When it comes to launching a business and running a startup, the word ‘funding’ is often hot on everyone’s lips and many, consider it to be a prerequisite to competing in the startup industry.
But in practice, running and growing a business organically is far healthier, since you do not rely on funding from other parties, have to meet deadlines, or feel that you are indebted to other people. Furthermore, if you are looking to sell your business one day, having a company that has been built up slowly and is now very profitable and has no debt, is going to be far more attractive to potential buyers.
Today, we speak to two startup founders to get a better idea of how to grow your business organically.
Reinvest Your Profits
“One of the hardest things as a business owner is having to reinvest your own profits,” explains Richard Allan, founder of funding startup, Capital Bean.
“Naturally, by starting and running the business, you will be inclined to keep any profits for yourself, but sacrificing this short-term payday can be very valuable if you reinvest it into the business.”
“Even just by reinvesting £10,000 per year, for 3 years, can give you £30,000 towards hiring any extra staff member, buying machinery or advertising spend – and this can certainly stimulate growth rather than a small increase in your personal salary.”
Have 3,6 or 12 Month Plans
“To ensure that you maintain your growth, it is important to have plans and regularly re-evaluate them,” Allan continues.
“Whilst a lot of startups have 12-month plans, you can look at targets and things you want to achieve in the next 3 or 6 months, or quarterly as a way to reach your growth requirements.”
“What do these targets look like? Are they a number of subscribers? Orders? Sales? Revenue or profit? But keeping an eye on the numbers and cash flow can be very valuable to maintain growth.”
Don’t Rely on Investment
“Getting funding is exciting, but you should not become reliant on it,” explains Justine Gray of consumer lending startup, Dollar Hand.
“Whilst CEOs or company founders seek funding for their business, if the growth is not quite there (which is typical for startups), they have to keep looking for funding and more funding – and this virtually becomes the full-time job of the founder, rather than being operational or managerial which should be their main focus.”
“During economic downturns, funding can become scarce and this is just one of the many reasons that startups fail.”
“If you grow organically and use your own company profits, you will not fail. And if you need to top up your finances through invoice factoring, merchant cash advances, business funding, or overdraft facilities, so be it, these are only short-term anyway.”
See also government funding.
Keep Your Overheads Low
“Part of growing your business organically and doing it successfully means keeping your overheads low. By comparison, a lot of startups feel that they have £1 million or £10 million at their disposal so they stop watching the pennies until the money runs out!”
“For starters, do not hire employees or consultants for the sake of it, rather have a handful of effective staff that are multifaceted. In other words, find the right people. When it comes to your location, invest in affordable office space or enable staff to work from home. Other cost savers include hiring staff on flexible contracts or using free credit for advertising from the likes of Google or Facebook.”