In our last installment of the 8 reasons why we discussed two roadblocks that, when done right, can provide you with the structure for effective growth. I strongly suggest reading the previous blogs before jumping into this one.
Today we will discuss numbers 5 & 6 on our list of roadblocks. In addition, we will be chatting about leverage (use of debt) and the lack of curiosity.
- Cash Flow
- Dependent Model
- Supporting Relationships (Trust)
- Lack of curiosity
- Vision with a plan
- A mirror
As with this entire series, one of these roadblocks is more tactical while the other is cultural. Why change a good thing now? Let’s get to discussing these two essential roadblocks.
Many first-time or small business owners have the dream of being able self finance their business. Amazingly they will generate enough profit to pay themselves and provide the lifestyle they want while fueling their business growth. However, this is rarely possible. Instead, you will need to get some source of financing, which brings us to leverage.
Before I explain leverage and how you can use it to pole-vault your business. I must share a warning. With leverage comes taking on debt; debt comes additional risk with potential greater reward. However, if you have assembled a team of supporting organizations, including CPAs, CFP’s, & Business coaches, you can mitigate this risk.
Now that I have shared the warning, let’s dive into the superpower that can come with leverage. What is leverage?
Leverage results from using borrowed capital as a funding source when investing to expand the firm’s asset base and generate returns on risk capital.
Okay, so what does that mean. Let me give you a scenario that may help. Say you have a fantastic toy that requires you to cut out many small pieces using a laser cutter. However, your company is currently only worth (equity value) $100,000; this is the money you are using to cover your current operating expenses.
However, you know if you were able to purchase a few laser cutters for, say, $300,000, this would expand your max capacity and allow you to increase your total production by a factor of 10. So how can you raise this money?
If you watch Shark Tank, then you have seen companies raise money by giving up equity. However, there is another way by using debt financing.
You can borrow the money that you would need to purchase the equipment. Essentially you provide the lender with a promise to pay back the debt plus interest. This is an excellent option because you do not have to give up any ownership control of your business.
When to use leverage? When it comes to business, it is best to use leverage when launching new projects, increasing inventory, capital expenditures, and expanding the company’s overall operation.
If you’re considering expanding your business or have the desire to grow, make sure to consider leverage (debt) as an option to reach those goals. Once again, make sure to consulate your team of experts before taking on the additional risk. This can be a great tool to grow your business without giving up a level of operational control.
P.S. There are many ways to debt finance your business, from private lenders to small business loans.
Lack of Curiosity
Would you consider yourself curious?
Building a culture of curiosity can be one of the greatest tools to getting your business past the roadblocks that keep it from growing. Curiosity leads to problem-solving, problem-solving leads to calculated risk-taking, and calculated risk-taking leads to exponential returns.
This trait needs to be developed into your culture, not just an owner trait. You want all of your employees to be curious. This is a weird thing to hear from a consultant who specializes in creating SOP’s, but to me, it is truly the most important trait have in a company. So how do you build curiosity? There are many ways, but here are a few of my favorites.
- Manage through questions
- Have a failure policy
- Communicate your guidelines
- Create time for staff to explore their interests
- Create employee dream plans as part of your onboarding & employee review process
- Engage all levels of your organization in strategic planning
Anyone or a combination of these systems can begin to develop a company-wide curiosity. So what are the benefits of curiosity?
- Your team will feel more positive and driven toward building the organization.
- As an owner, you will have reduced stress because your employees will constantly use their problem-solving skills.
- Your company will develop a shared language organically and system for communication.
- As an owner, you will develop higher levels of trust
- Your company will become a place where people want to work
- As an owner, you will begin to see problems solve themselves
With all that said, how are you developing a culture of curiosity?
Wow, what a third entry in our series. I hope you have begun to see changes you can make in your business at this point. Next week we will wrap up out 8 reasons your business is not growing with the importance of creating a shared vision and the most crucial reason a lack of a mirror,
Please feel free to share this series with a friend or colleague and let me know your thoughts in the comments. Also, if we can be of any assistance or answer any questions, please feel free to email us.
Remember, the best time to make a change was yesterday, so you better start changing today.