First Midwest BankFirst Midwest Bank logoArrow DownIcon of an arrow pointing downwardsArrow LeftIcon of an arrow pointing to the leftArrow RightIcon of an arrow pointing to the rightArrow UpIcon of an arrow pointing upwardsBank IconIcon of a bank buildingCheck IconIcon of a bank checkCheckmark IconIcon of a checkmarkCredit-Card IconIcon of a credit-cardFunds IconIcon of hands holding a bag of moneyAlert IconIcon of an exclaimation markIdea IconIcon of a bright light bulbKey IconIcon of a keyLock IconIcon of a padlockMail IconIcon of an envelopeMobile Banking IconIcon of a mobile phone with a dollar sign in a speech bubbleMoney in Home IconIcon of a dollar sign inside of a housePhone IconIcon of a phone handsetPlanning IconIcon of a compassReload IconIcon of two arrows pointing head to tail in a circleSearch IconIcon of a magnifying glassFacebook IconIcon of the Facebook logoLinkedIn IconIcon of the LinkedIn LogoXX Symbol, typically used to close a menu
FDIC-Insured - Backed by the full faith and credit of the U.S. Government
Keys To Managing Small Business Growth Without Major Investors
GET INSIGHTS

Get monthly ideas delivered right to your inbox.

Subscribe for Insights

For Your Small Business Jia Rizvi May 9, 2024

Keys to Managing Small Business Growth Without Major Investors

There are many reasons to grow a small business without investors. You may want to keep 100% of the equity in your business rather than share it. Or maybe your business isn’t having success attracting investors (yet). Whatever the reason, you still need money; if you don’t have investors, you’ll have to get creative.

The good news is that you’re not alone in financing your business without funds from investors. Approximately 80% of businesses are bootstrapped, according to reporting from Gitnux. Companies that bootstrap are more likely to succeed in the short- and long-term, and 60% are profitable within two years. To hit these metrics, you need to understand how to manage your small business growth without help from investors.

How to Grow Your Small Business Organically

Most companies without investors are founder-funded, with funds coming from several sources, including the founder’s personal finances and debt through loans. “Growing a business without help from investors is extremely common, but it’s not always easy,” says Justin Levy, CEO of iBusiness Funding, a lender AI platform that automates and streamlines the loan application process. “Successfully growing without investors requires a blend of strategic planning, financial acumen, and a deep understanding of one's business model. Making this decision to raise equity capital, bootstrap and run lean, or utilize debt financing is part of the constant decision-making process for an entrepreneur.”

Here are a few key strategies to effectively manage your small business’s growth trajectory.

1. Embrace Bootstrapping and Its Benefits

Bootstrapping involves using your company's revenues to fuel growth rather than relying on external funding. This might mean plowing profits back into the business to fund expansion initiatives, such as developing new products or expanding into new markets. While this approach can restrict rapid scaling, it encourages a disciplined financial perspective and fosters innovative, cost-effective solutions to business challenges.

Even though it’s challenging, bootstrapping has several benefits, including forced innovation. “When you bootstrap, you are forced to get good fast. As humans, we prefer to put in only as much effort as we need to, but whether we recognize it or not, we all have extra gears. Sometimes it’s not until things get really tough that we find the gears that allow us to shift into overdrive – that is what bootstrapping does for you,” says Ryan Smith for the Harvard Business Review.

2. Leverage Organic Growth Opportunities

One of the most sustainable ways to grow without significant external funding is to focus on organic growth. Yet, “while organic growth is crucial to a company’s survival, many executives underestimate its value. In past research, we found that fewer than 30% of businesses systematically scan for and evaluate new growth opportunities,” says a report from McKinsey.

Focusing on organic growth involves enhancing your existing operations and customer base to increase revenue. Start by maximizing the value of your current customers through upselling and cross-selling. “It's often more cost-effective to increase sales with those who already trust your brand than to attract new customers. Additionally, optimizing processes to create operating leverage and reduce waste will result in greater scale, lower costs, and higher profit margins,” advises Levy.

3. Prioritize Financial Management

“Effective financial management and preserving capital is crucial for any size business,” says Levy. “This involves thoughtful spending, strategic investing, cash flow management, and contingency planning. Entrepreneurs must manage their finances effectively. There are lots of great tools out there to help you monitor and control your expenses to ensure that your financial resources are directed toward growth-enhancing activities.”

For example, automation tools can handle repetitive tasks such as inventory management, billing, and customer service, giving your team more time to focus on the strategic activities that drive business growth. Moreover, data analytics tools can provide deep insights into market trends, customer behavior, and operational efficiency, guiding more informed decision-making.

Managing the growth of a small business without major investors is challenging but entirely achievable with the right strategies. By focusing on organic growth, maintaining strong customer relationships, managing finances prudently, and leveraging technology, small businesses can survive and thrive in competitive markets. These strategies require dedication and adaptability but offer a path to sustainable, independent business success.

Connect with an Old National Small Business Banker for more insights to help your business grow.

This article was written by Jia Rizvi from Forbes and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.

Subscribe for Insights

Subscribe