Williams says that when he talks about numbers with business owners they too often have the basics covered but have no overarching plan.

“There’s sometimes a P&L, and occasionally a budget,” Williams says.

“If you’re lucky, there’s a balance sheet. And if you’re very lucky, there’s a cash flow forecast.

“Much the same as with other areas of the business, a financial plan should be aligned to and support your strategic plan.”

For example, Williams says, the kind of financing required by a business that is planning to expand internationally is fundamentally different from the financing demands for a retail store that wants to expand its product lines.

“If you’re not clear about what your growth looks like, if you’re not clear what kind of resourcing you want to invest in from a people point of view, if you’re not clear on how you’re going to drive more business, then it’s hard to know what financing needs you are likely to have,” he says.

Williams says once a business is clear about these things it can then start thinking about what the business is currently able to produce in terms of cash flow and assess whether it can fund off of its own balance sheet or not.

“I’ve seen more than a few businesses over the years that have run into real strife because they burned too much of the cash reserve on the growth strategy and neglected to plan for some cash in the bank to pay for working capital like items like wages, stock and for other things like servicing bank debt or paying a tax bill,” Williams says.

“So it’s important to understand what the business can currently generate and whether that is feasibly adequate to realise your plans.

“If there’s a gap between those two things, what are your options to close those gaps? One of the ways you can do that is to plan out optimising your existing business.”

Williams says businesses should internally consider the following to close these gaps:

• Are there any lazy assets you can sell? Depending on your circumstances, you might get far better growth returns by deploying cash from the sale of an asset into growing the business, as opposed to just owning a plot of land, for example.
• How much longer can I sweat the assets that are on my balance sheet? Rather than spending money replacing existing plant and equipment, perhaps you can let them run for another year, keep your repairs and maintenance going on them, and deploy the cash that you would have used to buy a replacement vehicle or machine into doing something else to grow the business.
• How do you manage your cash flow to help fund growth? For example, can you go back and renegotiate the payment cycle terms with some of your key creditors in order to unlock extra cash flow in the short term?

Financing growth externally comes down to two fundamental options, says Williams.

“One is to go and borrow the money from somebody, and one is to sell a chunk of your business to somebody, an entity,” he says.

In both cases, building relationships over time is key to success, he says, whether that be with your bank or with potential buyers or investors.

“Share your thoughts, plans and suggestions so that you can socialise the journey,” Williams says.

“Start doing this today, long before you ever need the money because people that know you are going to find it far easier to digest the financial statements, opportunities or contracts – whatever it is that you’re building out when you go and sit with them to look for external finance.

“Some of the most successful sales deals in companies that I’ve been involved with have been bilateral agreements with folks that we built up a relationship with over time.”

Reflecting on staff retention in a finance context, Williams says that share options for staff, or a phantom share scheme, can be a good solution in some cases, but they require advice and serious consideration of the technical consequences. For example, how you treat and manage voting rights, capital expenditure and tax implications.

“I have found them to be an incredibly useful tool to motivate and keep the core critical resources in the business engaged. But it’s absolutely imperative that you go and get advice from specialists in the space to help you understand all the various implications,” Williams says.

Whatever financing approach you take, Williams says to remember it’s okay to have to consult.

“Having more smart people around the table trying to solve a problem is not a bad thing,” he says.

“You don’t have to paddle the boat alone because heaven only knows being an entrepreneur is a super lonely and tough journey. Having other people in the boat with you is both rewarding and good for the business – good for the company and the people in it.”

Williams spoke with Dr Jana Matthews, ANZ Chair in Business Growth and Director of the Australian Centre for Business Growth at UniSA, as part of this series.