Just as 2020 delivered a host of pandemic-related unknowns and hesitancy in planning far into the future, 2021 has proven to be ripe with new opportunities for expansion.
Fueled by the Valley’s exponential residential and business influx, growth opportunities for companies previously in a “wait-and-see” holding pattern are more eager to deploy their liquidity to support expansion or strategic acquisitions.
This environment is the impetus to seek vertical-integration opportunities to better control costs and/or the supply chain, expand offerings to offset reduction in business and, most importantly, revisit multi-year strategic plans.
As experts in helping businesses grow, commercial bankers are often asked how companies can prepare to get to the next level. The answer includes:
Gathering knowledgeable resources. The best strategies are developed with input from a wide range of knowledgeable sources who can be tapped for insights and real-world experiences. If one doesn’t already exist, business leaders should consider forming an advisory board to give key executives critical access to experts who can offer their advice, and even caution, on navigating growth opportunities and challenges.
Planning for the potential impact of growth. Planning ahead means understanding the impact that growth may have on various facets of the company. For instance, asking questions about whether a company’s infrastructure will have the capacity to absorb new business, determining if/when to hire, evaluating if additional equipment will be needed, gauging inventory needs, assessing IT and cybersecurity and other questions will help mitigate unexpected results of growth or expansion.
Evaluating sustainability of plans. Large goals are drivers for great things. But setting mileposts along the way to evaluate whether the company is on track is critical. While growth typically translates into profits, business owners need to focus on how it will impact cash flow in the near future. Understanding and forecasting how quickly inventory, receivables and payables turn is imperative to ensuring the company’s cash flow and liquidity is sufficient to meet their ongoing operating needs. Companies can quickly grow themselves out of liquidity if they are not adequately modeling this for their expansion.
Invariably, knowledge is power. Ensuring a sound growth-planning strategy means being surrounded with the best knowledge base possible — from management and key vendors to accounting, legal and financial partners — who deliver different perspectives to head off potential pitfalls on the path for successful growth.
Jeff Schelter is managing director of Commercial Banking at Alliance Bank of Arizona, where he provides financial expertise to businesses across the state as they plan for growth and future success.
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