Capital strategy is a delicate balance

Consider using the influence and skills of an experienced third party

Capital strategy guides the way your business obtains and manages the money (capital) it needs, to carry out the plans of the board and executive team. These funds could be for growth, expansion or simply day to day activity. This can mean raising debt or issuing shares, both of which are major events for most companies. Bringing in external help with specific experience can make an enormous difference to the quality of your capital arrangements.

Keeping a tight rein on risk

An appropriate mix of debt and equity in a company’s capital structure can be a delicate balancing act best undertaken by those with skills and experience in the area. Your company will face unique risks specific to the way capital has been (or will be) raised. This may make it vulnerable to changes in overseas debt markets, interest rates or local share markets. The input of an expert with foresight and experience gives you the knowledge and skills to manage these exposures without major risk to the business itself.

Know your limits

A good capital strategy will also outline safe levels of debt for your company, relative to its assets and income. If your board (if applicable) and executive team understand and agree where the limits are for debt exposure, then your business won’t be making the newspapers for all the wrong reasons any time soon. It’s also important to share your capital strategy draft with a range of stakeholders. An impartial third party can be an excellent mediator between different stakeholder groups.

Keep reviewing

Even if your company already has a capital strategy, it’s not a set and forget document. Regular review is essential as your business grows and changes. Despite its importance, it is the kind of task which could filter to the bottom of the to do list in a busy treasury or finance department. Retaining an external consultant has the dual benefits of getting the job done quickly (and exceptionally well) and keeping your team free to get on with other pressing tasks.

Don’t leave your business exposed to capital risk

Contact us on 0401 142 311 and discover the depths of Mike’s knowledge in this tricky area.