To grow your business, investment is essential. Whether it’s expanding the team, updating your technology, launching marketing campaigns, acquiring new premises or diversifying into other markets – without investment you risk stagnating.

Before investing, you need to plan carefully. Making financial forecasts and setting clear objectives ensures you identify the most promising opportunities and get value for money.

For Notepad, a branding agency based in Birmingham, and Terrible, a London-based music merchandise company, investing wisely has helped navigate tough times.

Investing in technology, software, marketing and new staff members has helped Notepad succeed.

When coronavirus restrictions caused a 90 per cent drop in work for the branding agency, managing director Naeem Alvi decided to use the Coronavirus Business Interruption Loan Scheme to ensure the business had enough working capital.

However, in the three weeks it took to access the funding, a sales push led the company to win new work and its position became less precarious.

Naeem said he was tempted to leave the money in reserve and ride out the crisis. However, an adviser urged him to think about investing.

“There’s no point in having that money doing nothing for you. You can keep some of it there to protect yourself but also look at what you need to invest in,” Naeem said.

The company updated its laptops, gave the team access to powerful new graphics tools and implemented a new CRM.

The funding also paid for Notepad’s first proper outbound marketing campaign, which included creating downloadable assets and direct mail.

At the same time, the company was able to fund two new employees through working capital.

“When you’re approaching a recession, there’s a load of data to suggest that if you hunker down and hold onto your cash and stay slow and steady you’ll likely fail. If you invest and go for growth you’ll prosper,” Naeem said.

Borrowing money to invest in new revenue streams enabled Terrible to survive tough times and keep growing.

Before coronavirus, the music merchandise company made 70 per cent of its sales at concert venues. During the pandemic, this was reduced to zero. General manager Jack McGruer said ecommerce was the obvious way to plug the drop in revenue.

“Our demand fell 90 per cent. We were really riding the limits of our existing credit, our overdraft was £15,000 and we were in it hard because of the outgoings and loss of revenue,” Jack said.

The business applied for the Bounce Back Loan to cover salary costs and invest in online sales, a channel that had been neglected. The company applied for the loan on the first day it opened, receiving the maximum amount available and getting the funds within four days.

“It was a unique opportunity for us. We could have remained static and cut operations, but instead we thought we needed to make online work. We didn’t focus on ecommerce at all when we came into this,” Jack said.

Ecommerce is providing much needed short-term revenue, but there’s long-term potential too. Jack hopes that they can continue building online sales when live concerts return, putting the business in a much stronger position.

While fortune favours the brave, it is important to ask yourself some tough questions before investing. Can you afford it? Do you have a clear goal to accomplish with the investment? Do you have robust financial forecasts?

If investing your own money, it’s essential that you calculate cash flow and make financial forecasts. The last thing you want is to invest in expansion only to find yourself unable to cover existing costs.

If borrowing money, you need to be absolutely sure that the business plan is viable and the terms of the loan are agreeable. Can you afford the repayments? Do you fully understand the structure and terms?

Businesses looking at borrowing money need to think about whether what is being done is sustainable, Jack said.

“As a business owner, you have to have an honest conversation with yourself about the viability of your business. I don’t like that word but you have to have a serious conversation with yourself,” he said.