Expansion: Borrowing to grow

It seems to be about the money

The recent business failures are due to the approach to group expansion.

Thomas Cook Group expanded on a wave of optimism. Servicing the debt would be easy in those market conditions.

The expectation that assets remain stable and creditors won’t get nervous is the common view. However, the reality is that lenders aren’t interested in the long term.

Thomas Cook PLC establishes this, first the banks require an additional £200 million then they increase this to £250 million. This action cascades the demise of the business.

Borrowing versus Investment

My personal approach to expansion has always been pragmatic, never buy another business, it adds to the risk. Use new money to expand, never link it to assets alone. Never borrow from a bank, high street or commercial lender.

A new investor requires some equity or incentive to join the journey. They stand to lose and need to engage to protect the investment. Also, they understand the risk.

Therefore, my approach is self-fund expansion, where that isn’t the option, find the right investor.

The “Right” Investor

  • The investor understands the business
  • The Investor recognizes that they profit from the expansion
  • The investor has a real stake in the success
  • The Investor must be involved

Borrowing against a business plan is viewed as a safe option for business owners. However, actual versus projected performance complicates matters.

Banks protect investor funds, therefore, reducing the risk. Consequently, the Bank is forced to react.

Therefore, cut out the bank!

Expansion through Investment

The need for a clear approach to staged growth and expansion underpins the investment strategy.

Ask simple questions: why the expansion is required? who will gain? how long will it really take?

Therefore, use three lines of projected performance, the:

  • Desired
  • Actual
  • Minimum

Explain the risk factors. Report performance monthly.

Investment Strategy

Consequently, planned expansion needs a clear strategy.

“Like a joke, it has failed when you have to explain the punchline!”

Contact us for more detail on how to attract investors with a powerful Investment Strategy!

Preparation

Preparation
Preparation and planning

Preparation! Winning Tender Writers build a foundation for successful bidding. Therefore, the preparation time is critical.

The Gift

“O wad some Power the giftie gie us

To see oursels as ithers see us!”

Robert Burns

This is the gift described by Robert Burns and business owners can do something about what the Buyer sees.

Although, the public image isn’t the first step in the due diligence process our public reputation can pose a problem.

Check
Check your profile

An example: A Care Provider presents evidence in their bid document that states they respond to and resolve every complaint.

Based on the information they have presented it would appear correct and complete.

However, the local care providers database has a clear complaint about the service, it has been read frequently. The Care Provider has ignored the complaint. Therefore, public evidence contradicts the bid.

As a buyer reviewing your evidence would I be confident that the information presented was accurate?

Consequently when preparing to bid set aside some time to review your public profile. Always do something about outstanding criticism.

Evidence

Proof of competence requires preparation. Take time to gather real evidence.

All of us have encountered academically skilled individuals, however, they lack competence at point of delivery.

On paper, the qualification looked right, in practice, there was still a distance to be traveled.

Therefore, our evidence needs to be gathered over time and from a variety of independent sources. Focusing on Care Providers, one round of surveys provide a snapshot. However, effective preparation ensures access to a wider data set.

Winning Tender Writers know how to present the evidence “what you do”, “why you do it”, “what your existing clients think”. The evidence comes from your customers.

Preparation Never Ends

The key to winning tender writing is constant preparation. Gathering, collating, and presenting evidence of competence of service is never rushed.

The Offer

The team at Mark P Trotter focuses on ensuring that your business is tender ready.

The document review is a simple step but important. (I’ll explain why in another blog”) Public profile, again straightforward enough. Evidence of what you do is relatively easy.

However, combine and present that information for Winning Tenders and the challenge has changed.

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