How to Fund Business Growth: 5 Ways to Finance Your Next Big Move

Funding Your Next Business Expansion.
So many founders don't go after opportunities because they don't know how to fund them. There's many ways that growth can be funded; from bank finance and investors to joint ventures, vendor finance and pre-selling to your existing customers.

In this episode of *Money Secrets*, Fi explores how to think differently about funding a new revenue stream, buying another business, opening a new location or launching a new product line.

Listen to Episode 82

What You’ll Learn in This Episode

Growing your business may require calculated risks. Think beyond your existing cash flow to fund bigger growth.
How to fund the purchase of another business. Explore options including your own cash reserves, vendor finance and pre-selling services to existing customers.
Vendor finance is an option worth exploring. Discover how, in some circumstances, the person selling a business may finance the purchase and be repaid over time.
Your customers could help fund your growth. Learn how pre-selling products, services or founding memberships can generate the capital needed to bring a new idea to life.
When bank finance is the right option. Banks are more willing to lend against tangible investments such as equipment or a fit-out.
What to consider before bringing on an investor. Investment can fuel growth, but it also means giving up equity.
Funding a new product or revenue stream. Explore pre-orders, lines of credit and other ways to cover the upfront costs of developing something new.
How collaboration can be a growth strategy. Discover how a joint venture partner can contribute skills, time or expertise in exchange for a share of future revenue.
Big ideas are worth exploring. Don’t assume an opportunity is out of reach just because you don’t have the money yet.

How to fund your business expansion (EP#82)

Introduction

We've made a lot of progress as a society in many areas, but one thing that hasn’t changed enough is our relationship with money. If we want to tip the scales in favour of marginalised people, we need to understand the secrets to making money in small business.

The more we talk about money — especially the secrets that usually stay behind closed doors or on the golf course — the more empowered we become. My mission is to get more money into the hands of good people, specifically business owners like you.

Because I believe small business can change the world. And to do that, we need to be making more money.

Acknowledgement of Country

This episode was recorded on the lands of the Wurundjeri People of the Kulin Nation. I’d like to acknowledge them as the Traditional Owners and custodians of this land and water that I live, work and play on.

I pay my respects to Elders past and present, and recognise that sovereignty has never been ceded. This always was, and always will be, Aboriginal and Torres Strait Islander land.

How to Fund Big Growth in Your Small Business

What if the next big move in your business needs money you don't currently have?

Maybe you want to buy another business.

Open a new location.

Launch an entirely new product range.

Invest in equipment.

Or take an existing business and turn it into something much bigger.

It's easy to look at the price tag attached to a big idea and decide it's simply not available to you.

But what if the better question was:

How could I fund this?

In this episode of Money Secrets, Fi Johnston explores different ways small business owners can fund significant growth, including bank finance, investors, vendor finance, joint ventures and pre-selling products or services to existing customers.

The goal isn't to take unnecessary risks. It's to open your mind to the different ways a great business opportunity could be funded instead of automatically assuming the money has to already be sitting in your bank account.

Growth Sometimes Requires Risk

Running a financially responsible business is important.

You need to understand what's coming in, what's going out and how much revenue you need to keep everything running.

But there's a difference between asking:

"How much money do I need to keep my business safe?"

and:

"How much revenue do I need to create the business I actually want?"

Fi sees many business owners become incredibly good at managing what they already have, but much less comfortable taking calculated financial risks to create something bigger.

And sometimes, meaningful growth requires exactly that.

It might mean purchasing equipment that creates a new revenue stream, travelling to meet a potentially significant customer, acquiring another business or investing in a new part of your existing business.

The point isn't to take risks for the sake of it.

It's to understand that risk can be a tool for growth when the numbers and opportunity make sense.

You Don't Always Have to Build Something From Scratch

Imagine you run a marketing agency specialising in organic social media.

You know paid advertising would be a valuable additional service for your clients.

One option is to build that capability yourself.

You could hire people, invest in training, create new systems and slowly develop an ads department.

But there's another option.

You could buy a business that already does it.

Instead of spending years building a team, client base and processes, you could acquire an existing Meta ads agency and merge that capability into your own business.

It's certainly a bigger move and comes with greater risk and complexity.

But it could also dramatically accelerate your growth.

So How Do You Fund a Business Acquisition?

The obvious answer might be cash.

If your business has enough money available to purchase another business outright, that's one option.

But it isn't the only one.

Fi explains that small businesses are often valued using a multiple of profit, although the actual valuation depends on the individual business and professional advice is important.

If you're considering an acquisition, the bigger question becomes whether the future profit and strategic value of the business justify what you're paying for it.

And then comes the interesting part.

Where does the money come from?

Option One: Vendor Finance

One possibility is vendor finance.

Instead of paying the seller the entire purchase price upfront, you may be able to negotiate an arrangement where the seller effectively helps finance your purchase.

You then repay the agreed amount over a period of time.

It's not necessarily simple, and Fi is clear that professional legal and accounting advice would be essential.

But the important lesson is that the person selling the business can potentially become one of the sources of funding for the purchase.

That's a very different way of approaching an acquisition from assuming you personally need the entire purchase price sitting in cash.

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Option Two: Let Your Customers Help Fund Growth

Here's where things get particularly interesting.

What if the people already buying from your business helped fund the next stage?

Going back to our marketing agency example, you could approach existing clients who are interested in adding paid advertising to their marketing.

Instead of waiting until you've purchased or built the new service, you could offer those clients an attractive deal to pre-pay for a period of future ads management.

Enough customers pre-paying could provide some of the funding needed to acquire the ads business.

And suddenly you've done two things at once.

You've raised funding and demonstrated demand for the new service.

Your Customers Can Be a Source of Capital Too

This idea doesn't only apply to business acquisitions.

Imagine you've been running a massage business from rented rooms for years.

You've built an incredibly loyal client base, but your dream is much bigger.

You want your own wellness space.

Massage rooms.

Saunas.

Beauty or hair services.

Yoga.

Meditation.

Other complementary health and wellbeing offerings.

You find the perfect location and calculate that you'll need $500,000 to make it happen.

Half might be needed for the physical fit out, while the other half is required as working capital to get the business operating before revenue catches up.

For many small business owners, that's where the dream stops.

"I don't have $500,000, so I can't do it."

Fi's challenge is to keep going.

Ask:

"How could I find $500,000?"

Different Parts of the Project Can Have Different Funding

You don't necessarily need to find one person or institution willing to give you the entire amount.

Perhaps a bank finances part of the physical fit out.

Then you need another source for the working capital.

You could explore bringing in an investor.

That investor might contribute money, advice, connections and expertise.

But equity funding also means giving somebody else ownership in your business.

That's not automatically good or bad.

It's simply a trade off that needs to be understood.

Alternatively, you could look to your future customers.

Could You Create a Founding Membership?

Imagine offering 25 people in your existing community a special founding membership at $10,000 each.

That's $250,000.

In exchange, those customers receive a compelling package of future services and benefits.

Perhaps they receive a set number of treatments over several years.

Maybe they receive priority access to new services or special booking privileges.

The exact offer would need to be commercially sustainable and backed by appropriate terms and legal advice.

But the broader idea is powerful:

You can sometimes fund the creation of a new offer by selling it before you've finished building it.

And if you can show a bank that you've already pre-sold a significant amount of future revenue, that may also strengthen the story you're presenting when seeking finance.

Pre-Selling Can Work for Products Too

Let's look at another example.

Imagine you own a successful homewares brand selling tea towels.

Your customers love them, the product is profitable and you're confident those same customers would buy a complementary bathroom towel range.

The problem?

Creating a new product isn't free.

There's design.

Product development.

Manufacturing.

Supply chain.

Quality control.

Inventory.

Packaging.

And all the other costs that arrive before you've sold a single unit.

Again, you could decide you need to save enough cash first.

Or you could ask your customers to pre-order the new range.

Perhaps you create an exclusive launch bundle and use those initial orders to fund your first production run.

If your pricing and margins have been structured properly, revenue from that launch could then help fund your next batch.

Collaboration Can Reduce How Much Cash You Need

Money isn't the only resource you can bring into a new project.

Sometimes somebody else has the expertise, time or infrastructure you need.

In Fi's homewares example, perhaps you know an artist or textile designer who can help create the new range.

Rather than paying them a large fee upfront, you might explore a joint venture or collaboration where they contribute their expertise in exchange for an agreed share of future revenue.

Again, the details matter.

But this introduces another useful question:

Instead of asking "How much will this cost me?", ask "Who could I build this with?"

Or Borrow the Money and Do the Maths

Sometimes speed matters.

Perhaps you've found an opportunity with your existing supplier and need $100,000 quickly to secure inventory.

Waiting months for pre-orders or developing a collaboration might mean losing the opportunity.

In that case, a line of credit could be another option.

But borrowing should come with a clear financial model.

How much will you borrow?

What will the interest cost?

How much revenue do you reasonably expect the investment to generate?

How quickly could you repay the debt?

And after you've repaid it, will there be enough profit left to make the risk worthwhile?

The question isn't simply:

"Can I borrow $100,000?"

It's:

"What does this $100,000 allow the business to create, and do the numbers make sense?"

Final Thoughts

A big business idea doesn't necessarily require you to already have a big pile of cash.

There are more ways to fund growth than many small business owners initially consider.

You might borrow from a bank.

Bring in an investor.

Negotiate vendor finance.

Find a joint venture partner.

Pre-sell a product.

Pre-sell a service.

Or combine several funding sources to make the numbers work.

None of those options removes risk, and bigger financial decisions deserve proper financial, accounting and legal advice.

But the bigger lesson from Fi is about opening your mind to what's possible.

Instead of seeing the cost of an idea and immediately deciding you can't afford it, start asking better questions.

What would this opportunity create?

How much money would I actually need?

What return could it generate?

Who benefits from this idea?

Who might want to invest, collaborate or buy early?

And what level of risk am I prepared to take to grow my business?

Sometimes the money doesn't have to come from you.

The opportunity is working out where else it could come from.

Outro

Thank you for listening to Money Secrets. If you loved this episode, please subscribe, share it with a friend, or leave a review. Your support helps us get these conversations into the hands of more good people who deserve to thrive in business.

We’ve come so far as a society in many ways, but money is one of the areas where progress hasn’t been enough. If we want to tip the scales in favour of marginalised people, it starts with understanding the secret: money in small business.

In this podcast, Money Secrets, host Fiona (Fi) Johnston—Chartered Accountant, small business advocate, and impact enthusiast—dives into the conversations we need to have about money. The secrets that once stayed behind closed doors (or on the golf course) are finally out in the open.

Fi’s mission? To get more money into the hands of good people, like you. She believes small businesses have the power to change the world, and the key to making a bigger impact is to make—and manage—more money.

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Thank you to everyone involved for bringing this podcast together. We are excited to hear from you with any questions, feedback or suggestions for future episodes that you might have. Send a Direct Message to @peach.business

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