Getting ahead of the competition is critical to building a thriving business—and the key to staying competitive is innovating.
“Consumers reward innovators,” said Dave Munson, the owner and CEO of Saddleback Leather Company, a store that sells high-quality leather goods and accessories. “They like companies that try to improve things.”
Improvement, however, often requires financing. According to the 2019 Small Business Credit Survey, 56% of small businesses have sought financing to expand or pursue an opportunity. Extra cash can give you the freedom to generate ideas, experiment with marketing tactics, and take risks.
“Funding and credit are essential to tapping growth opportunities,” said Ted Chan, the CEO of CareDash, an online healthcare review directory. “Markets innovate very quickly now—whether it’s debt or equity, funding can launch a new product or service line to capture fast-moving opportunities.”
Business lines of credit are particularly flexible. Unlike a term loan, which gives you a lump sum of cash, a line of credit is revolving. You can tap into your funds on an ongoing basis and use them repeatedly as long as you bring your balance back down to zero.
Ready to step up your game? Here are five ways you can use funding to edge out your competition.
1. Develop a new product or service
Developing a unique product or service can help you attract new customers and increase revenue.
“One of the best ways to stay competitive in any field is to stay on top of the trends and always put your customer’s needs and wants first,” said Lydia McConnell, the founder and creative director of Le Chic Miami, a shop that sells handmade jewelry. “What would your customers benefit from the most? How can you make the best possible experience for them?”
For McConnell, that means gathering feedback from customers on their favorite jewelry styles, then experimenting with designs, colors, and concepts. For other businesses, catering to customers’ needs might require conducting market research, adding new features to current products, or investing in a unique platform or offering.
“We used our line of credit to build out our core product, the CareDash healthcare directory,” said Chan. “Staying ahead of the curve on key trends like the consumerization of healthcare, telemedicine, and value-based care is essential to the growth of our business.”
2. Improve production and increase output
If you can’t compete with larger companies on price, try competing on output. Using funding to streamline your production process can help you take on more work and grow your business quicker.
When McConnell used a line of credit to purchase a laser cutting machine for her studio, she was able to process larger orders. “Before, when I was using a laser cutter at a local Makerspace I could only use their machine two hours a day.” Full-time access to such an efficient tool also helped McConnell improve the quality of her products. “It has really allowed me to create complex shapes and more intricate designs,” she said.
Consider which areas of your business’s production process are slow or outdated. If, for example, you struggle with organizing inventory or boxing items quickly, you could use a line of credit to purchase inventory management software or buy packaging equipment.
3. Meet increased demand
Whether or not your business operates seasonally, there are certain times of the year when you need to respond to a surge in demand. “We always want to have our most popular things in stock during the big season,” Munson said.
A line of credit can help you cover upfront costs in raw materials, labor, production, and storage. Or, if you run a service-based business you could use a temporary cash infusion to hire seasonal employees or contractors.
“We use our line of credit in August or September and start producing an extra 10-15% of product each month to prepare for the holidays,” Munson said. “We have to buy a lot of leather and pay for the labor without the sales, but once the sales come in they far outweigh the interest on the line of credit.”
It’s crucial to have enough resources to cater to customers when demand spikes; businesses that do are more likely to see repeat customers and benefit from referrals.
4. Invest in marketing
It’s tempting to cut your business’s marketing budget when cash is tight, but consistent marketing can be critical to expanding your customer base. A line of credit can give you the financial cushion to adopt a new marketing strategy or try a different distribution method.
If your content marketing consists mostly of articles and blog posts, for example, you may want to explore videos and infographics. Or maybe you want to double-down on strategies with a proven ROI, like email campaigns and social media ads.
Funding can also give you the freedom to rethink your approach to finding and retaining customers. Chan said his company employs judo strategy, which involves responding quickly to market changes and adding new features to their products before their competitors can. “We then market these features aggressively as differentiating points.”
5. Capitalize on growth opportunities
Taking advantage of growth opportunities can set you up for long-term success, but you need the funds to act fast. A line of credit can provide the cash necessary to acquire a smaller competitor, relocate to a busier side of town, or bid on a large project.
For Munson, the opportunity came when his clients began asking him to manufacture for them. “We had to hire people for a few months and pay for their salaries and their training, on top of trying to grow the company and continue with inventory,” he said.
Despite the upfront expenses, the work came with long-term benefits. “The more I can grow the factory, the more it distributes the fixed costs of the factory and makes us more competitive in our pricing,” Munson said.
Get ahead of the game
Staying ahead of the competition is essential to your business’s longevity and financial stability. To see if you can get the funding you need to help gain this competitive edge, apply for a Fundbox line of credit now.
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Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.