Author: Mark Maurer Date: 10/16/2019

What to Consider When a Young Business Grows Quickly

Somewhere in the corner of a brewery in Sheboygan sits a very dusty case of beer… a case of beer that served as the seed that would blossom into 3 Sheeps Brewing Company. The story actually starts in 1926, when 3 Sheeps Founder Grant Pauly’s great-grandparents purchased a failing brewery, renamed it Kingsbury Breweries and took it nationwide. Grant never walked those floors, but his father did, and the stories Grant grew up hearing would be the initial spark in a lifelong passion for beer. Fast-forward many years later; he received a homebrew kit as a birthday gift from his wife Heather. This present would start a hobby, ignite into a passion and evolve into a dream: to open his own brewery.

When the only brewpub in town went out of business, Grant went to meet the new owners of the building. Together, they looked at the equipment and within a few hours would form a handshake agreement — he would open his brewery in the back and the owners would open a bar in the front.

A few months later, in April of 2012, 3 Sheeps Brewing Company opened its doors. That year they won RateBeer’s Award for Best New Brewery in Wisconsin, a state overflowing with fantastic beer, and Grant knew he was on to something.

Business took off quickly, and four years later, the fledgling company was already running out of space. Grant moved the business to a former bottling plant on North Avenue in Sheboygan, where he and his team built the new taproom from the ground up – from the bar to the concrete to the tables and chairs. They currently offer 17 beers on tap, have a variety of taproom-only offerings, a growler fill station, and have a strong presence at a variety of establishments and retail stores throughout the region.

Watch Grant Pauly's Story

Want to learn more about Grant and how Investors Community Bank helped make his dream a reality? Watch the video to see how ICB walked in Grant’s shoes and partnered in his overwhelming success.

This may sound like a dream scenario when it comes to starting a new business, but early success and fast growth comes with its own set of challenges and growing pains. The growth and expansion phase is an exciting time for any small business, but many don’t anticipate the pressure that can accompany rapid growth. In the worst-case scenario, they can grow themselves right out of business without proper planning and cash flow management.

Cash Flow through Proper Debt Structure  

The costs of running a new business can be difficult to manage, especially coming on the heels of any cash spent to open the business. At this early stage, the company may be relying heavily on credit as they try to grow revenue and manage expenses. Rapid growth is encouraging but requires more supplies and more labor. These important expenses require more cash, often during a time when the company does not yet have excess cash on hand. If everything goes according to the business plan, this isn’t an unmanageable problem; however, rarely do things go according to plan.

Fortunately, there are loan programs available that can help with this, with the goal of structuring debt in a fashion that doesn’t put as great of a cash flow strain on the business. The Small Business Administration’s (SBA) 7(a) and 504 programs and the USDA’s Business and Industry Program Loans have longer repayment terms than traditional loans, which means smaller monthly payments as cash flow grows. These loans reduce risk and enable easier access to capital while offering competitive terms and lower down payments. Loans guaranteed by these programs range from small to large and can be used for most business purposes, including long-term fixed assets and operating capital.

In addition to bank and government loan programs, in some cases your city or county may have financing options available for businesses. In 3 Sheeps’ case, the company was able to secure a loan from the City of Sheboygan with below-market interest rates and a very accommodating repayment schedule.

Other Considerations

Proper debt structure is an essential component for the success of any business – old or new, large or small – but success is also driven by a number of other factors:

  • Good Communication

Communicating with your banker about both the good news and the not-so-good news is critical to a good banking relationship. The fewer surprises, the better.

  • Timely Financial Reporting

Producing accurate and timely financial reports and sharing those financial statements with a banker on a regular basis will assist him or her in making adjustments quickly.

  • Wise Balance Sheet Management

Sales and expansion opportunities are always on the horizon for new businesses, but pursuing these situations may not always be ideal in the given time frame. When faced with these difficult decisions, consider including a trusted banker in the conversation. He or she can help guide business owners on a path that best fits the needs of the growing company. 

When cash does come in, treat it as a precious commodity, and use it prudently. While it may be tempting to prepay on a building or equipment loans, they may not be the best investments at this point in time. Again, talk with a business banker before proceeding. 

Every entrepreneur imagines building an overnight success story, but the secret is to find creative ways to control business growth, which is more likely to maximize profits and minimize cash usage. Although small business owners may be working to grow their individual companies, they are not on the journey alone. Remember that a banker is an essential member of any business advisory board, and is always available to help navigate the exciting waters of a growing company.

Visit InvestorsCommunityBank.com/walkinyourshoes to view more customer success stories!

8 Ways Your Banker Can Impact Your Business

Topics: Financing, Business Growth, Cash Management, General Business

 

Written by Mark Maurer

Mark Maurer, Vice President - Senior Business Banking Officer, leverages 35+ years of experience to provide insightful guidance to businesses of all sizes.

 

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Views provided in this blog are general in nature for your consideration and are not legal, tax, or investment advice. Investors Community Bank (ICB) makes no warranties as to accuracy or completeness of information, including but not limited to information provided by third parties, does not endorse any non-ICB companies, products, or services described here, and takes no liability for your use of this information. Information and suggestions regarding business risk management and safeguards do not necessarily represent ICB’s business practices or experience. Please contact your own legal, tax, or financial advisors regarding your specific business needs before taking any action based upon this information.