Cultivating growth

Whatever size and shape a business might be, and regardless of the products it makes or the services it extends, its primary mission in life from the moment it is born is attracting money in return for what it does, staying ahead of the flow of expenses, and returning to its owner what is popularly known as a profit.

All businesses face the same fundamental challenges and yet some seem to fly along and have no problem staying on the right side of the profit/loss line, others struggle and some even dip so far in the negative register that they cease to be. Is running a business and keeping its finances alive a complex matter?

To say the funding and finance side of running or building a business is complicated is perhaps a little wide of the facts. It is an area of business that is unfamiliar to many who are starting out and it wanders into territory where statutory needs have to be considered. That suggests specialist advice and yet more of those costs that are all too apparent when looking at the numbers. Get to know the basics and it is by no means difficult though.

Keeping a small business humming along and appropriately funded through its early expansion and taking it onward is the focus of this feature. That means keeping an eye on some key indicators in the business and making the needed inputs to keep all the gauges out of the red zone in the early days. Moving on, a business may arrive at the point where there is a need for financing capital expenditure for bigger kit and that defines another step on the journey a business takes. Then there is the sustaining work needed to fund a profitable business through its continuing growth to address. Every business takes its own path, on its way though it is likely to encounter these career moments.

Planting the seed

Getting a business off the ground in the first place invariably means finding some money from somewhere. It need not be a lot, it rather depends on the complexion of the business the founder intends building, and what it might need to establish a trading position.

Getting into a business that is already trading successfully is some-thing that has a price ticket attached to it. ‘Acquisition’, is how the business world typically describes the passing of ownership of a business from one set of hands to another and some truly hysterical numbers sometimes accompany the transaction.

Valuations based on discounted cash flows and other exotic means of getting to a price cover the whole ‘science’ in a veneer of complexity that is far from the reality of the matter in many cases. Fact is, small businesses, in good trading health, do change hands for quite reasonable sums of money as people retire, cash-out, get fed up, succumb to poor health or whatever. Getting in, then, may not be as difficult as some imagine and the attraction of a ready-made trading position is obvious.

Denied the ‘easy’ option, the cost of entry into the signing and allied industries from a scorched earth position is very modest. Many of today’s successful operators began, literally, in back bedrooms and garages. Many choose still to operate in such a manner. The basic tools of production can be inexpensively acquired, easily accommodated, and profitably operated. With expenses kept to a minimum, a profitable sign company could get off the ground for just a few thousand pounds.


Most people who seriously want to start a business though can lay hands upon a few thousand pounds. It may not be the cheapest few thousand pounds they will ever ‘buy’, but it will get a venture off the runway. Hands up those who started the business they are operating now by financing it with a credit card? More than a few.

Up and running

With some basic production equipment aboard and somewhere modest to work, the next thing needed is the means to make the things the business sells, or, critically, the things it expects to sell. That means raw materials. Let us illustrate a key point here by considering an industry staple that everyone has to buy at some point, self-adhesive vinyl.

If you expect to make signs, you can expect to buy vinyl. That is a fact. What then should you plan to stock? Vinyl comes in some very broad categories, any of which you may have occasion to need. It comes in lots of colours, finishes, and types. If you put them all on your shelves, you now have vinyl and you will not have as much money available as you did before you acquired it.

A key part of financing a business is trying to phase what you may hear referred to as its variable costs. Do that properly and, in many cases, it is possible to have made a sign, sold a sign and, even got paid for a sign before you pay for the materials used to make it. Provided you are getting your materials at a price that makes sense, that is a healthy way to trade and finance a good part of your business. And it is a situation that is not lost on one of your primary sources of business financing—your suppliers.

Metamark’s Max Somper explains: “If you want to run a business and have a high degree of confidence that you’ll have the materials you’ll need on hand to do the job, there’s really only three legal options open to you.

“One, you can set up shop and make them. Forget doing that with a credit card, think instead of an investment comfortably striding away from seven figures. Two, you can buy all the materials you think you’ll need and put them on the shelf and say goodbye to your cash for a while. Three, you can make someone else keep the stock and pay for keeping it for you.”



Clearly, of the three options, the third sounds the most attractive to anyone trying to finance a small business. Somper says: “Metamark makes materials and sells them, that’s what it’s best known for, but, if you look at the way we’re doing it, it’s through a system that’s expressly designed to tilt the odds in the favour of the small business. We keep so many materials in such depth, you can back off the need to keep big stocks onto us. We have what you want when you need it. Buy what you need, when you need it, and you will have funded your businesses via the credit we extend to you. You could see your money in before you pay us.”

Working well with a supplier committed to your relationship is a great way to fund a business, or at least a part of it. Big inventories or ‘stocks’ have an alter-ego—it is cash. You can be making a profit, but if it is spent in ballooning inventories of raw materials, then you are not going to get the profit out of the business in the form of cash. You may, on the other hand, have more raw materials than you will ever need.



Getting your supplies on good terms is key. So then, is getting credit from a supplier. Lots of companies will want to supply you with all the consumables you will need in order to keep your growing business fed and nourished. The crowd thins dramatically though when it comes to extending you any credit. “Got a minute? Get an account,” says Metamark’s Somper. He explains the company has a system for rapidly approving those who apply to it for a trading account and the company welcomes growing businesses. Get an account and treat it like gold-dust. It helps keep cash flowing through your business rather than stagnating in the form of unused and damaged materials laying around the workshop—mature businesses take note.

You are not a bank

Having lifted a business off the runway one trick that is best learned very early is understanding what you are in competition with, and what you are not. You are in competition with other companies supplying the same markets you do. You are not in competition with banks. Why mention that? Only to make the point that your business is not there to sustain others. Let the things you make go on very relaxed payment term and someone else has your money. In your business, the man who makes something for nothing is always on holiday. You expect to be paid. You are not in the business of extending significant credit. You are not in competition with your customers’ banks.

Banks are obviously a front-line supplier of funding to businesses of all shapes and sizes. Banks, contrary to the popularly held view, are run by ordinary, reasonable people, they are businesses after all. Some would-be entrepreneurs find banks difficult to deal with and that is understandable. Banks actually want your business to succeed just as much as you do. The difference is, banks do not have a scrap of sentiment invested in you or your venture, and they probably do not understand it beyond the bald numbers either. Handle banks gently—they have the money and you may want it.



Banks want two things, at least, from you if you are after money. A charge over some asset or other that will get them the money they will lend you back if your venture lands butter side down, and a solid, well-reasoned plan prepared along closely prescribed lines.

Many who have been though a round or two with bankers and tried to get them to sign up for a funding plan or credit line do not endure the experience well. Tales abound of numerous iterations and clinical dissections that leave plans seemingly in tatters. Then the guns come to bear on the bank and the barbed invective begins to fly. Banks are not in the business of getting people to revise or resubmit plans for the sake of the experience. They want to help— but on terms that make sense to them too. If you feel you are getting a bad deal—and that may be no deal at all—move on and explore other options.

Banks typically do not want to lend money just for the purpose of keeping you afloat and funding the credit you feel you have to extend. Correction, they do, but it is through a mechanism called factoring. That puts a bank between you and your customer and, in effect, the bank takes a share of the value of the invoice in return for taking on some risk. Not everything qualifies, so if you do fancy factoring your debt be careful in investigating the options.

The next step

One of the first situations your thriving new business is going to encounter when the available source of entry level money is not enough to cover the needs is capital expenditure needed for the stuff you want to buy. How about a van? So many deals out there that an explanation would be tedious. Suffice to say, you can lease, hire, or buy a van on all sorts of terms. If you fail to pay, the company extending you the money comes and grabs the van back—deals tend to recognise how simple it is to seize vehicles. Where though do you turn when you need specialist kit, say, a big router?

The first place you turn is backward. Look behind you. Do you at this point have a trading record? It does not have to be much of one, but it does need to be there. Supposing you do, you are qualified to the extent you need to start exploring your options. First things first, primary need. You are buying a monster, can you feed it? The answer is almost certainly yes. Carve the numbers and you will see that some very good hardware costs very little to run.

Julian Sage, managing of Complete CNC Solutions explains: “To most businesses we speak to about computerised routing and knife cutting systems, the very fact they do not have such a piece of hardware represent an impediment to growth. Buying a computerised routing system can almost be thought of in the same terms as hiring another pair of hands. Very productive and highly skilled hands as it happens.

“There is a cost attached to hiring people and to getting new hardware on favourable terms. Work both back to the hourly rate you are charged and you’ll find that the numbers supporting the business case for acquiring one of our routers make very compelling reading. You see the cost—you calculate the potential income, plus the inevitable savings you make, and the profit element confirms that you’re making money when you get the hardware.”

Complete CNC Solutions has helped arrange business financing for many of its customers. According to Julian Sage, the process is fast, it is not particularly intrusive and nor is it onerous.

“There’s a lot of attraction is buying a piece of quality hardware and financing it with our help,” he explains, before adding: “Capital equipment that has a quality element like ours is much easier to finance, as there’s an assured value in it. Lesser hardware once used would be difficult to find a home for were things to go wrong. Ours isn’t, that makes a big difference to the financing.”

When a growing business thinks in terms of financing new hardware, it is usually to serve the needs of growth. Growth can attract funding assistance from other quarters. When economic prosperity and jobs are motivating expansion, grants may be available. Sage says:  “Grants against the financing of hardware can be arranged with our broker and serve to help companies finance growth. It’s not the complex process that many expect and getting a resolution or an answer is surprisingly fast in most cases.”



Ready to grow

From the flicker of an idea through to a profitable trading company many turns have to be negotiated. Help is out there though. Suppliers extend generous credit lines, which can help run a properly managed business, hardware suppliers will provide valuable help in calculating returns, planning and arranging finance and even help in pursuit of grants. All such initiatives serve to help growing businesses do just that—grow.

Day to day operation of a business is funded with the cash that flows through it, or it ought to be. Money invested in deeply funding others through the extension of credit or in buying business by underwriting deep discounts often ends up as sunk cost. It is best to keep a very simple perspective on matters, after all, you are in business to make money. Your prices are set according to that need. So, run a very tight ship and watch all discretionary costs and the recipe should work, provided you have customers and the resulting sales.



Businesses that have run the gamut from the beginnings through growth and on to the point where sustaining activity and more ambitious plans can be applied need money too. Businesses have potential and potential has value. Releasing the potential has cost associated with it and that sends many looking, plan in hand, for growth funding.

With this in mind it is not at all unusual for banks to be handling the flow of cash through a business both in and out. Many businesses have a ‘facility’ negotiated with a bank to help smooth the cyclical nature of income and expense. Banks are where most people turn first when there is a need to do something beyond basic capital expenditure that cash available cannot cover.

Banks will want to know why you want the money they manage. Banks are not in the business of ‘investing’ in ventures that do not have the legs to carry on. Suppose that yours does though, your plan gets the OK, the money you want is there for the taking, everything in the garden looks lovely—what next? Were you to ask Dave McDonald, managing director of Chorley based Poppy Signs, his advice would be along the lines of waiting and seeing what you have actually been offered.

Getting the right deal

Some time ago, about a year, McDonald was in the position where he had presented a solid plan to his bank predicated on the potential of his business to deliver growth in sales and profits. The bank reviewed the plan, and, eventually, moved to a point where an agreement looked close. Bringing the story up-to-date, Poppy Signs’ plan worked. Sales and profits, just as McDonald’s plan forecast, are strongly ahead. The only deviation from what was obviously a masterfully created business road-map is that McDonald never took a penny from his bank to fund it.

The money banks offer comes, surprise, at a price. It also comes with what could be called, ‘strings attached’. This is by no means an exclusive arrangement, money that anyone offers to businesses comes at a price and, to a greater or lesser extent, wrapped up in a Gordian knot. Some knots are easier to unravel than others though, and some prices look like much better value.



McDonald’s plan was eventually funded not by one bank, but by many individuals. The point of commonality among the individuals funding the growth and expansion of Poppy Signs is, they are all members of FundingCircle. This organisation connects groups of people and the money they have available to invest, to opportunities such as the one McDonald presented. From the investors’ view-points, ‘getting in’ is a position that they are buying and that makes it competitive. The upshot is, if your plan looks good, and lots of people want a piece of it, then the rate you will get becomes more competitive. The whole process is said to be simple, it is certainly fast and, in the case of McDonald and Poppy Signs, it was successful.

O Factoid: Grants are available to fund the acquisition of capital hardware, particularly where a job is created or saved. Bear in mind that suppliers will also extend credit to small businesses and keep large stocks of materials so you do not have to tie up cash. O

McDonald has fully paid down the funding he received and, standing on the shoulders of the loan, has built a bigger and more profitable business. It has a stronger balance sheet, it is dealing with more customers, it has expanded its horizons. From a clearly advantaged trading position and behind a strong and differentiated brand, Poppy Signs is moving ahead and planning its further development. Would McDonald tread the same path again in terms of his funding?

The answer is yes, but he would do a thorough due-diligence on ‘alternative’ funding sources. FundingCircle is not alone.


Taking a business from its faltering first steps to the point where it is confidently striding past its goals and its competitors is a journey. You may get there entirely on the strength of the cash the business generates or, you may need to lean on someone for assistance. If there is a point to be made it is this—money is out there and so is considerable intellectual capital willing to help you. Suppliers will extend you credit, capital hardware can be funded through experts in their fields, and individuals have made a specialisation out of bringing resources together and supporting growth opportunities.  


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