Business is good. Is it time to start looking at expansion? Should you set up
new locations, expand your production lines, add to your product mix or open
new offices to attract more clients? How do
you determine what steps to take and when
do you start thinking about expansion?
According to Jim Kimbrough, chairman,
president and CEO of SunTrust Bank,
Nature Coast, “Take care of today but plan
for the future. Tomorrow is definitely going
to provide different challenges and opportunities. This is especially true in a growth
state like Florida. You never know when a
door may open that provides an opportunity for corporate or personal expansion.
You need to be ready.”
Smart Business talked with Kimbrough
for more insight into areas a person should
take into consideration as they think about
expanding their business.
How important is it for a business to plan for
growth?
It is critical for the most efficient growth
of a business. Planning should reduce, if
not eliminate, the problems of too little or
too late. There are five things that you don’t
want too little — or too much — of if you
are going to successfully grow your business. They are inventory, staff, facilities,
capital and debt. A good business plan,
updated at least annually, can be a key
ingredient to efficient growth. At the very
least, it will eliminate some of the bumps. It
is also imperative to be open to change as
the plan and time evolve.
What are some of the basics to keep in mind
as you ‘expand your territory’?
What is the forecast for the demand of
your products or services? What is the economic forecast? Who is your competition?
What have been the reasons for their successes or failures? What can you do differently to maximize your potential? What
will be the cost of facilities? Consider land
and building costs as compared to rental
costs. Determine your options and how
they fit your business plan. Also, will you
be able to maintain your profit margins in the expanded territories?
How important is cash flow management?
It is a major key to the success of any
business. You have to make payroll, pay
suppliers, service your debt requirements
and meet the demands of owners/stockholders. You have to cover the cost of
inventory to supply demand. You have to
be prepared to weather the storm during
lean times and stock up during good times.
What are some strategies for restructuring
debt to improve cash flow?
Identify idle company assets that might
not be contributing to the business in the
years to come. Outdated equipment, buildings, etc. should be sold to raise cash.
Excess or outdated inventory also should
be disposed of to help cash flow.
Re-amortizing or extending debt over an
extended period or consolidating loans can
have a substantial positive effect on your
cash flow. Infusion of cash from owners
may be needed. Sometimes this infusion of
cash from owners may be the only way to
grow the business.
Who should be involved in the decision-making as you plan for growth?
The CEO and other substantive shareholders. Those within the company
should include the CFO, sales and/or
marketing manager and others that
might have responsibilities and insight
on potential expansion. Outside advisers
should include the CPA and company
banker.
What does a loan officer look for when processing applications for growing companies?
Earnings history and the future outlook for the products or services are
important. Credit rating, ownership
structure, current debt to equity ratios,
and how the company is handling past
and current debt are reviewed.
Diversification of assets, products or
services, and client or customer base are
all considered. The makeup of assets
can be important. Last, but not least, the
loan officer considers how prepared the
company is to handle change.
Are there specific ways your banker can
help as you consider growth potential?
The banker is going to look at what has
fueled growth or been your catalyst for
success to date. He or she can help analyze personnel to be sure that you have
the right people on board and might be
able to assist in finding the new people
you need for expansion. They’ll help
analyze your company finances and help
determine if you have the money, can get
it readily, or are willing to take on debt
or find partners or additional owners.
JIM KIMBROUGH is chairman, president and CEO of Sun Trust
Bank, Nature Coast. Reach him at [email protected] or
(352) 754-5505.