Sowing the seeds for business success: planning and preparation tips

Many businesses that achieve significant success, have often been established on a foundation of planning and preparation that enabled scalability, right from inception. Entrepreneurs and owners should consider their business and its structure through the eyes of a lender or investor, as this perspective can provide valuable insights into what is necessary when the time comes to demonstrate value to secure external funding. Tony Dean, Senior Director, Corporate Leverage at Shawbrook provides some tips to guide business owners through this process.

People make a business 

A robust and experienced management team is the backbone of any successful business. Lenders look for leadership with a proven track record and the capability to steer the company towards growth. From the outset and as operations scale, ensure that your team possesses diverse skills and they are aligned with the company’s vision and strategy. Having a robust succession plan in place for key roles will demonstrate a long-term view of sustainable cash generation, important for any lender or investor.

Once you have the team in place, remember that markets rarely stand still, so investing in continual development and upskilling your people is invaluable in remaining competitive. Regular training and development ensure that your team stays ahead of industry trends and maintain strong capabilities, as well as being best placed to identify new developments or trends and capitalise on them. This commitment to growth reflects positively on your business's long-term prospects, and as a result the ability to raise capital to execute on plans.

Let the numbers speak for themselves

Demonstrating financial discipline and strong cash flow management is essential, for any business but especially when seeking outside capital. Lenders and investors look for businesses that manage their finances prudently and have a clear plan for maintaining liquidity. Regular financial reviews and audits can help ensure you are on track. Banks focus on the strength of your underlying cashflow and like strong cash conversion.

Modern management information (MI) and data systems become fundamental both at the start when you need to provide accurate business projections and insights, and for ongoing reviews. Lenders and investors rely on these systems to assess the financial health of your business and its future potential. Ensure your data systems are current and capable of producing reliable forecasts and key members of the management team understand how to use them.

Another significant factor for lenders is a strong credit history. Ensure that your business meets its financial obligations on time and maintains good relationships with creditors. A positive credit history can significantly improve your chances of securing funding.

Know your customers, know your market

It’s critical that your management team has an intimate knowledge of the customers you serve, and are able to articulate the culture and behaviours that generate long-term and repeatable revenue from them. Additionally, utilising customer insights to demonstrate opportunities for expansion and new markets, having a diversified customer base, and the ability to generate recurring revenue will be appealing to potential lenders and investors. Concentration in customers and markets can be cause for concern.

Show lenders and investors that you have a thorough understanding of your market, including trends, competition, and customer needs. This knowledge demonstrates your ability to navigate the market effectively and adapt to changes, which is vital for long-term success. It is also vital when considering diversifying into adjacent markets or broadening your product range in the current market.

Alongside this, it is crucial to highlight what sets your business apart from competitors. Whether it’s innovation, superior service, or unique capabilities, showcasing your unique value proposition can make your business more attractive to lenders and potential investors.

Have a clear strategy, plan out your business journey

A clearly defined business strategy is imperative as a guiding compass for the business. As is a robust business plan that outlines how the strategy will be achieved. The business plan should clearly outline how the business plans to execute on their vision, and should clearly articulate the value of the business to internal stakeholders and outside investors and lenders.  

Having a clear picture of your objectives, target market, competitive landscape, and growth plans, and delivering a clear roadmap that not only guides internal efforts but also instils confidence in lenders about your direction and potential for success is an important ingredient in driving growth.

Whether your business journey is based on organic growth, merger and acquisition (M&A) activity or an ambitious buy and build strategy, it is essential to keep focus on your long-term aim and to maintain a good balance between the benefits of the transition and the impact this can have on your existing set-up.

For M&A activity, it is vital to understand what the potential transaction will bring to your business, whether it is market expansion, new capabilities, or synergies. Clear goals help make informed decisions and present a strong case to lenders and investors to get behind your plans.

For businesses pursuing a buy and build strategy, a staged yet flexible approach is critical. Begin by assessing alignment in terms of structure, financials, and culture. Then progress the transaction and integrate fully. Finally, complete a post-completion review to determine future activities and ensure ongoing alignment. Many successful acquisitions have benefitted from the monitoring of a 100 day plan which is meticulously followed and actioned post completion.

Surround yourself with expert support

Where possible, engaging with knowledgeable advisors from the outset not only helps you put the correct building blocks in place, it also makes navigating future growth and business evolution as you can build upon a successful set of foundations. When looking to secure external funding as the business evolved, it can lead to a smoother process as many of the ingredients a lender or investor will want to see will already be in place. Lean on your accountants and lawyers for insights and guidance to support your growth ambitions and to find the right specialist lenders when faced with the next business critical event.

Similarly, when looking towards external funding, consider the long-term business relationships you’re building, the sector knowledge the lender has and the time and effort they deploy in identifying your full requirements. An experienced lender will ask more complex questions, and quite often structure a solution that was not on the cards initially but delivers a more suitable outcome for the business. This solid relationship between lender and client can then also support and streamline future transactions as the business grows.

Conclusion

By putting in place solid foundations at the outset, as well as careful planning, a solid strategy, the right systems, and an experienced management team, you’ll possess the cornerstones of a successful business capable of scaling. By considering these principles and addressing the above elements at the beginning of the journey, business owners can build a strong foundation for growth and achieve their business objectives with confidence, and be ready to secure capital as they move through the phases of growth or important business milestones.