As the years of recession role on, it’s so clear how important growth and having cash reserves are in your small business. How can you have a sustainable business if you don’t have growth and if you don’t have cash when you need it to perhaps invest or fix things up? How can you have sustainability without economic growth? Okay, some environmental economists have looked at what prosperity could look like in a finite world with limited resources and a population expected to exceed 9 billion people within decades. It’s not an easy question to answer, especially when you are working in an old paradigm and you have to make decisions in the here and now.
But you see companies that have a mandate to pursue the growth agenda taking risks in markets far away from their home markets as shareholders put pressure on them to grow. When the cellphone and service provider market saturates in a home markets what can you do to increase revenue? Jack up airtime rates and because data demand is increasing spike that cost up too. But how far can you go? Next thing you start to look outside in so-called underdeveloped markets where the risk is higher, including regulatory risk.
Now, a small business owner does not have the same shareholder pressures unless he or she has investors in his or her business. A case in point: a small business owner in this economy has expanded no less than three times, making those three decisions himself. His business continues to grow, because he has discovered a growth niche and is providing value that the major national chains can’t match.
The other area is cash reserves. For the listed company the problem is that because of financial rules and regulations only so much cash is permitted to be kept in reserve. Without cash reserves the larger mining or industrial companies find it difficult to maintain operations. In a resources commodity down cycle, you might think that it’s a good idea not to invest in your plant and equipment. But if you don’t, it’s going to be far more expensive down the line when demand for resource commodities increase. Yes, you can find different ways to raise finance later on, but it will come with an added cost.
For the small business owner who has built up reserves, a cash kitty, he or she has flexibility to invest, replace outdated or worn equipment and, when necessary, bring in new technology. Another case in point: a small printing business has bought a new flat-bed, A3 scanner to improve reproduction quality for customers. Without a cash reserve, the scanner would cost double if it was bank financed.
Are you as a small business owner taking advantage of the freedom and independence you have to make decisions about growth for your business and are you building up a cash reserve or cash kitty to make improvements in your business?
