Dear Aunty B,
We have experienced 25% growth last year and want to achieve 35% growth this year.
We have grown without any sort of plan but I am working on an 18-month plan now because I can’t see past 18 months as our industry (mobile) is changing so fast.
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We have been able to grow from internal funds but I am concerned that next bit of growth is going to make things really tight.
But if I can’t see how things are going to change, how can I do the plan to see if I am going to run out of money? Or should I just focus on the business because it has all worked out so far.
Financing your growth is your number one issue. It is great to talk about revenue and good on you for growing so fast especially in this economy. But it is your profits that determine how much you can put back into the business to drive growth. And then don’t forget. You can still run out of cash even though you are going to make a profit and you are growing really fast!
Think of it like this: Very few companies can generate the required profit to keep growing at 20%.
Why? Well, think back to the last 12 months. Think of the staff you have hired, the computers you bought, the staff you trained, the extra furniture and travel, the software – you get my drift. So no, you can’t keep growing like that without a longer strategy that builds in a plan around how you are going to fund the expansion.
So if you are going to take on debt or private equity you need to know when you need to do this and plan on time away from the coalface as you raise the money. That doesn’t mean you can’t be flexible and adapt to conditions quickly. But it means you won’t run out of money as you grow!
Your Aunty B
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