How to Maximize a Capital Injection
A CFO’s Guide to Optimal Capital Application
A capital injection, be it in the form of debt or equity, can be the start of a new chapter for a struggling business. It can remove hurdles, create opportunities, and bridge gaps that were previously untraversable. Without concise planning, meticulous execution, and thorough oversight of the entire process, however, a capital injection can yield little to no results.
Kevin Fagundes, the Chief Financial Officer at Express Business Funding, provides his tried and tested methods for maximizing a capital injection.
“Most business owners with whom I have worked are incredibly talented in their respective fields – but finance is an industry unto itself, and it can be a real challenge to tackle financial obstacles when you don’t come from a finance background. With a good plan and a little help, though, even those with no financial experience can leverage a capital injection effectively,” says Fagundes.
Conduct a financial and operational analysis
By assessing your company’s financial and operational status, you can identify its needs. Once all needs are identified, you can begin prioritizing them. Drawing a roadmap like this allows you to plan for any eventuality in the resolution of outstanding issues. Regardless of the steps you take to maximize your capital injection, it’s imperative that you start by conducting a thorough analysis of your business’ finances.
Employing an expert in this field is advantageous, as they are often familiar with the kinds of issues that businesses face and how to address them cost-effectively and expeditiously.
Map out your goals
“Your goals don’t have to answer your immediate needs. Sometimes goals, such as the establishment of secondary revenue streams, can be as advantageous as addressing a stumbling block. If your newly available capital only allows you to choose one over the other, it’s important to ascertain whether you will gain more by way of cash flow growth or the prevention of significant loss by plugging a hole. Sometimes, however, setting smaller, more manageable goals, allows you to spread your budget in such a way that it permits you to address both needs. By setting goals and assessing the whole landscape, it is easier to identify the best route forward. Don’t be afraid to look long-term when doing so,” says Fagundes.
When you have an increased availability of budget, it’s possible to reduce supplier costs by leveraging your improved buying power.
Conduct an analysis of high rotation stock. Once this is complete, discuss the benefits of purchasing larger volumes with your suppliers. Many suppliers will offer up to 30% discount for larger purchases.
“Don’t be afraid to ask for bulk discounts. It’s better to ask and get told, ‘no’ than to keep quiet and miss out on the opportunity to hear, ‘yes’. If a supplier isn’t willing to entertain the discussion, then perhaps your money is better spent elsewhere. And if they are willing to entertain the discussion, then the relationship is worth nurturing and you can begin negotiations without having to seek out a new supplier. It’s really that simple,” says Fagundes.
Tackle Outstanding Debt
“Outstanding debt can feel like a pit you have to dig yourself out of. Every month, you’re starting at below zero. Not only that, but it’s also going to impact your creditworthiness as a business if it becomes problematic or impossible to pay said debt. Clear non-beneficial debt off the books as quickly as you can when you can,” says Fagundes.
Beneficial debt (in a business context) does exist (see Asset-based Lending and its tax benefits), so it is vital that you ascertain which debt serves little to no purpose for your business. Non-beneficial debt could take the form of short-term loans, special loans, and other loans with no linked asset or tax benefits.
Invest in (Great) Marketing
“Great marketing comes at a cost. This makes it inaccessible to a cash-strapped business. But, if you have the capital available to fund a great marketing strategy, at least until the strategy can prove ROI and essentially fund itself, then you should absolutely look at it as an option for how to maximize a capital injection,” says Fagundes.
Established marketing agencies will provide case studies to prove historical success in industries similar to yours and set KPIs that will prove a return on your investment. Don’t buy into snake oil – do your homework, tap into your network for references, and ensure that you are spending your marketing budget effectively.
“The automation of processes is a guaranteed way to increase productivity. I’ve seen instances where businesses were able to cut project timelines in half by implementing effective automation. Whether it’s software, upgraded machinery, or the contracting of skilled worker/s, there’s no doubt that improved processes have a significant impact on a business’s bottom line,” says Fagundes.
Get Help from the Right People (Bridge Skills Gaps)
Whether you are experiencing a management issue or a breakdown at a financial level (or anything in between), there are experienced consultants available to assist in refining your business. If you are experiencing a skills gap somewhere in your organization, it is recommended that you use your available cash flow to bridge this gap.
It is also beneficial to look inward when identifying the person/ people you need to bridge a skills gap. Sometimes, it is possible to upskill those within your business and allow them to alleviate the headaches that your business is facing. This also aids in employee retention – by offering growth within your organization, your employees are much more likely to show loyalty to you.
Ask Express Business Funding for Help
“At EBF, we pride ourselves in our ability to assist customers with more than just financing. Our expertise is at our customer’s disposal, and only a phone call or email away when they’re needed. If your business is at an impasse and you need help but don’t know where to get it, I’d love for you to reach out to me. My team and I are here to help!” concludes Fagundes.
You can reach Kevin or a dedicated Business Development Manager here.