Most businesses will undergo hardships or times of change in their lifespan. The desire of every entrepreneur in these stages is to survive.

Being resilient in the face of struggles is crucial to the long-term success of your business. It gives you the time to meet your goals and avoid the negative ramifications of losses or unforeseen closure. It also means that when you are ready to step away from the business, it remains attractive to buyers to bring you profit.

Many factors affect business longevity. You need to adapt to change, continually drive demand and operate sufficiently. Having the funding you need is crucial to promoting this resilience.

Our blog explores the relationship between external finance and business longevity, including the types of funding you may utilise for long-term performance.

• Why does longevity matter?
• What are the contributing factors to business longevity?
• How can funding help

Why does longevity matter?

Surviving as a company is no mean feat. According to the data, 20% of businesses fail in their first year, 60% fail within the first 3 years and only 33% make it past the ten-year mark.

Although the minority seem to last long-term, longevity is needed for continual results.

Longevity brings many rewards, giving you the time to build a favourable reputation, win over customers, improve your market share and drive profit. The longer a venture lasts, the more likely it will grow, bringing increased profit and performance. This enables entrepreneurs to achieve their personal goals.

There are also benefits for the broader economy, including improved employment rates, better demand fulfilment, stronger local economies and tax payments.

What are the contributing factors to business longevity?

Many factors determine whether an enterprise will survive. We’ve listed the most significant below.

• Profitability – the more profit a business makes, the more capital it can reinvest into growth, adaptability or cash reserves
• Cost management – keeping on top of rising costs and maintaining healthy profit margins
• Cash flow – maintaining the balance between income and profit to avoid losses and disruption
• Flexibility – the ability to evolve in line with your changing needs to maximise performance
• Growth – expanding over time enables you to become stronger as a business, reducing the risk of failure
• Effective planning – practical strategies that seize opportunities, optimise operations and encourage stability
• Flexibility to market trends – adapting to customer demand and market trends to stay relevant and competitive

You will need the right tools and resources to incorporate these themes into your business. You typically require funding to enable you to invest in capital equipment, drive performance and optimise your business to overcome any obstacles.

How funding will help?

In most cases, the challenges you need to overcome as a business will be financial. Even if it isn’t, you’ll need funding. Funding enables you to improve your business to make yourself more resilient against any threats.

We explore the most common scenarios affecting longevity and how finance will help. 

Emergencies

Business risks can emerge at any time and often unpredictably. In the recent coronavirus pandemic and subsequent lockdowns, businesses were forced to close, entirely shutting off their revenue streams. Without financial support, many of these ventures would have been unable to continue with depleted reserves and no revenue, leading to their eventual closure.

Whilst a global pandemic is rare, emergencies of different descriptions will always arise, causing disruption. In these scenarios, funding is often required to fill the funding gap and enable that business to continue. Few companies have the cash reserves to take the hit themselves, so external support becomes vital – particularly with loans and government-backed schemes.

Cash flow

A recurring issue that many businesses face is fluctuating cash flow. Cash flow problems can stem from many sources, including falling revenue, unexpected expenses or late customer payments.

Negative cash flow leaves you unable to meet your financial commitments, which affects productivity and leads to losses. However, external funding is often used to ease the pressures, including short-term loans and stock finance.

Some solutions can be used on an ongoing basis to help you overcome recurrent issues, like invoice finance if you regularly deal with delayed payment or trade finance for those who import and export.

Growth

Growth is an essential factor in the resilience of a business, enabling it to operate more efficiently, obtain better results, expand market share and drive profit. These outcomes will safeguard you against risk while allowing you to keep up with your competitors and avoid getting overshadowed.

However, growth is costly. Few businesses have the capital in their reserves to meet their targets. Therefore, growth finance is vital for expansion and enabling entrepreneurs to fulfil their goals. Again invoice finance and trade finance are strong solutions to the demands placed on the business.

It’s important to note that the alternative to growing is usually stagnating or declining. These will dangerously affect your resilience and make it less likely to access long-term results.

Innovation

We live in an increasingly technological age, where markets are constantly evolving. It’s no surprise that businesses need to innovate to continue to serve customers and find new markets.

Once again, innovation requires funding. Investing in new processes and technology or experimenting with new ideas comes at a price. Utilising external finance enables you to cover the costs through grants, loans, investment or R&D tax credits.

You can then reap the rewards of innovation – including identifying better processes that allow you to navigate the ever-changing market.

Turnaround

Some obstacles are harder to overcome than others. You may find yourself on a downward slope, where revenue is falling, and your business is failing. However, it doesn’t always mean the writing is on the wall.

Often, a change in tack revitalises a struggling business. There are costs involved with this, especially if you need to boost cash flow or reinvest in your company to get back on track.

Turnaround finance is designed to secure the funding you need to successfully adjust, overcome your issues and re-emerge as a profitable business.

This is often the difference between a business that ultimately fails and one that lives to fight another day.

Conclusion

It’s natural for every owner to want their business to survive with a legacy that extends beyond your leadership.

However, with the stats against you, it should never be taken for granted that you will survive in the long-term – and if you do, the road is unlikely to be smooth.

Fortunately, there is plenty of support available to help. By accessing the right financial solutions, you will plug the funding gaps, achieve your goals and adapt when required. This is crucial to the longevity and success of any business.

If you are looking for funding to improve resilience and fuel growth for your business, we will help you access the right solutions. Get in touch today to find out more.