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They say that a staggering 96% of all businesses fail within their first 10 years, and this highlights the incredible range of challenges that can undermine SMEs when they first enter their chosen marketplace.
While businesses can struggle immensely with an array of issues when they first start out, there are some that have become recurring themes in the SME realm. One of these is the lack of an agile and sustainable business model, which can underpin organic and long-term growth while also minimising external debt.
With this in mind, it is important to develop a flexible business model that can sustain your business during challenging times. In this post, we will explore this in further detail and ask how such a goal can be achieved.
The Importance of Creating an Agile Business Model
When you develop your business plan, you are likely to have a number of core objectives that revolve around a predetermined exit plan. Whether you want to sell your brand as part of a large-scale merge in the future or ultimately float your company shares for the purposes of stock and CFD trading, the cultivation of an agile business model is crucial if you are achieve your business goals.
To understand this further, let’s take a look at the way in which you fund the development of your business model. Historically, firms would take out a bank loan against their business plan and a fixed form of collateral, while committing their venture to rigid repayments and a potential cycle of long-term debt. This can undermine your businesses ability to grow organically and in line with demand, while it also restricts your profitability over a defined period of time.
In the modern age, however, an agile business model would see you seek out innovative and short-term funding options, which dramatically reduce the cycle of debt and the financial burden placed on your venture. One example is factoring in supply chain financing, through which flexible company assets such as their accounts receivable and purchase orders are leveraged to secure advance funding. Capital can be secured to the value of these assets, providing instant cash flow and optimising the level of working capital that exists within your business at any given time.
This debt is then repaid when clients settle their own invoice along 30, 60 or 90-day terms, freeing your company’s assets and optimising these over time.
How Does Such an Ethos and Business Model Allow for Sustainable Growth?
This is certainly a business model adopted by ambitious brands, with a number of tech start-ups now seeking their funding through peer-to-peer platforms and vehicles like crowdfunding. Take Ouya, for example, which is an open-source game console that was able to raise over $8.5 million in just 29 days through the crowdfunding platform Kickstarter. Not only did this minimise many of the traditional barriers to entry surrounding commercial financing, but it also helped firms to retain their equity and control of their core business plan.
This, along with the previous funding options we discussed, offers a clear insight into how an agile business model can underpin sustainable growth. Firstly, it removes restrictions in terms of the accessibility of finance, while enabling businesses to retain as much of their equity as possible from the outset. This is key as you look to develop your business and ensure that it grows in a sustainable way, as you are able to retain control and ensure that as much capital as required is reinvested into the venture.
If this ethos is continued throughout your venture, you can also begin to seek out flexible and impermanent business solutions that reduce fixed cost bases and allow you to adapt your SME in line with demand. Pop-up stores and temporary employees (who are usually skilled and hired according to the requirements of each individual project) allow you to expand your venture quickly and affordably, without committing you to huge financial costs. As a result of this, you can also adapt to change in real-time, without deviating too far from your long-term growth plan.
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