We find business credit financing solutions for business owners. We also find that many business owners hold anxious trepidations about the concept of borrowing money.
Yet, the need does arise for working capital to continue to grow your business success story.
Whether the working capital need is unexpected–due to an unusually large order from a customer, a seasonal downturn in revenues, or a sudden opportunity for growth such as purchasing a competitor–or a planned requirement such as equipment purchase or investing in a new marketing plan, your business will need capital to grow. Unless your profit margins or cashflow planning have created a massive pile of cash for just such a capital expenditure, you’ll need to go outside your company to find that money.
The alternate choice to credit financing is to bring in capital from other equity sources.
Refinance your personal home or leverage your retirement accounts and bring in the required capital. Sell off valuable equipment, ideas, collectibles. Bring in an equity partner. We’ve pontificated at length about the last option…do you really want a partner who may wind up telling you “how to make the pizza?”
There are many reasons why choosing equity sources for capital infusions are bad for you personally and professionally.
Yet, too often this is the path chosen: equity sources. Business owners go down this path for several reasons: time-constraints to obtain the capital; anxiety around the idea of borrowing.
Credit financing to obtain working capital doesn’t have to frighten the heck out of you. At Aurora Consulting, we understand the worries that come along with borrowing money: “What if there’s a downturn in my business and I cannot repay this loan?”
Especially after the global meltdown and subsequent recession of a dozen years ago, lingering fears and doubts remain laced through our economy and our economic thinking like clogged drainpipes during a sudden torrential downpour. The water has to move, and move quickly, but the remnants of various and miscellaneous flotsam and jetsam are jamming up the pipes and the rainwater backs up causing all kinds of other problems.
The same is true of these lingering doubts about borrowing money. Credit can be a good thing and nothing to be fearful of when approached sensibly and when the credit terms are incorporated into your business planning.
Still, these worries hang on.
We’ve come up with the concept of 3 important business metrics you can keep an eye on after you’ve borrowed that needed working capital.
Remaining vigilant on these metrics can help you avoid a sudden negative revenue issue which could lead to default on credit obligations. While it may seem obvious to you that these are the metrics ANY business should constantly monitor for maintaining profitability and continuing growth, as with all advice and observations we provide from Aurora Consulting, our real-world experiences demonstrate these ideas are not so obvious to every business owner.
What is obvious is worry and anxiety. Thus, our presentation of these not-so-revolutionary-ideas.
- Profit margins: pricing and expenses
- ROI: products/marketing plans/infrastructure/product development
- Customer Retention/Construction
Monitor these important metrics by maintaining your financial reporting to the most current and efficient methods. We often see businesses with financial statements such as P&Ls and cashflow statements that are not up to date.
A balance sheet isn’t just for your CPA to use when you’re filing your tax return!
And the ever important marketing and business plans? Wow, we are constantly shocked when we request these vital documents from our clients to include in a financing request package only to be told they don’t have one!
Creating and maintaining these financial reporting documents is incredibly easy with the sophisticated computer applications available, even for your smartphone!
Making the time to check in with them is another thing altogether. We sometimes feel as if our clients present us with financial statements and they haven’t reviewed them, recently, or ever.
That’s why we suggest you at the very least monitor these three important metrics on a constant and vigilant basis. WHY?
First, it’s good for the overall health of your business.
Second, you will find you can anticipate challenges and successes before they arise.
Third, you can plan for those challenges and successes well in advance and avoid nasty surprises and cashflow chokeholds.
Finally, and best of all, you can lower or maybe even eliminate altogether your anxiety and fears of credit financing capital to grow your business.
REACH OUT to us and ask us anything whether you agree or disagree. We would love to hear of the “fly by the seat of your pants” stories too!