Running fast but standing still? Managing business growth is like preparing for a marathon

Business owners often shy away from long-term planning. Maybe it’s because they are more comfortable dealing with the day-to-day operations or are being pulled in multiple directions. To plan effectively, you need to stand back, survey the horizon, consider where you’re heading and plan the best route.

Mark Newbold explains why different ways to get money in the bank, prioritising your investment needs and securing your team should be front of mind when planning for growth.

On your marks - Set your priorities

Business owners face overwhelming demands on their time right now. We are emerging from the pandemic and the starting gun for growth has fired. The race is on. But there are hurdles in the way:

• Is there enough money in the business?

• Where is urgent investment needed?

• Can we hold onto to our most valuable staff?

• Are the management information systems up to the job?

Get set - Put money in the bank

“Turnover is vanity, profit is sanity, but cash is king”.

The pandemic drained cash reserves for many businesses. But now that things are picking up, you need to boost your funds fast. Whether that’s to hire staff, buy raw materials, absorb higher prices, adjust to different import and export regimes or accommodate hybrid working arrangements.

Defer or reclaim payments

During lockdown, the Government allowed certain payments to be deferred, such as VAT. Unfortunately, there were mixed messages at the time and some businesses thought that they had to pay up the following quarter so didn’t benefit much.

At the start of 2021, the Government announced that VAT could be deferred further And repaid over a longer period of time in monthly instalments.

If you made losses, you can offset them against corporation tax payments going back three years.

Organise bank facilities

Some businesses are reluctant to borrow – preferring to retain cash in the business for working capital and investment. However, when faced with the inevitable short-term windows of opportunity that open after a recession you need to be able to act fast.

You never know what’s round the next corner. Communication with your bank is key. Share your operational plans, stay in touch and remain aware of the bank’s priorities and criteria for support.

Negotiate overdraft or loan facilities in advance. It’s always easiest to do this from a place of calm than when you are up against a wall of imminent bills or demanding creditors. During the pandemic it was almost impossible for businesses to open new bank accounts – several international clients reported issues in this area. The banks are busy and it may take longer to get what you need.

Assess Government loans

Many businesses took advantage of the various Government-backed loans on preferential rates that were available during the Pandemic. CBILS, CLBILS and BBLS – offering up to £5 million - all came to an end on 31 March 2021. Launched in April, The Recovery Loan Scheme (RLS) is the replacement and extends to £10 million.

Consider re-financing

Those businesses who are still reluctant to borrow might consider re-financing. This route doesn’t require personal guarantees. If you own freehold property you could consider a sale and lease back. There are tax advantages to doing this too.

Other assets that could be used in this way are plant and machinery – which may be an option for businesses relying on significant equipment or extensive production facilities.

Acquire a competitor

Another good reason to keep a reserve of cash ready is to be able seize opportunities presented by those who fell behind during the Pandemic.

There might be a chance to add market share, valuable plant and machinery, rare skilled staff and even customers and order books by a strategic acquisition of a competitor or supplier. Organic growth takes time and the purchase of another company can leap frog you ahead of the game.

Go - Pick your winners

There’s a hidden danger in eagerly seizing every opportunity that comes into view. The temptation to reach out for all of them is great – especially as you try to build that cash war chest.

But the problem is profitability. Or the lack of it. In the quest to generate cash – profitability can be neglected.

Identify the most profitable products and customers

Sophisticated businesses will have robust processes for introducing new products. They will decide what products to sell, gear up for production, agree the pricing and identify the channels to market. They will check demand carefully – perhaps through pilot trials - before committing.

Other companies may not have access to the expertise or resources for this. We’ve helped companies assemble the necessary third-party specialists – designers, researchers, marketing professionals, industry experts - so they can take a more measured approach to launches.

Some clients have excellent systems for monitoring data – detailed monthly operating reports that provide granular information. They can always see what is working and switch gears accordingly.

Many businesses may be looking at improving their data, information and management systems to support more flexible and agile operations. But you need that working capital and management team bandwidth to be able to take such steps.

Take advantage of temporary tax reliefs

Now is the time to make major plant and machinery investments. To upgrade or replace a fleet of commercial vehicles. To set up additional production facilities or fit out new testing laboratories.

In the past, you could get up to 100% tax relief on plant and machinery investments up to £1m. That limit has yo-yo’d around – sometimes dipping as low as £25,000. There is a now two-year window of super-deductions. Until March 2023 you can claim 130% tax relief and there is no limit on the amount you invest. This enables businesses to make substantial tax savings on any planned investment needed to gear up for growth.

Retain your best staff

As markets pick up, there will be greater demand for skilled and experienced people. Regardless of your staff’s experience during lockdown, the competitive market means it is natural that they may be tempted to consider a move.

Business owners need to incentivise valuable staff and lock them into the business. Changing the business structure and allocating shares is one route – but there may be personal tax implications for staff. And they may not be willing or able to buy into the business.

Our preference is for EMI - Enterprise Management Incentives. These schemes reward employees with share options. They are low risk and tax efficient – and relatively straightforward to set up – whether you are a small or large business.

At Haines Watts Reading we are passionate about growing businesses providing advice, coaching and an objective view of the road ahead. We help business owners get fit for the future and navigate growth obstacles.

If you’d like to find out more about how we can support you with growing your business, get in touch.