How can I deal with lack of bank funding to maintain fast growth?
I started up seven months ago, made sales fast and hired three people. But since then my bank funding plan has fallen flat on its face. The banking crisis seems severe and I can’t even get an overdraft, never mind a loan. Can you offer advice on how I might capitalise on such a bad situation?
A. Laura Tenison writes:
The only safe way to start a business without capital investment is to grow very, very slowly at a rate that the business and your personnel can sustain. It has taken me 18 long, hard years to get where I am, and I started in the last recession. The banks scoffed at my business plan and I borrowed £2,000 from my brother to start my first ‘proper’ company. Only now is our gross turnover £19m.
For the first year I worked alone, using an office agency to handle calls and deal with enquiries. I kept a day job and worked on the business at night. After three years I took on two staff; I now have 250. Boring I know, but I lived to tell the tale.
I hate suggesting redundancy, but I fear you have done too much, much too young. If your team are that good and you really need them, how about suggesting reduced or no salaries in exchange for a few shares – it could be the best investment they ever make and may keep you going for now. You could all get day jobs and work on the business at night. Move the office back home, work round the clock and don’t expect life to be easy.
If you batten down the hatches, you will survive the next few years without relying on outside funding and will have learnt through necessity how to run every area of the company on a very tight rein – a lesson that will become the company ethos for the future. You may even get to keep all of the company’s equity. But you need to be 100% determined that this is exactly what you want to do, because you won’t have time, money or energy to do anything else for quite a long time.