Growth potential and the need for financing go hand-in-hand. “Certain milestones or trigger points are common growth challenges that require additional financial support if the business is going to move to the next level,” says Ray Vargo, director of the Small Business Center at the University of Pittsburgh’s Institute for Entrepreneurial Excellence. Among those trigger points are the need for more staff, sales growth that exceeds existing production capacity, the need to purchase new equipment and/or arrange for additional facilities, and expansion into new markets, he says.


It is critically important for business owners to be proactive in creating a plan for future growth. “They must be both forward-thinking and flexible,” Vargo says. “Owners should always plan ahead and anticipate future milestones, but they should also regularly examine the current state of their business and try to identify new opportunities that weren't originally planned for and then determine the sort of financing needed to pursue such opportunities.”


Lindsey Gilkes, a management consultant at the Institute for Entrepreneurial Excellence, suggests conducting a brief checkup of your business at the end of every fiscal year. Here is a suggested roadmap for the process:

  • Identify your three major current concerns about your business.
  • Conduct a thorough financial review of the previous year’s performance with a focus on key ratios, such as your margins relative to the industry average, inventory turns, and cash flow (including receivables and payables turnover rates).
  • Compare your previous year’s actual performance with the numbers you had projected for it.
  • Set specific financial and other performance goals for the coming year.
  • Develop a plan with concrete strategies for achieving those goals.
  • Include due dates for each goal and contingency adjustments to be made during the year for goals that are not being met.
  • Designate who in your organization will be primarily responsible for achieving each goal.


Examining your budget and your current balance sheet in conjunction with your action plan will help you identify where you might need financing to complete items on your action list and what type of financing is likely to be most effective and accessible, Gilkes says.


Financing plans with accurate projections are not difficult to create, says Rob Dennison, a national partner in Irvine, California-based Hardesty LLC, an executive services firm focused on the office of the CFO. The challenge is executing the plan to achieve the desired results. “It’s imperative to have a flexible plan that can be adjusted and allows for modeling of unexpected events.”


Defining needs and assigning associated weighting to their importance is an integral part of this process, and some key considerations include:

  • Expansion versus risk mitigation. Potential revenue and profit gains from expanding into new areas or market segments must be weighed against the costs of mitigation measures required for new risk factors, i.e., currency fluctuations or political instability in new overseas markets.
  • Securing the best terms and the impact on timing. It makes sense to secure the best financing terms possible, but having the financing already in place may be a more important consideration for expansion minded businesses so you can move quickly when opportunities arise.
  • Business stage-to-financial stage ratio. Different types of debt and equity financing are generally more available to businesses at different stages in their development. Make sure your financing efforts align with your current business stage to improve your chances of success.
  • Capital allocation plan. Lenders will want to know what you plan to do with the money. Have a detailed plan ready that ties the funds being requested to specific business goals (purchase of new equipment, expansion of production lines, etc.).
  • External issues and “unknown unknowns.”


“Knowing the most effective way to allocate your funds is of primary importance to any business,” say Evan Charles, co-founder of Boston-based Launch Academy, a provider of coding and web development training. “Misjudgment here can result in wasted money and time.” Start with long-term and associated short-term business goals, make sure the contemplated spend aligns with those goals, and confirm you are taking the correct strategic next step rather than skipping ahead, he advises. “Be protective of your assets as if you have two personalities: One is an entrepreneur—that’s easy—and the other is a tight-fisted investor. If you are not financially savvy, seek help. The cost will far outweigh the spend.” Dennison adds that the goal should be to create a plan that anticipates growth and puts financing in play before it’s needed. “Anticipation versus reaction should be the theme as it relates to financing,” he says.


For more information on different approaches to building a finance plan geared for growth and gauging the health of your business, check out:


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