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Whatever your type of business, an appropriate financial structure is crucial if growth and development are to be nurtured. Any structure needs to provide maximum flexibility. You will have to balance the needs of a positive cash flow and sufficient working capital with the desire for a return on investment. For example, you must ensure that money withdrawn from the business to maintain your living standards is not damaging the firm's long-term future.
You will also need to build in protection against such risks as interest and exchange rate fluctuations, seasonal economic changes, slow paying debtors and illness or premature death of key players.
As your business grows the issue of whether to surrender ownership in return for new equity can be difficult. Outside investment can provide a much more substantial financial foundation than relying solely on debt, however, the process must be carefully handled to make sure that you get the best deal for both you and your business. You will need to formulate a structure which will be fair to all investors -- meeting their liquidity needs without draining capital from the business.
Monitor the debt-to-equity ratio - repaying debts may sound sensible but it can mean denying your business necessary cash.
Your financial structure should also take into account your final exit route. The earlier a decision is made to implement an exit strategy, the more efficient that strategy can be both in terms of improved tax planning and in optimising the position of the business at the point of sale.
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Sectors 