Most business owners want to see their business’s grow: they believe in their product and they want to do well for themselves, their workers and community. The problem is knowing how to drive growth without risking what they have already built.
For manufacturers in particular, scaling-up can be difficult. Your factory may be at full capacity; skilled workers can be hard to come by; and unlike services, delivering physical goods becomes more complicated the further away your customers are.
None of these problems are intractable, but the solution does inevitably require serious business funding, which could be working capital or capex or a mixture of both. Manufacturing business, by nature are capital intensive. Additionally, many small and medium manufacturers will have to plot a way of increasing their sales in a meaningful way if any investments in capacity growth are to pay off.
Evaluation
Any growth plan starts with an evaluation of your current process, your potential market, and your company’s place in that market.
Depending on the size and complexity of your business, this could be a major undertaking. A small (relative) investment in outside support to get an expert opinion may pay off many times over. On the other hand, many business owners are well informed about their market and know their own business inside out, so it could just be a case of making time, taking a step back and writing some key points down, along with a business plan.
What market share do you have? Are you able to increase it? What are your competitors doing? Are there new markets or geographically or in terms of product – that you could enter? Etc etc.
You will also want to look at the production side of things, and work out how you would service any extra sales you achieve. Can you maintain your margins? How much would it cost to finance an investment? You may have to think carefully about whether to concentrate on growing sales, or profits.
Export
For many manufacturers, growth often comes down to increasing the geographical area they sell to. Going beyond Australia’s shores and into global markets can increase your potential customer base a hundredfold and is a route to growth that every ambitious manufacturer should consider. The problem, for many, is that exporting brings a new set of daunting issues which management maybe unfamiliar with. It also threatens to erode margins and bring about cash flow problems because of longer delivery times.
This need not be the case as there has never been a better time for Australian manufacturers to start exporting, because there is now more help, support and finance available than ever before.
For an initial assessment of the opportunities available in foreign markets, the Australia Trade and Investment Commission’s Australia Unlimited site is very useful.
For innovative Export Funding which also takes care of logistics, look no further than OptiPay: our Trade Finance package can eliminate the cash flow problem of exporting, while providing you with the money you need to invest in growing production.
Diversify
The obvious alternative to growing geographically is to expand the range of goods you offer. Are there other products which your accumulated experience and skills as a business would give you an advantage in?
When thinking about increasing your range, think about your customers. What else do they need? Are there products which they are currently having difficulty sourcing?
Some good old-fashioned networking in the business community will help you get an idea of potential niches you can target.
Financing Growth
Whether you have just put together a plan to start exporting or grow your range, or you have had an idea of where your business can find new sales all along, the final stumbling block is likely to be funding. Even if finding the sales doesn’t involve advertising, increasing production will surely cost money. At the very least, you may need to hire extra staff and increase your orders of raw materials.
At this point, far too many business advisors would have you do your best suit and send you to meet the bank manager and ask for a substantial business loan or overdraft. While this will work in some cases, there are a number of drawbacks and increasingly, these are enough to stop many Australian SME’s growth plans in their tracks.
For a start, business loans are not as easy to come by as they once where and many promising SMEs find that they just don’t meet the banks’ criteria for funding. Even if they do, having a loan approved can be a very long process, delaying your plans so that windows of opportunity are missed. Perhaps most importantly, borrowing is inherently risky – and that risk will mostly fall on you. If your growth plans don’t pan out, you’ll still have to pay the loan back with interest and if you can’t your business will be in trouble and directors may well find themselves on the hook, personally.
A better idea, in many cases, is to reinvest your own money into growth.
Harness the Power of Your Cash Flow
If your business is doing well enough that you are looking for new markets, you probably have a healthy amount of cash flow coming in from current sales. You may even make enough profit to reinvest some cash into growth every year – but that is also a slow process. What can make a huge difference is the ability to bring forward the money tied up in your accounts receivable, getting a substantial cash flow boost all at once that can cover the cost of hiring extra workers and purchasing more supplies
With flexible Invoice Finance, you are using your own money to fund your growth plans, and because most manufacturers are paid months in arrears the amount you can raise by bringing payment forward is substantial. Often, it is enough to make capital investments in production as well as covering the increased working capital requirement of a growing operation.
A cash flow finance solution such as debtor finance; trade finance; or supply chain funding are ideal ways for manufacturers to fund their growth plans. OptiPay now offers all of these on one easy platform – why not call us and find out how we can get your growth plan moving within days!
