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  • Writer's pictureMarc Primo

Do I Need Growth Capital?

Updated: Mar 19, 2020

The following is an article “Do I Need Growth Capital?”

by Marc Primo.

Wealth in the form of money or ''capital'' out of all the things you might need to grow a business endeavor capital is probably the apparent guess that anyone would spit out.

But, do you know what ''Growth Capital'' is vs ''Working Capital''?

If you don't then you are doomed to go down the path of countless failed businesses that fail to plan out their growth. When you strategize how your business will grow in what timescale and how this growth will be funded, then you are thinking about growth capital.

Working capital is meant to pay your bills and maintain the current status. Having working capital to stay afloat every month is great and necessary, but if you want a bigger and better future, it’s growth capital you want.

Growth capital isn’t tied to any business cycle. Instead, it is meant to further the long-term goals of the business.

There are many ways to go about acquiring growth capital. Loans, investors, dutifully stashing a percentage of earning away for a determined amount of time. The problem is not in getting the capital but in how it is utilized.

Understanding how growth capital works and what it can do to help your business is important. Especially when the goal is to make your business larger and stronger.

All businesses have the potential to grow. The market is always fluctuating and consumers will follow the better option as long as it is available. So why do so many fail? Thousands of factors are involved in the failure of any endeavor, but these two are very common.

1-Many are content with generating working capital and stay small. This makes them vulnerable to the everchanging economic landscape since bigger and cheaper alternatives (sometimes better) usually end up eating their share of the market.

2-The other main reason behind failure is going forward with a growth plan too quickly.

So which is it? Doomed if I do doomed if I don't.

Here is the deal. You should be wise about the rate of growth, meaning the speed at which you burn that growth capital. It can take time to see your investments develop, and make a positive contribution towards the growth of the overall business, if you don't have an unlimited amount of money (most of us don't) then pacing yourself and patiently waiting for results before you take the next step is the smart way to go. Too many business owners fail because they burn through their capital and end up with little to show for it. This only means you need to spend time analyzing your business with a critical eye.

Depleting your growth capital before time leaves your company in a weak position. The competition strikes and there is no cash left in the coffers to strike back or even subsist the fire. Getting into a cash-strapped position should always be avoided and this can only be done through thoughtful planning.

It might make sense in the heat of the moment to grow fast but focusing on slow, sustainable growth builds trust with both customers and investors. Being first is not always the best strategy. Watch out for any cash burning tendencies you may have and think things through. Slow but steady.


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