While business may be booming with a loyal customer base at the heart, the growth of your company may, in fact, be stagnant. The greatest challenge when running a business is actively managing the development of your company to ensure that growth is always on an upward trajectory.
The growth of a company will naturally climb up and down as it mirrors changes in trading conditions triggered by the transition from peak to off-peak trading seasons, a decline in market conditions as seen with the coronavirus pandemic and cost of living crisis, and a shift in consumer trends.
To maintain a steady and reliable growth rate, your business must always be sufficiently fuelled with working capital. If the short-term financial obligations of your business are fulfilled, turn your focus to the long-term task on hand which is achieving growth that is sustainable, either organically or through acquisitions.
Karl Hodson of UK Business Finance looks at how a cash injection can promote both organic growth and growth by acquisition.
The growth of a company takes any of the following two forms – organic and/or artificial. While organic growth is naturally occurring, artificial growth is strategically engineered through the likes of acquisitions. Most businesses will seek to organically grow their business which may include:
Examples of inorganic growth may include:
A combination of organic and inorganic growth can consistently fuel a business looking to increase turnover and market share. The inorganic route is likely to be more accessible to businesses with substantial capital as they will have the funds necessary to achieve rapid growth by partnering or acquiring another business. What unites both growth pathways is financial fuel, as without this – your business won’t have the resources required to reinvest.
Whether your business receives a gradual revenue stream or a cash injection, plentiful funds, regardless of whether it’s self-generated or borrowed, are essential for company growth.
If you seek to borrow to fuel company growth, what you intend to use the money for will likely shape the type of finance, or cash injection that you secure. For example, if you wish to grow your asset portfolio by purchasing new machinery to expand order capacity, you may seek asset finance. If you need a short-term cash injection to bridge the gap between invoice payments, you would likely look at invoice finance.
A cash injection in the form of a full lending facility or a short-term commercial loan may provide your business with an inroad to achieving financial and operational growth.
At Red Flag Alert, we set ourselves the challenge of developing an industry-leading growth score from the ground up. This would allow our customers to identify and target high-growth companies as well as those that might be struggling to grow and be in need of business services.
We first had to decide what we would classify as the threshold for high growth. The Organisation for Economic Co-operation and Development defines this as a business that increases its growth by 20% or more within 12 months. As this is the definition generally accepted by the financial industry, it would become our benchmark for measuring growth.
Red Flag Alert’s data scientists then had to embark on the massive task of developing and building the growth score. To do this they analysed millions of company records going back 4 years, including both pre and post-pandemic data. They compared companies that had achieved high growth, to those that had achieved low growth, and to those that had not grown at all.
From this analysis, our data scientists were able to identify the key factors and events that each banding of companies had in common and how they seemed to influence growth. From these findings, they were able to develop a score that accurately predicted company growth.
Each company listed in Red Flag Alert's business database receives a growth score between 0-100, the pass mark is 56. A company that scores 100 is very likely to increase its turnover by 20% in the next financial year and a company that’s closer to the 0 mark is less likely to increase its turnover by 20% in the next financial year.
Growth, whether internal or external, is a benchmark for business success, and as such, should be strategically measured and planned to secure a prosperous future for your business.
Discover how Red Flag Alert’s experienced team can help you identify businesses with a high propensity to grow. Why not get a free trial today and see how Red Flag Alert can help your business?