I can see a growth opportunity but I can’t finance it. Help!

Dear Aunty B,

I am in a bind, Aunty B. So far I have been able to build my business from my cash reserves. But now I can see a huge opportunity and I think I will need about $1 million to really gear up and grab this space. But I can’t afford it! I don’t want to take in money as I want control, but what are my options? I don’t want to take money from a bank, even if I could get it. What is best practice for other fast growth companies?  

Stuck and Frustrated

Dear Stuck and Frustrated,

Ahh. You too. How frustrating is it? The ideal scenario is obvious: you charge enough so you can make a profit so you can reinvest that in growth (although be aware that if you are profitable you are likely to have a tax bill looming.)

The way that fast growth companies do that? Read through the Smart 50 profiles. There is a formula that most of them use: they charge higher prices which give them bigger margins. How do you do that? You develop products which are not price sensitive, you offer something that is different – and obviously better – than everyone else and that people have a compelling need to buy and you deliver it with great service.

But it sounds like this isn’t an option, so you are looking at equity or debt. Personally I would go for equity. You can find investors who know the industry, can open doors, sit on your board and give you advice. You are not a start up, so you won’t have to give away too much equity for $1 million.

As for losing control – who says you are in control? Anyone who runs a small business knows they are slaves to their employees, their clients, their suppliers and the economy. Running a small business sometimes feels like clinging on to the bottom of a train that has lost its brakes and that’s on a good day.

Tom McKaskill has done a great piece on this.

Good luck!
Your Aunty B