When you go into business, it’s to succeed. But depending on the sector, from 30% to 40% of businesses fail after a few years. What explains why two organizations – similar in every respect – can meet opposing fates, one enjoying spectacular success, the other going downhill and eventually closing?
“Financing may be the reason,” Daniel Valois says.
He has seen more than a few businesses in his lifetime. CPA, CF, MBA, and now Vice-President of Strategy and Finance at ProgressionLIVE, formerly with Desjardins and Deloitte, a speaker for the Ordre des CPA, Daniel Valois has amassed titles and defining professional experiences.
He talks about financing with a strategic vision, but with both feet planted firmly on the ground: he grew up in family businesses, so he is familiar with the day-to-day workings of SMEs.
“Of course, there are many factors of success and failure, but how you are financed plays a fundamental role that tends to be overlooked.”
The key when it comes to financing is to have a good strategy. And this strategy plays out largely in three parts: goals, cash flow, and balanced risk.
What is a financing strategy?
A financing strategy is essentially a strategy that proactively identifies financial products that foster the rapid achievement of the business’s goals, while respecting the desired balance in terms of risk and return.
The key word here is proactive.
Proactivity in financing involves evaluating financing needs in depth and getting the funding required for the business’s planned, sustained growth.
It is the opposite of a reactive approach, which involves waiting for the market to dictate how our projects are financed.
In one case (proactive), I am the one at the helm; in the other (reactive), I am passive in the face of market forces.
There are many financing options
The category of “financial products” is not limited just to loans, Daniel notes. There are alternative ways to obtain financing that too often fly under the radar, for instance, a shareholding partner, line of credit insurance, or complementary financial products.
It is worthwhile to seek out the right option to align perfectly with your strategy.
Having a strategy is essential
Daniel Valois emphasizes the importance of having a strategic plan. You don’t need to produce a 40-page document with no white space — a one-pager that summarizes the strategic vision behind a product can often suffice.
This vision must be all-encompassing, i.e., include all short-, medium-, and long-term needs.
Businesspeople are human beings first. And being human, when buying a house, for example, the instinct is to shop around for interest rates.
“It’s short-sighted,” Daniel Valois explains. “You need money for a specific event, and your thinking is limited to the interest rate. You need an infinitely more strategic vision of financing.”
I always ask my clients a series of questions: Have you considered all your other projects? R&D is fundamental these days to stay competitive: do you have the resources for it? Do you have expansion plans? Do you have the cash to surround yourself with the key personnel you need?
You need to stop for a moment, take a look at the big picture for today and tomorrow, and proactively seek out the type and amount of financing you need to grow your business.”
Implementing the strategy
Once you have set your goals, you need to make financial projections (using the earnings statement, but also, ideally, a balance sheet and a cash budget).
And make a financial arrangement. “This is where being proactive really makes sense. This is also where you will find out whether your bank understands and shares your vision and is prepared to support you as a partner. Or whether it just wants to make a loan. If you are in business, you need more than just a lender.”
Take into account liquidity, risk, and return
Daniel Valois presents other aspects of financing in his presentation, including the issue of cash flow (“It’s your fuel!”) and balancing risk and return. All these questions need to be considered when refinancing your business.
The webinar is appropriately entitled Investir dans son financement (investing in your financing). Investing time for analysis and reflection; investing energy too. “Because financing can be complex. Don’t hesitate to talk to your accountant about it. They can help you gain clarity, consider options you were previously unaware of, and make insightful decisions.”
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After watching the webinar – and you really shouldn’t miss it – you will understand the strategic dimension of financing and its importance for an organization. You will see the many opportunities that exist to provide a business oxygen, not just for its survival, but also for its development and growth.
And you will agree with Daniel Valois that financing is definitely a factor in the resilience and sustainability of any entrepreneurial effort.
This webinar is available in french only.
