Many people running their own business want to grow and become more profitable. Why should this be a problem you may ask? Surely everyone is in business to make a profit? Very true, however a business can grow too fast and actually fail as a result of this. Cash (or lack of it) is one of the key causes of business failure.
Growing a business may require new equipment or capital investment. Where does this cash come from? There are many funding options available that will help to ease the cash flow burden. Your accountant should be able to assist in obtaining the right funding for your business, along with helping to prepare any forecasts and projections needed to obtain it.
Securing some large contracts may seem like a really good business plan, but ……….reliance on a handful of large customers can have a negative effect on your cash flow. Larger customers can often extend the terms over which they pay, hindering your cash cycle. You will have paid your suppliers but may have to wait a further period of time to receive the income owed to you. Do you have a sufficient overdraft facility in place to cover this?
You may currently be below the VAT threshold, but growth may mean you must become VAT registered. How do you pass this cost on if you provide products or services to the general public or not another VAT registered business? Adding 20% onto you sales may result in you becoming less competitively priced. When your business starts to grow, you should speak to your accountant to help guide you through this.
Whilst it’s perfectly natural to want your business to grow and be as profitable as possible, be cautious and seek advice before leaping into the unknown.