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Investment vs organic growth

Dr Gavin Scrub looks at the reasons for, and consequences of, early funding decisions

Small companies often have stark choices to make when trying to grow: build the business organically or seek external investment. People don’t always consider funding a strategic decision, but it should be, as it will affect the culture of the company.

The decision to obtain external funding is often driven by the need for strategic expansion or for specific projects. This is a much better situation than if external funding is needed to cover day-to-day costs. It buys you time to find the best funding route and decide if you actually need it.

Regardless of motive, an advantage of seeking external funding is that you are introduced to individuals with substantial contact networks who now want you to succeed. You will need to build these relationships and spend time outside normal business operations to take advantage of the opportunity. Funders will want a credible story that shows how their investment will turn a profit in future and how funders will realise this profit.

This is an extract from the Business & Management Magazine, Issue 278, October 2019.

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