So today I want to talk to you about growth.
The exciting time when your idea, your business, your baby, starts getting some serious traction. You’re making sales, customers love what you’re doing and you’re thinking, “Oh we could be onto something big here”. But here’s the catch. More often than not, growth costs money.
And trust me, I’ve been there. I’m someone who’s had full control over their business who’s brought investors in and no longer been the majority shareholder and then more recently acquired the business back. So trust me, I have literally been through it all.
Now, when things started taking off at Crafters Companion, I was faced with that same big question, how do I fund this next step? So I’m gonna go through my own experience of handling growth, when to seek outside help, and I’m going to share my learnings with you in the hope that they can help you too.
Let’s get started. First things first, start with what you’ve got, your personal capital.
When I started my business in the beginning, I backed myself. I took all of the profits from those early sales and reinvested everything straight back to the business. No big salaries, no holidays, and I was able to do that because the sales and the money was coming in. Because at the time, our products were the first of their kind and they were massively in demand. That is personal capital.
It might be a savings, it might be a bit of help from friends and family, or your own time and energy instead of hiring someone else. And, if you can grow using that, then you can keep full ownership, full control of everything and it’s only you calling the shots.
I’ll tell you now, that can be absolute gold dust in the early days, especially if you’ve got a clear vision and you’re still figuring everything out. Because on the flip side, which I’ll come on to talk about later, if you take on investment, then that money always comes with strings. And the more of your company you give away too early, the less flexibility that you’ve got later on down the line.
If we go back to self-funding, every time I made some profit, I was looking at how best to reinvest that.
Should we buy more stock? Could we upgrade our packaging? Should we invest in a better website or better tools for the team? Could we invest in a bigger team? Should we bring in other new skills?
Making the decision to take that money and use it to pay for things that improved our operations, our product offering, and our customer service meant that we were able to grow Crafters Companion from a university bedroom into a company that was not only excelling in the UK, but also expanded internationally.
And we funded all of the set up costs and growth in the US from our profitable operation in the UK.
Now, I am a massive advocate of bringing in outside investment and I did that in my business at what I felt like was the right time for me.
So, when is a suitable time to start thinking about outside investment and if it will be right for you?
Let’s be honest, there comes a time when your ambition might outpace your cash. You might have the chance to launch in a new market or there is demand there that you just can’t meet and that’s when outside investment can start to make some sense for you and your business.
But, and here is the important thing, finding money is relatively easy. Finding the right investor is not. I know how appealing it can be when someone walks up to you and offers you the world on a stick, but don’t just take the cash for the sake of it.
I want you to ask yourself if you really need that money right now, if you can do it another way and whether you are truly willing to give up the control to get the growth that you’re after. I have seen so many brilliant entrepreneurs, both in the Den and generally speaking, rush into raising money so that they can hit the ground running instead of bootstrapping and keeping more of the ownership and control, but then they end up with 30, 20, even 10 % of their own business and then later regret making that decision.
Now, if you do meet an investor and they’re a great fit for you, then make sure that these three things line up…
Firstly, you must have proof of concept. You already know beyond doubt that your product, service or business is right. The model works and you are ready to turbo charge it with more cash. Secondly, you need to move to seize the opportunity. The alternative is taking longer and you’re concerned you’ll get left behind.
And finally, the investor should add value beyond the money. Expertise, contacts, distribution, credibility, try to think about it like a marriage. You wouldn’t marry someone just because they’re a nice car. I mean, maybe you would, who knows? But usually you marry someone because you have shared values, shared goals, you trust them to stick it out through the tough bits. So if you wouldn’t marry them, then don’t do it!
Finally, I just want to say there are lots of ways to grow without giving away equity. You could take a look at grants, especially if you’re doing something really innovative or you’re manufacturing in the UK. You could take out a loan, which could be a solid option if you have a reliable income. You could look at crowdfunding, which has proven to be brilliant for a lot of B2C brands, business to consumer that have passionate audiences.
Or, you could look to form a strategic partnership. For example, you might team up with a retailer who would help fund your growth in exchange for exclusivity or margin. Though again, make sure that you are fully aware of what all of these options entail and make sure you know what you’re signing up for. Think outside the box before you give away a slice of the pie.
So what are our takeaways?
Use your own capital first, reinvest and build something strong. Then only bring in outside money when you are truly ready and the partner is right. And then most importantly, know your worth.
Don’t sell yourself short just because you’re hungry to grow. Growth is brilliant, but growing the right way, that is what builds a legacy. Trust me, I’ve been there and it is so worth it when you do it your way on your terms. So get out there, build smart and go back yourself.