A new year means new business goals and exciting opportunities to take a business to the next level. Business owners have a chance to evaluate where their business is, how they want to grow and then put a plan together to achieve their objectives. It’s important to establish a plan to attack the market in the coming year and to re-evaluate and adjust that plan when circumstances change. Sometimes that process is aided by getting the input of key business partners, like your banker.
Business owners who put together a plan, execute that plan and find ways to work successfully with partners should be able to leverage favorable market conditions to grow their business.
Kurt Kappa, chief lending officer at First Federal Lakewood, shares three steps they can take to get started.
1. What financing opportunities should business owners consider and/or potentially act on in the new year?
When exploring financing opportunities for the new year, there are two areas business owners may want to consider — their current cash position as well as utilizing debt.
Businesses should look at their cash position and how it sets them up for future growth, and keep in mind that it’s possible to fund growth via loans or lines of credit instead of cash. If a company is cash positive at the moment, it is a good time to talk with your banker about tapping into a working line of credit.
However, depending on the economy and if debt is inexpensive, it may be a good time to fund a business expansion, whether that’s through organic growth or through acquisitions. When it comes to the latter, inexpensive debt can be used to help fund an acquisition, but the high company valuations might mean it will take buyers time to find the right opportunity.
2. What unique opportunities or conditions exist in the market and how could they affect a business?
Many businesses are entering succession planning and ownership transition periods. This is mostly because baby boomers who are in leadership or ownership positions have reached an age where they are looking to transition, either through succession planning or through a sale. For these owners, now is a good time to really evaluate which path is best: a sale of the business or by growing and bringing on other team members to run the business in their place.
3. What conversations should business owners have with their bankers this year to get the most out of the new year?
Business owners should talk with their banker about all that is happening, and what they would like to happen, with their business — what their growth objectives are, what could hold back their growth and how they can navigate those obstacles to achieve their goals.
It’s common for business owners to get so caught up in running the day-to-day operations of their business that they often struggle to step back and take a bigger picture look at the organization and where it should be headed. Taking some time to talk with a banker can create the opportunity to have an in-depth conversation about the strategic vision, get some outside perspective on how they and their organization are currently set up to achieve it and build accountability into the plan.