RSS feedsGraham Apperley, Horwath Clark Whitehill LLP
Managing a period of rapid growth for any business is exciting and fraught with potential difficulties. A strong business plan, based on clear strategic thinking, will avoid many of the difficulties. If there is insufficient finance to fuel the expansion, disaster awaits.
We are told that the finance for the expansion will be provided by issuing share capital to ‘family and personal and business friends’. Shareholder expectations have to be managed by any business, but with family and friends as the investors, pressures to perform
well and pay dividends will be higher. Will the directors be able to set aside personal relationships when making difficult business decisions?
We are not told whether other more traditional ways of raising the necessary finance have been considered. An independent funds provider will be capable of appraising plans for growth and, by investing purely for financial return, bring objectivity, will leave friendship and familial affection out of the decision-making process.
If Intendance has no other option than to pursue the share issue, then it must ensure that the funds raised will be sufficient to meet the anticipated requirements.
Potential investors must realise that this is a commercial transaction with all of the attendant risks and no guarantees.
James Meyrick, policy adviser at ACCA
Businesses, such as Intendance, face many challenges accessing finance to fuel expansion. Investment from colleagues, family and friends can turn a moderately performing, small business into a substantially more successful, bigger business. Yet getting finance is only the first hurdle. Generating the growth that delivers the needed returns to investors and meets your business objectives can be harder than getting the business started.
Intendance must review its business model and assess whether it has the capacity to handle the demands that a doubling of turnover will entail. Areas that must be reviewed include staffing, management, capital expenditure and cash requirements. A business growth plan must include strategies to ensure that the growth is managed effectively and ultimately benefits the business.
It is essential to communicate the business plan, not just internally to employees, but externally to the business’s accountant, bank and external investors.
Intendance points out ‘flexibility and adaptability in industry are essential’ and its growth plan must reflect this. Plans are not set in stone – they need to adapt and grow, but they should always guide the business decisions and alert the business-owner to danger signs.
Intendance wishes to pursue sales-based growth; put simply, more sales and similar costs equals growth. Yet the truth is more complex. Branching out into other sectors requires research, marketing and other expenditure, which must be accounted for. Given Intendance’s refreshing approach and flexible outlook, this growth is possible.
Nick Winters, Vantis
One of the key issues facing Intendance will be the increase in staff levels, and it is vital to ensure that the right people join to maintain standards and culture.
There are many recruitment tools that will help to profile the characteristics that are important for each job, enabling you to
identify how closely candidates match those characteristics and gauge how likely they are to have the capability to perform their roles. These can be simple to use and are not overly expensive. I recommend using a structured recruitment process to help reduce the possibility of recruiting unsuitable people.
The next issue is how to double turnover in the current year. This is most likely to be achieved by building on the company’s reputation and extending the sectors that it serves. The directors should look to build their reputation and profile by examining the sectors that it operates in now and devise strategies for maximising income from those sectors. Also, decide which other sectors are most likely to be receptive to its services.
It should raise its profile in these sectors by attending/sponsoring industry events, appearing in industry media, targeting specific companies in those sectors and arranging meetings to establish a relationship with some of the relevant people. It should attend general networking events – for example, breakfast groups.
In my experience this marketing activity can best be achieved and monitored by appointing an individual who will champion each of the sectors to be targeted.
