. If for some reason you can’t make your payments, the problem can snowball from losing the assets you pledged as collateral to more devastating losses, including bankruptcy. Consider these three ways to achieve business growth without approaching a lender for money.
Steps For Achieving Business Growth For Your Small Business
1. Ask for Pre-Payment
This option is as simple as asking your customers to pay you in advance of receiving your products or services. Depending on the nature of your business, this might be something you are already doing. If not, try to explain that you are changing your payment policies and outline your new terms. Explicitly state that you are now accepting payment on the first of the month or at the beginning of a project—whatever works for you. As the owner of your business, you get to decide when and how much you need to be paid in order to deliver your products and services. On a related note, you might consider using a subscription model for a new income stream. Some possible subscription-based services with a recurring pre-paid fee are:
- a password-protected website offering valuable info and community for your
- a monthly service membership website (i.e. beauty, dry cleaning, home
- box kits for DIY enthusiasts (i.e. cooking, crafting, and other hobbyists)
2. Try Crowdfunding
Crowdfunding campaigns connect individuals with a community of willing donors via a platform such as Kickstarter, Fundable, or Indiegogo in exchange for some reward. In addition to providing an inexpensive source of financing, crowdfunding allows entrepreneurs to gain market validation for a new idea before overinvesting—and provides an opportunity to market to potential new customers. You’ll be able to start selling before your new product or service is ready. So, you can continue to avoid the small business debt trap and achieve business growth instead.
Form an Alliance
Partnering with other businesses is mutually beneficial: each company can increase its sales by introducing each other’s products and services to their own customers at no added cost. You can potentially attract brand-new customers, too, by increasing your range of offerings by way of your alliance. Likewise, a marketing alliance is a simple strategy where two companies agree to spread the word about each other’s products and services with their customers. Each partner would earn royalties on sales to the other partner’s customers, bringing in easy growth revenue without any additional marketing or advertising costs.
As you move forward with your next phase of business growth—no matter how you fund it—be sure to touch base with a business advisor. Seeking the guidance of experienced business experts who can help you update your business plans, and choose the best strategies to cut costs, increase profits, and achieve your short and long-term goals, will lead to greater success.
As a virtual bookkeeping firm, we are able to provide you with full-scale bookkeeping services for your small business or startup. We focus on maximizing profitability for all our clients, to facilitate business growth. Feel free to connect with us (no-obligation call) to see if we’d be a good fit.