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Breaking the $2 MM revenue mark: Not as simple as increasing sales

First West Capital has financed many fast-growing companies, but according to a recent StatsCan study, highly profitable firms have a greater chance of reaching success than firms that grow too quickly. There are three recurring themes present in companies that have achieved, and sustained, growth rates in excess of 10% per year, while maintaining profitability and securing the financing required.

A professional management team

As your business grows, operational issues become more complex and successful companies invest early in human capital to manage functions like sales, finance and business operations. Knowing your strengths and weaknesses is critical and will help you identify any talent gaps, as well as innovate and diversify.

Developing your team allows you to spend more time on the business and helps demonstrate your financial strength to prospective lenders or investors. Without a professional management team, your company is at risk of looking unprepared or lacking the financial sophistication required by lenders, resulting in missed opportunities for growth and financing.

Think you can’t afford it? Consider a part-time CFO or a contractor to complete a specific project, such as develop a strategic plan or work with lenders to secure the financing required to achieve the growth goals.

Flexible business model with proven revenue streams

Traditional lenders typically want to see a track record of profitable revenue growth and a proven market for the next phase of your expansion before considering growth financing requests.

It is also important to prove you can walk, before running. Consider leveraging crowdfunding sites, such as Kickstarter, to test the market and raise much needed capital to fulfill the initial orders. Success stories like Ryan Grepper’s Coolest Cooler, which went viral and raised $12.5 million more than his original $50,000 goal, prove this method can be effective. First West Capital client, ESPRO, also used this method to test its products in the marketplace across North America.

Instead of committing capital to manufacture your product in-house, consider using a contract manufacturer or co-packer that has smaller minimum run sizes – enabling you to launch a new product or expand your product line without making a major capital investment. Alternatively, rent the equipment needed to prove that with increased capacity, revenue will increase.

To prove your model works in a new market, options include working with a manufacturers’ representative or distributor to expand your market through proven channels. This is critical if you are expanding into a new, unknown global market.

Leveraging technology

A company which cannot adapt quickly to change may find itself left behind; once a company starts to lose market share, it’s position in the market can decline rapidly. Technological savvy can help mitigate these changes by facilitating communication, innovation and cost-saving efficiencies.

The use of internet-based services like Skype, GoToMeeting, and cloud-based marketing automation systems can synergize your efforts to reach your market with little capital invested.

Similarly, agile manufacturing is an approach which focuses on meeting the needs of customers, maintaining high standards of quality and controlling the overall production costs. Companies which utilize agile manufacturing tend to have very strong networks with suppliers, and numerous internal cooperative teams, which work to deliver products effectively. They are able to respond quickly to changes in the market by retooling facilities, negotiating new agreements with suppliers, increasing production based on consumer demand, or redesigning products to suit the open market.

The result of executing these strategies is financial stability, allowing you to build a strong customer base while continuing to innovate and introduce new products – keeping you ahead of competition and on the path to sustainable, profitable, growth.