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Financial wellness: growth 4 min read

Financial Wellness Indicator: Ability to grow

How capital, capacity, and management expertise can help you know if you're ready to grow.

Your business is established, it’s been historically doing well, and the market for your products or services continues to look promising.


Your mind now turns to the possibility of doing more. So, how do you know if you’re ready for that – and, if so, how much more?


Here CWB’s Graedon Rust, Senior Relationship Manager, Commercial who’s based out of our St Albert banking centre, gives a rundown of some table stakes considerations for determining how well positioned you are for growth – an important indicator of your business’ health.



Growth: some high-level basics


Factors that affect it:

Three broad areas to consider when looking at the possibility of expanding your business are…

  • Capital (the money needed to deliver your products or services)
  • Capacity/ability to scale
  • Management expertise 


How to look at these factors:   

Capital: This can be gauged by two things – (1) the ability of the owner to inject funds, and (2) having excess working capital in the business that you can direct towards growth. “Both of these capital sources should be evaluated in comparison to the anticipated costs of growing,” says Rust.


Capacity/ability to scale: “This is related to your business’ efficiency,” says Rust. “How efficient is your business today? Can that efficiency be maintained if revenue were to jump from $1 million to $5 million? Do you have the processes, policies, and systems in place to handle that?”


Management expertise: “A significant increase in revenue brings with it different management challenges, so you’ll need to determine if you have the right people in place to navigate those,” says Rust. 


How this impacts your business banking:

Capital or cash shortfalls can affect the banking relationship negatively with overdrawn accounts and defaults on loan payments. However, if you have sufficient capital the bank can partner with you to compound that capital and help with the growing pains – like an increased operating line or equipment loans,” says Rust, adding that management experience is important here when it comes to understanding loan structures and margin formulas that become more complicated.


“As companies grow, their needs become more complex and so do their credit agreements. Understanding these agreements allows you to fully use your loans, keep onside with borrower conditions or covenants, and maintain a strong working relationship with your bank.” 


Common challenges:

“As companies grow, they often come into a cash crunch and don’t have the capital needed to purchase inventory or supplies or hire additional employees because all their cash is tied up in existing projects,” says Rust. “When it comes to management expertise, trouble can arise if your team doesn’t understand the complexities of larger loans and contracts, and the overall logistics of running a bigger business.”


He explains growth becomes more challenging – and should be approached with optimistic caution – as complexity increases. Take, for example, growing a retail business vs. growing a construction business. “After a retail business gets past the hard part of increasing its revenues and getting people to purchase its products, the growth process is fairly straightforward. If you can produce double the revenue year over year, accommodating growth doesn’t require many changes aside from maybe some staffing and logistical issues. In contrast, a construction contractor who doubles revenues year over year will need to ensure all the new jobs have a healthy margin. That means understanding the costs associated with the new revenue, whether that’s additional equipment, increased interest costs to purchase inventory in advance, or more labour to ensure there’s enough staff to complete the contracts. What’s more, larger contracts can be more complicated and contain clauses that management may be unfamiliar with or may not fully understand the consequences of – like how timeline guarantees can eat away profits.” 

Broad solutions:

Capital: “Keep some excess working capital or ‘dry powder’ available for growth opportunities,” says Rust. “This is particularly important for small businesses. If they get the opportunity to grow and don’t have the capital to take advantage of that opportunity, there’s unfortunately not much the bank can do to help. We can lend on existing assets supported by cash flow, but banks won’t lend on the possibility of growth – just on the result afterwards.”


Capacity/ability to scale: To ensure profitability, it pays to have good processes in place for quoting jobs, says Rust, adding you’ll also want to ensure your overhead spending is intentional and have a plan for future overhead expenses that’s tied to your growth goals.


Management expertise: As the company grows, make sure you understand the expertise of each member of your management team. “Really know who’s on your team – their abilities, their knowledge areas, their limitations. Identify any gaps, then either train for it or hire more qualified people if you need to,” says Rust.  


CWB solutions:

CWB’s financial planning services can help business owners with ongoing financial support for sustained business growth. This includes…



  • Term loans to access equity in equipment and buildings.
  • Margined operating lines to assist with lags in receivables.


Capacity/ability to scale: Connecting clients with accountants and other management groups to help support their efficiency as they grow.


Management: Explaining and providing advice on loan agreements and referring clients to qualified professionals in other areas.



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