Growth Strategy: Adapting for Scale in the Current Business Climate

For middle-market companies seeking growth in a changing economy, change is constant and strategy means everything. Managing the day-to-day needs of customers may be company leaders’ top priority, but it takes a realistic long-term growth strategy to stay in front of an unpredictable business climate and fast-evolving market forces.

The right growth strategy depends on what unique forces are affecting a company’s industry, as well as their budgets, local talent pool, team, and facilities. The help of trusted partners – including your accountant, lawyer, and commercial banker – is essential for mid-size companies to understand their options, and make sound investments in growth-driving (or growth-supporting) areas of the business.

Old national  combines deep expertise on the challenges facing mid-sized companies with strong local knowledge on the markets they serve. Here are a few key areas where mid-size organizations work with Old National as they define their long-term growth plans and determine how to finance them.

Real Estate

If you are renting a building, plant, or other property that is not essential to your business’ future, the flexibility of leasing the space may be beneficial to you. But if the property is a key component of your long-term business plan and strategy, owning that real estate creates tax advantages and additional benefits – like giving you an asset that can be left to heirs in the business succession plan, or rented out to others if circumstances change. 

Change is constant, however, and pivoting your strategy may affect how much space you use, how many facilities you need, or how a new or existing piece of real estate should serve your business. The appropriate financing option depends on the use of funds – like acquiring a property in a new market or renovating an office to support a rebranding – as well as the company’s timelines for the strategy and the level of risk involved in the overall effort. 

The risk level can be elevated in growth-driving scenarios. For manufacturers or others with high-specificity needs, for example, there’s a substantive level of risk involved in buying or building facilities to support new product lines that may be unsuccessful. Trusted banking and accounting partners should help you model returns realistically to avoid becoming over-leveraged. 

The right timing for a real estate financing effort also depends on the organization’s existing debt profile and asset mix, which affect their overall risk of default and sensitivity to (potentially changing) interest rates. A trusted banking partner can help you monitor economic policy and discuss how interest rate changes may affect your business.

Infrastructure and Processes

Once you know what your real estate plans look like, adapting your infrastructure and processes is another step to enabling your growth strategy. 

Following the manufacturing example above, a company expanding into a new product line may also need to finance new equipment for packaging, or new supply chain partners or technologies for distribution. 

Additionally, mobilizing products or services into new locations and markets changes how your infrastructure and equipment get utilized, which may affect company finances significantly. Proximity, for one, is an important concern: Moving to a facility closer or further from existing customers and suppliers, can drastically affect transportation and equipment costs – potentially lowering ROI on the overall growth strategy.

Equipment is one of the most significant capital investments for a company, so it’s important to maintain a financial structure that preserves capital for your business to use. Extensive modeling and mapping with financial partners is necessary to determine the right finance or leasing solutions.

For some companies, the cost of equipment is countered by the savings of taking the human capital component out of certain processes through technology and automation. That said, embracing automation is not a fail-proof enhancement to an existing strategy. 

In manufacturing environments, automating processes require extensive investment in new machinery and training (without eliminating the need for skilled labor and engineering). In software-heavy industries, process automation requires employees to embrace new ways of working – which they may push back against unless automation feels valuable to their roles and central to the growth strategy.

While automation may help to innovate and grow your business, there are risks to increasing the debt service to automate areas of the business. A trusted banker will assist you in navigating and managing those risks to help your business grow by determining the right financing options for your longer-term strategy.

Talent

That longer-term strategy should include a focused plan for retaining top talent and maintaining a pipeline of qualified new employees. 

Investing in things like employee engagement programs and development opportunities is key because turnover and low satisfaction create hidden costs in lost productivity and resources spent on training and recruiting. 

Ensuring employees feel valued is also crucial to your growth because the success of any strategy hinges on your team’s ability to execute. 

Adapting your business for growth demands a clear understanding of what your staff does well (and how you iterate on that success) as well as where your talent is lacking. Looking critically at operational performance across departments to spot areas of opportunity for arbitraging costs using outsourced labor, or for consolidating areas of the business into partnership with competitors, is an area where trusted banking partner can help you spot opportunities or finance timely deals. 

Acquiring talent is possible, too, but hiring through M&A is costly and risky. Especially in smaller markets and service-oriented industries, nothing is more important to staying competitive than keeping your top talent on board and motivated to help the company reach a better, stronger future. 

Financing for a changing landscape

Leaders must prime their businesses for future success with investments that create meaningful growth. 

But mid-size commercial borrowers are wise to be cautious with the reasons they take on debt. Loans applied toward unproven technologies or untested product lines can saddle a company with debt while compromising existing performance.

Interest rates are low (and may be even lower by year’s end), but all forms of financing – including lines of credit, traditional commercial loans, or SBA loan solutions – come with unique risks and considerations that a banking partner should help you navigate. 

 

Old National can help mid-size organizations navigate their financing options and understand their unique considerations. Contact Old National to build a solution that meets the needs of your growth strategy.