Are you in good shape for growth


With economic indicators pointing to a return to growth in Britain, UK businesses are moving out of survival mode and focusing on revival. To take full advantage of the upswing, companies must be ready to tackle the challenges of growth.

With economic indicators pointing to a return to growth in Britain, UK businesses are moving out of survival mode and focusing on revival. To take full advantage of the upswing, companies must be ready to tackle the challenges of growth.

For the first time in years, mid market companies across the UK are planning ahead with a shared sense of confidence, and with their eyes firmly fixed on growth. While the long-awaited economic recovery presents a range of opportunities, a good growth strategy must also take into account the risks inherent in business expansion.

From Lloyds Bank’s experience of working closely with companies, of all sizes and from all sectors and throughout the economic cycle, we have identified four key areas that businesses would do well to ‘health check’ when preparing for growth. The first of these is capacity.

Companies exiting a recession tend to be lean – they may be undercapitalised or under-resourced, which can make it difficult to cope with the demands of swift growth. As such, it is important to predict not just current capacity, but also medium-term capacity. Companies will need to consider what level of investment in systems, machinery, or staff will be required to ensure they keep pace with growth. It is also worth considering what the opportunity costs of not investing in the company’s asset base might be. For example, old technology is likely to be inefficient and have higher running costs.

The stress placed on a growing company will tend to show operationally – and this is the second suggested area to health check. Introducing or updating key performance indicators can assist in making sure operations are running efficiently. Ensuring the company’s supply chain is ready for growth is another imperative. Will the distribution network cope with an increase? Will the company be able to source raw materials quickly enough to fulfil rising orders? These questions will take on even greater importance for those companies looking to expand overseas.

A third consideration is that business expansion will also have significant financial implications. As the company grows, it will likely need to fund asset purchases, increased working capital requirements and investment in premises, plant and machinery. When taking on more debt to fund these purchases, companies must carefully consider the impact that rising interest rates would have on their repayment obligations. A strategic review of the company’s fixed/floating mix would be pertinent – as would a review of the best available funding sources.

Lloyds Bank can assist with this. Every business faces unique challenges and opportunities, and our relationship managers are fully committed to understanding these issues and applying their expertise and experience to help their clients to become ‘fit for growth’. We offer end-to-end capability and expert advice across debt solutions and strategic finance throughout the entire working capital cycle, via trade finance and asset-based lending. For companies looking to expand internationally, or begin sourcing overseas, Lloyds Bank also offers a range of tools to help mitigate foreign exchange risk. Efficiently executing international payments is another challenge of expanding into new markets – we offer transactional FX solutions designed to ensure the best exchange rate is secured every time.

The fourth ‘fitness’ consideration is strategy. To make the most of their growth potential, leaders of mid market companies will require a practical vision of the company’s expansion. This will mean setting goals, such as becoming market leader in a particular segment or entering new markets, together with a plan of how these goals will be achieved. Lloyds Bank’s insight and experience in assisting companies to achieve their growth ambitions can be invaluable in ensuring the chosen expansion strategy is closely tailored to the operational and financial fitness of the business.

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