When to grow Featured

8:00pm EDT May 26, 2007

Business is good. Is it time to start looking at expansion? Should you set up new locations, expand your production lines, add to your product mix or open new offices to attract more clients? How do you determine what steps to take and when do you start thinking about expansion?

According to Jim Kimbrough, chairman, president and CEO of SunTrust Bank, Nature Coast, “Take care of today but plan for the future. Tomorrow is definitely going to provide different challenges and opportunities. This is especially true in a growth state like Florida. You never know when a door may open that provides an opportunity for corporate or personal expansion. You need to be ready.”

Smart Business talked with Kimbrough for more insight into areas a person should take into consideration as they think about expanding their business.

How important is it for a business to plan for growth?

It is critical for the most efficient growth of a business. Planning should reduce, if not eliminate, the problems of too little or too late. There are five things that you don’t want too little — or too much — of if you are going to successfully grow your business. They are inventory, staff, facilities, capital and debt. A good business plan, updated at least annually, can be a key ingredient to efficient growth. At the very least, it will eliminate some of the bumps. It is also imperative to be open to change as the plan and time evolve.

What are some of the basics to keep in mind as you ‘expand your territory’?

What is the forecast for the demand of your products or services? What is the economic forecast? Who is your competition? What have been the reasons for their successes or failures? What can you do differently to maximize your potential? What will be the cost of facilities? Consider land and building costs as compared to rental costs. Determine your options and how they fit your business plan. Also, will you be able to maintain your profit margins in the expanded territories?

How important is cash flow management?

It is a major key to the success of any business. You have to make payroll, pay suppliers, service your debt requirements and meet the demands of owners/stockholders. You have to cover the cost of inventory to supply demand. You have to be prepared to weather the storm during lean times and stock up during good times.

What are some strategies for restructuring debt to improve cash flow?

Identify idle company assets that might not be contributing to the business in the years to come. Outdated equipment, buildings, etc. should be sold to raise cash. Excess or outdated inventory also should be disposed of to help cash flow.

Re-amortizing or extending debt over an extended period or consolidating loans can have a substantial positive effect on your cash flow. Infusion of cash from owners may be needed. Sometimes this infusion of cash from owners may be the only way to grow the business.

Who should be involved in the decision-making as you plan for growth?

The CEO and other substantive shareholders. Those within the company should include the CFO, sales and/or marketing manager and others that might have responsibilities and insight on potential expansion. Outside advisers should include the CPA and company banker.

What does a loan officer look for when processing applications for growing companies?

Earnings history and the future outlook for the products or services are important. Credit rating, ownership structure, current debt to equity ratios, and how the company is handling past and current debt are reviewed. Diversification of assets, products or services, and client or customer base are all considered. The makeup of assets can be important. Last, but not least, the loan officer considers how prepared the company is to handle change.

Are there specific ways your banker can help as you consider growth potential?

The banker is going to look at what has fueled growth or been your catalyst for success to date. He or she can help analyze personnel to be sure that you have the right people on board and might be able to assist in finding the new people you need for expansion. They’ll help analyze your company finances and help determine if you have the money, can get it readily, or are willing to take on debt or find partners or additional owners.

JIM KIMBROUGH is chairman, president and CEO of Sun Trust Bank, Nature Coast. Reach him at jh.kimbrough@suntrust.com or (352) 754-5505.