When Do You Need to Look for Investment in a Growing Business?



Posted on Tuesday 8th of April 2014 by
Manish Khanna

A major question that people ask themselves when in a business or looking to buy a business, is do I need a form of investment, why and when. Investment in or for a business is usually only required when the owner is looking to outlay a large amount of money for the business and either doesn’t have the available money or doesn’t want to spend their money at this time because they want to save this for any future requirements of the business.

2 examples of times when you require investment in the business are as follows:

  1. Purchasing of a new or existing business
  2. Purchasing of new equipment, machinery, stock and/or recruitment of required staff

1. Purchasing of a new or existing business

This can happen a number of times during your life from the first time that you want to buy your first business through to many businesses owned down the line. In some cases businesses will purchase a business who is a competitor and to help expand their business into another location or market, remove this business from their marketplace as a competitor, and to help grow their current client base.

2. Purchasing of new equipment, machinery, stock and/or recruitment of required staff

One of the cases a business is looking to either replace their current equipment, machinery, stock, etc… due to it being out-dated, irreparable, etc… or when they wish to upgrade their equipment to new and improved versions which have a potential to improve profitability and growth.

Another case where this is used is when a company has obtained a major contract which has the potential to have the effect of major growth for the company. In this case the company’s current equipment and current staff aren’t enough to be able to handle the new contract and they may need more equipment, machinery, stock and staff to handle the work load. If the business doesn’t have the cash flow to handle these purchases by the time required, they will need to look at an investment of sorts to help them get everything going before the contract starts.

Beware of this type of investment requirement as if a business isn’t able to gain the investment before the contract starts, it can cause the company to collapse as they will default on their contract, or the wrong investment types can cause financial issues with the company if their aren’t able to meet the repayment terms.

What are the different types of investments?

There are 4 main forms of investments as follows:

  1. Injection of funds from a Director or owner – This is usually a loan from one of the directors or owners of the business.
  2. Investment from a Financial Institution – This is usually a business loan from one of the banks to help the business make their purchases.
  3. Investment from Private Investors – This is usually a call for investors to invest their money into the business to receive a percentage of the company and a certain amount of control.
  4. Sales of Shares – This is for a public company who offers the sale of some of their shares to investors at or below the market value to obtain money for their required investment.

To be frank, major growth in a business without ANY investment is extremely hard. Although there are ways to increase your business productivity without an investment, when it comes to cash flow for your business, some investment is needed in order to make sure that the business can run smoothly without severely reducing your cash flow to pay off the everyday requirements like salaries, bills, etc…. In this article I will explain ways where you can increase your business productivity and how small investments can make a huge difference in your business returns.

People tend to overlook the effect of business productivity in your business growth. New business owners tend to think that in order to grow your business, investment is needed and a lot of it. Increasing your business productivity requires Focused Efforts and Intelligent Planning. You must have faced many working days where you are not satisfied with what you have accomplished. Productivity is something which can continuously be improved. Regardless of the size of your business or the industry, there are a couple of ways with which you can increase your business efficiency.

Boosting Your Staff Morale

Your staff plays an important role in production, without them it is not possible for you to handle everything alone. There are various ways where you can increase your staff morale, including some of the following:

  • Offering them a good salary,
  • Bonuses and offers of promotions,
  • Outings and Treats them at the end of the week, month, etc...

One note, a treat is something that happens randomly and not all of the time, if it happens too often then people expect this all of the time and can become disappointed and disillusioned with the business if someone forgets to make it happen.

Here is an example of a well thought out treat offered by a well-known company.

Richard Branson organised a special treat for his Air Hostess from Virgin Airline one day, when their staff were on their way out from work 1 day, they were welcomed by a Hummer Limo and a note saying “Courtesy of Richard Branson” every staff member was dropped to their home while enjoying the ride & drinks. This made everyone excited and boosted morale of everyone who got the treat and everyone who heard about it!

If someone as famous and busy as Richard Branson is willing to do something like this for his employees, then it must create a huge impact on the business productivity as well and don’t forget the word of mouth promotion of his company as well. I learned that it’s always the little things that matter a lot, if you are good to your employees then your staff will try to give it back to your company as well.

Business Processes

Business processes such as Customer Service, Customer relationship management and your business’s Management should always evolve over the time. The more experience that you gain in your industry should mean that your staff and business should become more efficient, this experience has the opposite effect and it leads to complacency and in efficiency as people follow the same procedures and skip important steps.

Create proper communications within your organization in order to identify any new rising problems and launch a systematic approach to resolving these issues. If any issues arise, investigate where the problem originated from and where your systems fell down in rectifying these issues. If everyone is following your systems, then don’t blame the staff member, fix the system so that it doesn’t happen again. This will help your business to evolve and will help you pick up on any issues before they become a major problem.

This type of approach will help to improve the running of your business as a whole and will also show staff that you aren’t looking for a person to blame, but a way of improving the systems. Staff will be more inclined to offer feedback and will support your systems in the future. You can try conducting training sessions to check the performance of your employees and finding ways to improve it. Try to always keep yourself and your business updated with the changing market conditions to make your business proceed smoothly and increasing its efficiency.

Try to take a more proactive and positive approach to your business, by realising that people make mistakes, but if you improve your systems over time, every mistake is a chance to improve your business systems as a whole and a way to improve your processes, making your business more efficient. This will make your business more efficient, mistake free and reduce costs.

For those who are in manufacturing businesses, embrace change. By changing to new systematic approach such as lean manufacturing it can actually help you reduce costs and improving profit margins.

Importance of Technology

Adding new computer technology is also a great way to boost your business productivity especially if you are an owner of a small business. Try to think outside of the box and talk to your staff about the manual processes used in your business. Ask how time consuming tasks can be automated so that you can get more work done, allowing your staff to be redeployed in other areas, helping the processes to become more optimized.

When you use technology, it can actually open the path to your business success. You can also use them to monitor your business productivity and assign employee goals. These days technology is improving day by day and replacing the manual work. The reason being, it can efficiently get the task done while consuming less resources and time.

While investment is something which is needed when business growth comes to mind, when you think smart and improve the efficiency of the business, the amount of investment required for any growth can be reduced.