Even if your business just got started, now could be a great time to think about planning for business growth. Business Banking Officer Tony Willkom shares his top tips to help businesses succeed when planning for the next step.
Tip #1: Growth Means Different Things For Different Businesses
When thinking about business growth, there is no one-size-fits-all description. “For a business based on service, growing could mean adding more staff,” explains Tony, “but for a manufacturing business, you could be having a conversation about expanding your location or acquiring additional equipment.” No two businesses are alike, so every business should have a different plan for growth.
When a Member comes to Royal with a request for help with their business growth plans, Tony starts by learning about their goals. “I’ve had some businesses that know they can grow just by being more efficient with what they have,” he shares. “Being able to process more transactions each day and increasing their customer base is what growth could mean for that business. But each business is different.” A good first step when it comes to business growth is having a conversation with your business banker to share your goals.
Once he knows where a business wants to go, Tony can help create a plan to get there. One of the benefits to having a business banking relationship with Royal Credit Union is that Tony and other business experts can help with almost any banking need. From saving and lending to credit cards and treasury management, Royal has options to help you with just about anything your business needs to grow.
Tip #2: Establish Business Lending Relationships Early
For many businesses, growth requires using a lending option – whether that’s a business loan, working capital line of credit, or other borrowing product – to keep cash flow intact while expanding. “When a business needs to hire someone, when they need a new piece of production equipment, or when they want to build a new shop, a lending product lets them do it while keeping their normal day-to-day income for operating their business.” Tony explains. “But what businesses sometimes don’t realize is how important it is to establish a business lending relationship early so you have credit history.”
Unlike personal credit, business credit usually isn’t reported to a credit bureau. Instead, financial institutions like Royal rely on a business’s existing account and loan history to help make future business loan decisions. Having a small loan or credit card in addition to your business operating accounts at Royal can provide history that you’re a responsible borrower and make it easier to obtain a larger loan to grow when the time is right.
Having an established relationship also provides an easy way to adjust your borrowing to meet changing needs later on. “We can always look at your needs again in a few months or a year and see where we should adjust,” says Tony. “One thing that often changes over time is credit card limits. Maybe a $5,000 credit card spending limit was fine last year, but now you’re looking for a $10,000 limit to keep up with the extra business you’re doing.”
Tip #3: Avoid Common Business Lending Pitfalls
Tony has seen a couple common pitfalls for business owners when it comes to lending. First is relying too much on personal credit: if a business owner finances things with their personal credit, it will appear on their credit report. In some situations, this can make it appear that the business owner is over-using credit, creating a skewed picture of their financial health and jeopardizing future loan eligibility. By leveraging a business loan or a balanced combination of personal and business loan solutions, you can avoid negative impacts to your credit score.
The second pitfall is not being prepared to invest in the business yourself. “You’re still going to need some equity, you’re going to need to put something into that property or equipment purchase loan to show that you’re willing to shoulder some of the risk,” says Tony. Business lending is a partnership between Royal and the business, and both sides need to be committed to succeed.
Tony explains, “As a financial cooperative, we’re here to help Members make good investments in their future, so sometimes the conversation is reviewing why we don’t think a loan makes sense for Members or for us.” Most established businesses have already invested a significant amount into their business but growing to the next level requires taking on more risk. That’s when having a trusted advisor like Tony on your side is invaluable.
Tip #4: Planning For Growth Should Be Constant
You might feel that there’s no time to plan for growth between the everyday aspects of running a business, but the best business owners find ways to keep growth top-of-mind. “It’s important to take time to work on your business and not just work in your business,” notes Tony. “My favorite conversations to have with our Members are the ones where the owner comes to me with a plan to grow based on how great things are going.” In other words, the best plans for tomorrow are based on what’s working today. Look for growth opportunities with a foundation built on what is already driving success for your business.
One common way that Tony has seen businesses grow is by becoming more specialized. “Think of your business like a restaurant,” Tony says. “When you first open, you have a bigger menu, but then word gets around that you cook a really good steak. So, you turn into a steak restaurant – now you can run a more efficient and profitable business with a streamlined kitchen, supply chain, and menu.” Business owners might be able to find a niche in their area of expertise that allows them to capitalize on their market or on their unique strengths.
No matter how you approach business growth, conversations with a business expert are key. Discussing your aspirations with a business banker and keeping open communications about your goals will make it easier to ask for help when you need it. “We work with many businesses over a longer period of time, so we know where they want to go from past conversations. It’s not a surprise when they ask for a loan to expand their business,” says Tony. “It’s easier to help a business be in the best position to make that loan request if we’ve been talking about it for months or even years.”
Tip #5: Startup Resources Can Also Help With Growth
Many business startup resources are also able to assist with business growth planning. The Small Business Development Center through the University of Wisconsin and the SCORE business mentor program are two popular local resources that help business owners grow beyond the startup phase.
“There’s so much emphasis on starting a business,” says Tony, “that a lot of people forget that these organizations have amazing resources to help grow an existing business.” The help offered through these resources is often free, and Tony has seen the benefit of their partnerships firsthand. “I love when businesses provide financial projections after meeting with the Small Business Development Center.” says Tony. “When they bring those numbers, I know they’ve gone through a formal process and they’re very invested in their plans.”
As an established business, you’re in a far better position to talk about where you might grow than a startup business. “It’s no longer a conversation about so much of the unknown,” explains Tony. “The discussion becomes ‘I know I can do this much business now, and if I make this change, I know I can probably do this much more in the future.’”
Have questions or want to discuss growing your business? Reach out to Tony directly or find a Royal Business Banking expert near you.